…Though stalling among larger employersNew research from the Employee Benefit Research Institute (EBRI).
Research by the Employee Benefit Research Institute (EBRI) finds very different trends in coverage by self-insured health plans for small versus larger private-sector establishments: While the percentages of smaller establishments with at least one self-insured plan increased between 2015 and 2016, self-insurance in larger establishments declined over that same period of time.
“Since the passage of the Patient Protection and Affordable Care Act of 2010, there has been speculation that an increasing number of small and midsized employers would convert their health plans from fully insured to self-insured plans,” says Paul Fronstin, director of the Health Education and Research Program at EBRI. “The rationale has been that several of the key ACA components—creditable coverage, affordability, essential benefits, and various taxes and fees—would drive up the cost of health coverage, making self-insurance a more attractive alternative for many cost-conscious employers.” Yet, EBRI’s research finds, overall enrollment in self-insured plans fell from 60 percent to 57.8 percent between 2015 and 2016.
EBRI’s Issue Brief, “Self-Insured Health Plans: Recent Trends by Firm Size, 1996‒2016,” explains why.
Using findings from the Medical Expenditure Panel Survey-Insurance Component, the Issue Brief notes that the percentage of small establishments (less than 100 employees) that report offering self-insured plans actually did rise materially from 14.2 percent in 2015 to 17.4 percent in 2016. However, in 2016, the percentage of midsized establishments offering a self-insured plan fell from 30.1 percent to 29.2 percent. And, for large establishments (500 or more employees), the percentage offering self-insured options declined from 80.4 percent to 78.5 percent over that same time period.
Excerpts from ‘Self-Insured Health Plans…’
Employment-based health plans generally fall into one of two categories―fully insured plans or self-insured plans. The
key distinction is whether the employer has decided to purchase an insurance contract to cover the costs and financial
risks associated with its employee health plan, or to use its own funds, including funds that might be set aside in a
separate trust maintained by the employer (e.g., a voluntary employee beneficiary association) to cover such costs.
Employers offering self-insured plans often purchase stop-loss coverage from an insurance company to mitigate the risk
of higher-than-budgeted expenses. Different experts may have different views about how any particular health plan
should be classified, especially when plans include a flexible spending account (FSA), health reimbursement
arrangement (HRA) or health savings account (HSA) that is funded separately from the main health plan.
The fully insured/self-insured distinction is also important from a legal perspective. Under the federal Employee
Retirement Income Security Act of 1974 (ERISA), which provides the legal framework for the uniform provision of
health benefits by U.S. employers, state laws (other than insurance laws) are generally pre-empted. This means, for
example, that self-insured health plans do not have to satisfy state health insurance laws, including state-mandated
reserve, benefit, claims, premium, and other requirements, which results in ease of administration and lower expenses.
In contrast, fully insured plans are required (among other things) to cover state-mandated benefits and pay state
insurance premiums. Both fully insured and self-insured health plans may have to comply with other federal laws
applicable to such plans, such as components of the Patient Protection and Affordable Care Act of 2010 (ACA).
Since the passage of the ACA, some commentators have speculated that an increasing number of small and midsized
employers would convert their health plans from fully insured to self-insured plans.1 The rationale has been that several
of the key ACA components—creditable coverage, affordability, essential benefits, and various taxes and fees—would
drive up the cost of health coverage, thus possibly making self-insurance (which is viewed by many as generally less
expensive than fully-insured alternatives) a more attractive option for many employers.
Establishments With Self-Insured Plans
The percentage of private-sector establishments offering health plans that report they self-insure at least one of their
health plans has been generally increasing since at least the mid-1990s, well before passage of the ACA. In 2016, 40.7
percent of private-sector establishments reported that they self-insured at least one of their health plans, up from 28.5
percent in 1996 (a 43 percent increase).
Over this same period, the portion of large establishments (those with 500 or more employees) offering health plans
reporting they self-insure at least one plan increased from 71.6 percent in 1996 to 78.5 percent in 2016, while the selfinsured
percentage for midsized establishments (100‒499 employees) with health plans decreased from 35.3 percent to
29.2 percent over the period and the self-insured share of small establishments (fewer than 100 employees) increased
from 12.1 percent to 17.4 percent of those offering plans.
These long-term trends have generally held for each of the years during the period, until recently. Between 2013 and
2015, the percentage of establishments offering health plans with at least one self-insured plan increased for midsized
establishments from 25.3 percent to 30.1 percent, but decreased to 29.2 percent between 2015 and 2016. The share of
large establishments offering self-insured options has steadily eroded, declining from 83.9 percent in 2013 to 78.5
percent in 2016.
Workers Enrolled in Self-Insured Plans
While there has been an increase in the percentage of establishments that self-insure at least one health plan,
enrollment in those plans has decreased. The percentage of covered workers (i.e., workers covered by an
employment-based health plan) enrolled in self-insured plans decreased between 2015 and 2016. In 2016, 57.8 percent
of covered workers were enrolled in self-insured plans, down from 60 percent in 2015.
More specifically, over the 1996‒2015 period, the percentage of health-plan-covered workers employed by larger
establishments (1,000 or more employees) and enrolled in self-insured plans increased from 67 percent to about 86
percent,3 but then fell to 82 percent in 2016. Similarly, the comparable self-insured percentage of workers in midsized
establishments (100‒999 employees) rose slightly from 39 percent to 40.5 percent between 1996 and 2015, but then
fell back to 39 percent in 2016. In contrast, growth in covered workers enrollment in self-insured plans occurred among
smaller establishments between 2015 and 2016. It increased from 14 percent to 16 percent in establishments with
fewer than 10 employees. It increased from 10 percent to 15 percent in establishments with 10-24 employees. And it
increased from 15 percent to 17 percent in establishments with 25-99 employees.
While most workers are employed by large establishments, most establishments are small. As a result, the increase in
self-insurance among small establishments was not large enough to offset the decline among large establishments,
resulting in a net decrease in the percentage of covered workers enrolled in self-insured plans.
Because large establishments employ so many more workers, the increase in self-insurance among small establishments was not large enough to offset the decline among large establishments, resulting in a decrease in the percentage of covered workers enrolled in self-insured plans.
The research confirms that more small employers adopted self-insured plans; however, it raises questions about why the recent movement to self-insured plans in the midsized market may be reversing itself.
The full report is published in the Feb. 27 Issue Brief, and is available online here.
The Employee Benefit Research Institute is a private, nonpartisan, nonprofit research institute based in Washington, DC, that focuses on health, savings, retirement, and financial security issues. EBRI does not lobby and does not take policy positions. The work of EBRI is made possible by funding from its members and sponsors, which include a broad range of public, private, for-profit and nonprofit organizations. For more information go to www.ebri.org or visit the web site of EBRI’s affiliated American Savings Education Council at www.asec.org