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 trends and statistics

The percentage of self-funded 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, 86.3 percent were in a self-funded plan.

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 in a self-funded plan.
  • The percentage of employees in self-funded 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

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-funded plans among employers (with the exception of organizations with less than 50 employees). Self-funded 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.

Read the full report from the Employee Benefit Research Institute here.

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