As insurance premiums head skyward, even small companies are considering self-insuring for health-care costs. But that's a big risk. Nachtraub, Cousino, O'Neil, Treuhaft, & Co., a Toledo accounting firm with an accountant's respect for risk, took a smaller, safer step.

The 60-employee firm had paid for a health-insurance plan that covered 80% of claims up to $2,500, and 100% up to $5,000, with a $200 deductible. In 1989, after seeing premiums rise 30% a year, managing partner Joe Nachtraub asked the insurer how much the firm would save if he raised the deductible to $500 and reduced coverage on claims above $2,500 to 80%. The savings would come to $1,000 a month -- 20% of the premium.

Nachtraub didn't want to reduce the coverage, though. What if he self-insured the difference? He figured that any claims by his young work force would probably not eat much into those savings. Self-funding the $300 difference in the deductible was safe, since many of his employees never spent that much. And if the firm self-funded the 20% on claims between $2,500 and $5,000, the most it would have to pay out on anyone was $500 (20% of $2,500).

Nachtraub opened a separate account to hold any savings. That's not required, "but it helped keep it clear in my head." In the first year savings totaled $12,000, half of which Nachtraub rebated to employees. (That brought the year's total bill for Blue Cross insurance and self-insurance down to $60,000.) In the second year, he rebated all savings. This fiscal year, which began in October, the company decided to spend the savings on preventive care that the insurance doesn't cover -- annual physicals and programs to help people quit smoking and lose weight.

Nachtraub is delighted with the outcome. "It's a small way to rebel against health-care costs," he says, "at little risk to the employer." -- Michael P. Cronin