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Self-insurance may become a more attractive means to mitigate regulatory cost increases
Will U.S. small businesses follow the lead of bigger firms and start self-insuring their medical benefits to avoid the costs of the Affordable Care Act (ACA)? So far, there is no evidence of a surge in that direction, according to research by the nonprofit Employee Benefit Research Institute (EBRI).
Since the ACA’s enactment in 2010, there has been speculation that the law will result in an increasing number of smaller employers offering self-insured plans, according to
Self-Insured Health Plans: State Variation and Recent Trends by Firm Size, published in the June 2015
EBRI Notes. The study looked at self-insurance through 2013, the last year for which data was available.
“Some employers think that components of ACA, such as the strict grandfathering requirements; the minimum-creditable-coverage requirement; the breadth of essential-health benefits; the taxes on insurers, medical-device manufacturers, and pharmaceutical companies; the affordability requirements; and the reinsurance fees will all drive up the cost of health coverage,” wrote Paul Fronstin, director of EBRI’s Health Research and Education Program and author of the report. “To the degree small employers are concerned about the rising cost of providing health coverage, self-insurance may become a more attractive means to mitigate any expected regulatory cost increases.” However, he added, “So far, there is no sign smaller firms are moving to self-insure, even though more large firms are doing so,”
The analysis found that the overall percentage of American workers in self-insured plans has been increasing in recent years compared to pre-ACA. In 2013, 58.2 percent of workers with health coverage were in self-insured plans, up from 40.9 percent back in 1998. However, the percentage of workers in self-insured plans in firms with fewer than 50 employees has been close to 12 percent in most years examined in the analysis going back to 1996.
As of 2013, among U.S. employers 37.6 percent used at least one self-insured health plan. By company size, the breakdown was as follows:
The overall percentage of workers in self-insured plans as of 2013 varied among the states, from an overall low of 35.5 percent to a high of 73.5 percent:
Costliest Catastrophic Claims for Self-Insured Plans
Individuals with claims in excess of $1 million remain a major driver of stop-loss coverage payments for self-insurance health plans, according to Sun Life Financial’s
Catastrophic Claims Report and
key findings inforgraphic.
Among employers for whom Sun Life provided stop-loss coverages during the study period (2011 to 2014):
“The findings confirm the need for self-funded employers to protect against common health events that could turn into catastrophic claims, and for employers to better understand the risks associated with large claims and the potential impact to a self-funded medical plan,” said Sun Life’s Brad Nieland, vice president for stop-loss coverage.
Stephen Miller, CEBS, is an online editor/manager for SHRM.
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Related News Article:
Are Smaller Companies Poised to Self-Fund Health Care?,
CFO, June 2015
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