Advantages/Disadvantages of Self-Insurance:

The advantages of self-insurance are listed below:

• Programs can be flexible. They are designed to reflect employee needs, including medical and dental care, prescriptions and so on.
  
• Mandated benefit laws and state insurance premium taxes do not affect these plans.
• The employer retains control over the timing and amount of funds paid into the plan and can manage costs more directly.
• Administration of these plans can be more efficient.
• Over time, these plans can save money.

The drawbacks to self-insurance include the following: 

• Health care is costly and heavy claims years may prove extraordinarily expensive.
• Commitment for the long haul is necessary to achieve significant savings.

CAUTION: While insurance can be a viable option for small businesses,  it should be undertaken only after careful study.     In summary, when deciding on a health, disability, or life insurance plan, consider what you and your workers want in a plan. Determine all costs associated with the plan. Investigate the quality of potential insurance carriers. 

Examine the quality of each plan, including the benefits and restrictions:  

• Hospital coverage (inpatient care).
• Outpatient services.
• Physical coverage.
• Substance abuse treatment.
• Prescriptions.

Check on underwriting and other restrictions that may exclude you from the health plan:  

• Employee medical histories.
• Minimum employer contribution.
• Minimum participation by eligible employees and dependents.
• Waiting periods.
• Proof of employee status.
• Purchase of other benefits.
• Other limitations — what isn't covered.

Check on the extent to which your company can control costs. This might include prior review of hospital admissions to determine necessity of hospitalization. Or it could mean concurrent review of hospital stays to confirm continuing need of hospitalization.

Management programs for catastrophic cases might be used. These programs arrange for the most cost-effective care.

Questions To Ask Before Signing a Benefits Contract  

   

• Who is the insurance company?
• Is it committed to small business?
• How solvent is it? What is its rating?
• What is the carrier's reputation for customer service?
• What is the choice of doctors and hospitals?
• How does the company manage health care costs?
• Who administers the plan?
• What information must the employer provide?
• How are the employees enrolled?

When Problems Arise From time to time problems arise with benefit delivery. Patience on the part of the provider, the employer and the employee usually brings a resolution.

Occasionally, unusually prolonged and difficult problems develop that do not yield to resolution. Such instances should be brought to the attention of your state's insurance department or commission, which is responsible for regulating insurance companies. 

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