Employers see self-insurance as hedge against ACA health costs
■ More corporate interest in self-funded plans, particularly from small employers, reflects fears that health system reform will send insurance rates skyrocketing.
Executives in health insurance and related businesses expect to see acceleration of companies self-funding their employee insurance plans as the mandatory health insurance aspect of the Affordable Care Act is implemented. Employers view it as a way to further control what they see as cost hikes prompted by health system reform.
Of the 326 executives surveyed by Munich Health North America-Reinsurance Division, 82% said they heard more interest during the last 12 months in employers self-funding their group health insurance plans. That includes 32% who said interest has increased “significantly.” As a result, 69% said they expected their business in administering self-funded plans to grow. The survey was conducted March 3-11 and released in April.
The trend toward self-funding is being driven by employers who are trying to control the costs of employee health benefits, said Richard Phillips, president of Munich Health North America-Reinsurance Division, in a statement.
“A properly designed self-funded health plan can allow a company to directly reap the benefits of their cost-containment and wellness activities as opposed to having to pay a monthly premium based on an arbitrary set of rating restrictions,” Phillips said in a statement. “As companies struggle with the growing cost of providing quality benefits, we expect self-funding to continue to grow in popularity.”
The majority of executives surveyed in the Munich report said they expect the ACA to increase health insurance premiums. Forty-two percent said premiums will increase by more than 25%. Forty-four percent said premiums will rise between 10% and 25%, and 11% said premiums will go up 10%. The remainder said it will have no impact, or premiums will decrease.
Big companies favor self-funded insurance
Self-funding of insurance has long been on the upswing. The Employee Benefit Research Institute reported in November 2012 that self-funded plans increased from 40.9% in 1998 to 58.5% in 2011. It found that large companies were most likely to offer them. Sixty-nine percent of employees with 50 or more workers were in self-insured plans in 2001, compared with 10.8% of workers in companies with fewer than 50 employees.
However, small companies are looking more seriously at self-funding, said Andrew Thompson, CEO of TS Insurance Group, a health insurance consulting firm in Heathrow, Fla. Those with good loss histories regarding their employees’ health plans are particularly interested, he said.
“Small employers usually have a good idea whether their employees have serious health problems,” Thompson said.
The Employee Retirement Income Security Act of 1974 governs self-insured plans. They usually are exempt from state laws that may have stronger regulations than ERISA — notably, ones that require insurance plans to pay physician claims within a certain number of days.