Self Funded Group Health Plan for an S-Corp?

[Guest scalzoa]

What happens to the 2% shareholders in a self-funded group health plan? I believe they are taxed as income on the fully insured equivilents and the claims paid out are not taxable as income. How does this impact non-discrimination testing if more claims are paid out to HCE's as opposed to non-HCE's? Are the HCE's then taxed as income on the claims?