Employers seek more flexibility in designing a plan suitable for their employees. The self-insured are not immune, however, from the effects of the healthcare reform debate.
More employers are moving to self-funded healthcare insurance and the trend is likely to continue as they seek health plans that satisfy their employees more than the commercial options currently available under the Affordable Care Act, says an industry insider.
Dissatisfaction with the offerings of commercial health plans is encouraging a steady migration of employers to the self-insurance option, says Mike Ferguson, CEO of the Self-Insurance Institute of America. Rather than paying the insurance company a premium to take the annual risk on the healthcare costs of its employees, the company assumes the risk and pays the bills directly.
"Over the years there has been a slow but steady increase in the number of employers moving to self-funded plans, and the reason for that is that they can better take advantage of some cost saving opportunities and also customize the plans to the needs of their work force," Ferguson says.
Bespoke Insurance
"If they purchase a health plan off the shelf, they get a one-size-fits-all plan, but on a self-funded basis, they get a plan that best suits a particular group."
The proportion of self-insured companies has increased from 28.5% in 1996 to 39% in 2015, according to data from the Employee Benefit Research Institute. The biggest increase was in companies with fewer than 1,000 employees.
The shift to self-insure represents a loss of group market share to the traditional health plans at a time when many are already finding it difficult to succeed with the imbalance of utilization costs and younger, healthier customers on individual plans.
The impact on the insurance giants is not likely to be enough to put anyone out of business, Ferguson says, but it is one more burden on top of many.
If the commercial health plans continue to find the ACA exchanges unworkable, Ferguson says the self-insurance market would not be directly affected and would continue humming quietly in the background. That does not mean, however, that the self-insured have no concerns over the current healthcare reform debate.
"It is good for everybody that we have a well-functioning individual insurance marketplace, and absent any new action or any fixes to the healthcare law, there is a reasonable chance that the individual healthcare insurance market will implode because the health insurers will withdraw from the exchanges," Ferguson explains.
Stop-Loss Insurance
"That will leave fewer options for individuals, and that can lead to a reactionary scenario in Congress where they feel they have to do something. Those actions, whatever they might be, can bleed into the group market like they did nine years ago in the run-up to the Affordable Care Act. We had a relatively large uninsured population and that led to legislative action that ultimately affected the group market also."
Ferguson's group saw some success recently in its push for passage in the U.S. House of Representatives of H.R. 1304, the Self-Insurance Protection Act (SIPA). Sponsored by Dr. Phil Roe (R-TN) SIPA would clarify existing law to ensure that federal regulators cannot re-define stop-loss insurance as traditional "health insurance."
Stop-loss insurance is utilized by most private and public employers with self-insured plans as a financial backstop to reimburse the employer or the plan for catastrophic losses and to protect the plan and plan sponsor from financial insolvency.
Designating stop-loss insurance as a form of health insurance would effectively force these self-insured entities to discontinue their plans, Ferguson says.
The possibility of such a designation arose during the Obama administration. Though it is less likely to happen now, Ferguson says it is important to codify the protection now to head off any similar regulatory threats in the future.
Gregory A. Freeman is a contributing writer for HealthLeaders.