Obamacare Driving Small Businesses to Self Insure

The biggest employment drivers in the US economy are small and medium size businesses -- small startups becoming successful, small businesses becoming medium size and medium-size businesses graduating to large.  The conduits to growth for these business are open markets and free enterprise. Burdens and barriers are anathema to their job-generating potential.

The Wall Street Journal notes that Obamacare is driving small and medium businesses to the high risk self-insurance route as never before.

As businesses cast about for ways to minimize new costs related to the federal health law, health insurers are stepping up. Among their latest offerings: allowing ever-smaller companies to switch to a riskier form of coverage traditionally favored by big employers.  UnitedHealth Group Inc. and Humana Inc. will begin offering smaller employers—including firms with as few as 10 members in UnitedHealth's case—the option of so-called self-insurance in some markets later this year. Self-insured businesses pay their workers' medical costs directly, instead of joining a traditional managed-care plan. Usually, they hire benefits firms or insurance companies just to administer their plans.

Most big companies choose the approach, because it gives them more control over benefits and can lower costs  For small businesses, being self-insured would let them avoid new requirements under the law that call for traditional small group plans to include richer benefits, such as mental-health and maternity care. Self-insured companies can also avoid changes to pricing rules that could increase costs for groups of healthy workers.

It comes with risks: A car accident or cancer case can leave small businesses on the hook for big medical bills. That is why most large insurers have generally offered such services to companies that have 100 or more workers and can spread the costs around.

Now, the health law is changing the risk-benefit calculation for smaller businesses such as Buckno Lisicky & Co., an 85-person accounting firm in Allentown, Pa. The company switched from a traditional health plan to a self-insured plan run by benefits-manager WellNet Inc. this year, in part because of the law's small-business rules, said Jack Lisicky, a founder.

High risks and higher costs are two ways that Obamacare impedes economic growth, something that a nation with a $17 trillion dollar debt, growing welfare rolls, a shrinking workforce and continuing deficits can ill afford.  The chickens will come home to roost.