The rate of self-funded health insurance among smaller businesses has remained relatively stable during the past decade, but that may change soon. Many businesses see self-funding as a way to skirt requirements of the healthcare reform law.
In response, carriers are offering self-insured plans to much smaller groups than the larger groups that have historically marketed such plans. UnitedHealth Group has even dropped its minimum size for self-insured products from 100 employees to as low as 10.
The plans are becoming particularly attractive because they're exempt from the new excise tax on health insurance premiums under the Patient Protection and Affordable Care Act, as well as the law's minimum set of “essential benefits” and limit on higher premiums for older enrollees.
In self-funded plans, the employer is responsible for funding the benefits that are paid out in claims, and the insurer primarily serves as a third-party administrator. To prevent an employer from getting into a situation where they don't have enough money to pay out claims, they also buy stop-loss insurance, which kicks in when an employer pays out a certain amount of claims and the stop-loss carrier pays the rest after that.