Self-funded Plans Gain Steam in the Private Sector

The Affordable Care Act (ACA) appears to be prompting more employers to choose self-funded health benefit plans, based on a study released by the Employee Benefit Research Institute (EBRI) in November 2012.

The study highlighted variations and trends among self-funded plans in the U.S., including the increasing number of employers offering self-funded plans in many states due to concerns about rising health care costs and ACA regulations.

Employers’ concerns about ACA regulations included:

• Grandfathering requirements
• Minimum-creditable-coverage requirement
• Breadth of health benefits
• Taxes on insurers
• Affordability requirements
• Reinsurance fees

Self-funded Plans: Trends and Statistics

The percentage of plans within the private sector has been increasing. In 2011, 58.5 percent of employees had health coverage within a self-funded plan, up from 40.9 percent in 1998. Listed below are key statistics found within the three sizes of organizations (large, medium and small):

Large Employers (1,000 or more employees)

• In 1998, 55.4 percent of employees were in a self-funded plan. By 2011, this percent increased to 86.3.

Medium Sized Employers (50 or more employees)

• Employees in a self-funded plan increased from 48.4 percent in 1998 to 68.5 percent in 2011.

Small Employers (Less than 50 employees)

• As of 2011, there was no evidence of an increase in smaller firms self-insuring their health plan.
• Only 10.8 percent of employees in organizations with fewer than 50 employees were self-insuring their health plan.
• The percentage of employees in self-insured plans was close to 12 percent in past years, 18 percent in 1997 and then went down to 10.8 percent in 2011.

Using Massachusetts as a Model for Self-Funded Plans

Massachusetts is currently the only state that has practiced health reform similar to the ACA. As a result of health reform, Massachusetts saw an increase in the percentage of self-funding among employers (with the exception of organizations with less than 50 employees). These plans increased from 54.4 percent in 2006 to 67.2 percent in 2011. Overall almost 74 percent of employees in Massachusetts were in a self-funded plan in 2011, the highest in the nation.

In conclusion, the Employer Benefit Research Institute found that Massachusetts serves as a benchmark to gauge the potential impact of the rising number of self-funded plans in the U.S. as well as the health insurance costs on self-insurance in the future.