HSAs have started looking pretty good for increasing numbers of consumers. Now that trend is being mirrored at the corporate level.
Historically, many large companies have already been self-insuring their healthcare costs. The reason they can do this is precisely because of their size. When you have thousands of employees and you self-insure, medical costs tend to smooth out over time.
In recent years increasing numbers of small- to medium-sized companies are choosing to self-insure. The company pays its employees medical expenses directly. Simultaneously, the company purchases stop-loss insurance to cover any catastrophic expenses above a preselected ceiling such as $50,000 or $100,000.
Rand Corporation 2010 statistics show 80% of companies with 1,000 or more employees chose to self-insure healthcare costs. That drops to 48% for companies with 200 to 999 employees, 20% for companies with 50 to 199 employees, and 8% for companies with 3 to 49 employees. Those numbers are increasing across the board, primarily due to increasing insurance premiums. Companies are happier holding on to their cash rather than watching it disappear into the black hole of insurance premiums. This is just like the consumer concept of an HSA coupled with a high deductible, low premium medical insurance policy.
Interestingly, this approach allows a business to have access to more detailed healthcare information about its employees. Such information informs wellness programs and strategies.
I applaud companies that adopt these approaches. Healthcare is already too big, expensive, and complicated. Anything that helps to simplify healthcare and reduce its expenses is a welcome change!
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