Honeywell International Inc. (HON), Alere Inc (ALR): The Fight To Self-Insure

Beyond the hot air from mass media, government bureaucracies, and pubic opinion, companies both large and small have been watching the changing healthcare environment closely. The reason for this is that every move in today’s healthcare legislation is an exponential move in so many businesses’ bottom lines because of coverage cost implications. The resulting effects of Obamacare may not only be rising healthcare costs through traditional insurance providers, but also inadvertently offering opportunities for companies such as GE Healthcare, Honeywell International Inc. (NYSE:HON), and Alere Inc (NYSE:ALR)—along with others—to cash in on the sweeping healthcare changes.

With Obamacare rhetoric endlessly broadcasted over news channels, the term replaced the bill’s original title, “Affordable Healthcare Act,” and has become one of the most contested initiatives of President Obama’s administration. The Affordable Healthcare Act has taken this country through litigious and bipartisan debates, countless hours of television and radio coverage, and many businesses shaking their heads or their fists.

The Flight to Self-Insure

As new healthcare regulations crash on the front steps of corporate America and small businesses, companies who’ve opted to self-insure their employees have been the first to be able to skirt higher healthcare costs brought on by Obamacare. Self-Insurance has been a mainstay in America for years. According to the Employee Benefit Research Institute, 59% of employers have opted to be their own insurance benefactor, which is up significantly from 41% in 1998. Taking corporate consolidation and washout into consideration over the past fifteen years could put the real percentage increase well over 25%.

A company choosing to become a self-insured organization, like Ford Motor Company (NYSE:F) has done in the past, controls their employee healthcare costs. They are able to do this for a variety of reasons, the paramount one being that a self-insured corporation can adjust healthcare benefits to meet their covered population’s needs. This minimizes excess spending and prompts businesses to incentivize employees to live a healthy lifestyle. Additionally, moving employee benefits away from traditional insurance providers effectively skirts around the minimum benefit requirement Obamacare.

According to the New York Times, companies and organizations willing to self-insure are able to initiate stop-losses on their policies, which protects the insurer from large or unexpected claims. With this stop-loss measure in place, businesses are free to venture into new territories, such as required exercise programs and mandated daily vital-sign monitoring, in order to reduce doctor’s visits and, consequently, patient claims.