Short Takes On News & Events

More Workers Covered By Bosses’ Self-Insured Plans

By Ankita Rao

November 28th, 2012, 5:25 PM

The number of U.S. workers covered by self-insured health plans—in which their employer assumes the financial risk for health costs rather than paying insurance companies to do that—has grown steadily in recent years. But such plans are still primarily used by large companies, not small employers, a new study finds.

As of 2011, more than half of U.S. employees were covered under these self-insured plans, compared to about 41 percent in 1998, according to a report by the Employee Benefit Research Institute. These plans can lower costs for employers by reducing administration, exempting them from state-mandated services, and allowing them to provide uniform coverage across state lines.

Sometimes workers do not even know that their employer is self-insuring because the company will hire a traditional insurance plan to administer the program.

Businesses with less than 50 employees have not followed the same trend, with only 10.8 percent of private sector enrollees in self-insured plans in 2011. The number has remained generally around 12 percent since 1998, according to EBRI.

The analysis also found that the rates varied by state — Hawaii was on the lower end with 30.5 percent of workers enrolled in self-insured plans, and Indiana and Minnesota were on the higher end with more than 70 percent enrolled. Massachusetts, the only state to have enacted universal health care coverage, saw more medium and large firms choose self-insurance.

The report’s author, Paul Fronstin, director of EBRI’s Health Research and Education Program, says the research was prompted by speculation that smaller firms increasingly may move to a self-insured model because of their concerns about rising insurance costs under the 2010 federal health law.

“Employers generally, and small employers particularly, concerned about the rising cost of providing health coverage may view self-insurance as a better way to control expected cost increases,” notes Fronstin. “This new analysis provides a baseline against which to measure future trends.”

In a separate issue brief, researchers from The Urban Institute said the health law will make self-insurance plans more attractive to small employers because of less price discrimination against small groups.

But since the federal regulations don’t apply to self-insurance, authors said a small business migration to the plans could “undermine the effectiveness of the Affordable Care Act’s small-group reforms and to destabilize the market.” But the brief describes ways that federal or state regulation can help mitigate that problem.

5 Responses to “More Workers Covered By Bosses’ Self-Insured Plans”

  1. Lance says:

    If all employers had done this in the past, we would not have needed Obamacare in the first place. People forget that Obamacare came into being because the private healthcare industry could not control their lust for more and more profits and their ineptness in their ability to see that the system was broken. The private healthcare industry put consumers at the bottom of their list of priorities. Our healthcare system is the perfect example of capitalism run amuck! A private system of out of control greed and sheer wanton lust for more and more wealth by corrupt providers. Had the industry made even a small effort to police itself and had providers been the least bit reasonable about profits, we would not have needed healthcare reform. They didn’t! That is why we have Obamacare. Although not perfect, Obamacare begins to put consumers back in charge of their healthcare and it begins to curb the wanton lusts of corrupt providers.

  2. Temo says:

    80% of hospitals are not for profit and both they and health insurance companies run on low single digit profit margins, much less than your average grocery store or bailed out car company. Profits are not the problem. If you eliminated all health insurance company profits, it would reduce the nation’s healthcare spending by less than 1%.

  3. Miekoo says:

    Of course profit is a motivator for all non-nonprofit companies. However you are sadly mis-informed. Companies COMPETE to offer you lower prices. Government intervention has jacked prices up with all its red-tape. Government red tape increased cost of medical services, cost to operate the hospital, cost to educate doctors, and that cost was passed on to the insurance companies who have to operate under higher cost. Government red tape put the “Door to Door” doctor out of business, it’s unheard of these days to have a doctor visit you.

    Look at this

    I am not defending the insurance companies, some of them too have been mis-managed, however to assume (all) the companies don’t care about it’s customers is ridiculous. Insurers have a HIGHER risk than ever and their profit margins are slim compared to 10 or 20 years ago.

    Doctors are losing money while at the same time, the cost of medical procedures goes up, the cost of tuition goes up and the cost to operate a hospital goes up.

    if Pure Government = If there were no private entities providing services, this might actually work out, the government compensates doctors more money depending on higher taxes (witch would replace health premiums).

    if Pure Capitalism = If companies were allowed to compete without red tape, they can offer customers lower health premiums and pay doctors more money.

    Government red tape on Capitalism = If government interferes with companies, the companies operating margin suffers, this results in higher premiums to cover E&O and other cost. Additionally, doctors are forced by the government to use certain procedures and can only charge certain amounts to certain entities (how to bill individuals how to bill insurance companies, how to bill medicare), this creates way too much overhead that the Doctor doesn’t need, so he has to hire additional staff whose job is purely to shuffle paperwork, total waste of resources.

  4. Woksitry says:

    Tempo $ miekoo,

    If profit oriented private enterprise is the answer to our broken healthcare system, then why did Obamacare ever get any traction? Private insurers have had a death grip on our healthcare system since anyone can remember and private profit driven providers have been in sole control of healthcare delivery. So, tell me how in the world did things get so bad and healthcare costs skyrocket out of control? If private enterprise is such a great thing, why does our healthcare system rank 37th worldwide in effectiveness and efficiency and why is our healthcare system the most expensive in the world by at least twice? You seem to defend profit driven private enterprise so much and yet, Obamacare got passed an enacted. If things were so perfect as you suggest, how did Obamacre have a chance of getting enacted. Something really sinks here guys! I’m not buying you spin! Somebody ain’t telling the truth, huh? My guess? You guys are just blowing smoke like Republicans normally do these days!

  5. Lance says:

    While just over 50 percent of people polled favor repeal of Obamacare, there are still almost 45 percent that want to keep it. The other 5 percent simply don’t know how they feels or just don’t care. With those numbers, as more of the new law gradually rolls out, more and more people, especially regular healthcare consumers, will see the many great benefits and will actually be enjoying some or all of them. Opponents scream “repeal” and yet, they have no replacement healthcare reform law. They simply want to continue with an unfair system where, depending upon where you work and depending upon whether your employer cares about the health of you and your family and depending upon whether your employer wants you to have good benefits, you are at the mercy of your employers decisions. For example, we can see a huge disparity between how Costco treats their employees compared to WalMart. We can see the disparity in how McDonald’s treats their employees compared to Boeing. That is the kind of Neanderthal healthcare system Republicans want to have. Sadly, that kind of system leaves 50 million people uninsured and another 25 million more underinsured. Fully one quarter of America’s population in jeopardy and overusing the hospital emergency rooms all across America. There’s only one way to describe what Republicans want. Third world healthcare! As flawed as some parts are, if Obamacare did anything, it started a conversation that is long overdue in America. America is ranked 37th worldwide compared to other industrialized nations and yet we pay twice as much for what we get. That is outrageous! All because Republicans want to protect the industry and the fat cats more than they want to protect the consumer.