Summary
The Employee Retirement Income Security Act (ERISA) — passed 51 years ago in 1974 — provides a uniform legal framework for employers operating across the United States to offer health benefits. This uniformity enables multistate companies to “self-insure” their health plans. Rather than purchasing insurance to cover the costs and financial risks of their employee health plans, these employers act as their own insurer: They design their own health plans and assume the financial risks associated with their employees’ use of health care services.
Since the passage of the Patient Protection and Affordable Care Act of 2010 (ACA), there has been much speculation that an increasing number of small and medium-sized employers would convert their health plans from fully insured to self-insured arrangements. The reasoning is that several key ACA components, such as essential health benefits, affordability standards, and new taxes and fees, would increase the cost of fully insured coverage. Those cost increases potentially make self-insurance a more attractive option for these employers.
What has actually happened to the availability of and enrollment in self-insured health plans since the ACA’s enactment? Using data from the Medical Expenditure Panel Survey - Insurance Component (MEPS-IC), this paper examines trends in the offering of and enrollment in self-insured plans, focusing particularly on the period from 2010 to 2024. The report also analyzes recent trends in stop-loss coverage, which many self-insured employers purchase to limit their financial risk.
Key findings:
- The share of private-sector establishments offering health plans that include at least one self-insured option has generally increased since the mid-1990s, well before the ACA.
- There is substantial variation by establishment size: Large firms are far more likely than small and medium-sized firms to offer a self-insured plan.
- Since the ACA’s major provisions took effect, self-insurance rates have risen among small and medium-sized firms, while declining among larger firms — though these trends may have begun to reverse in 2024.
- Over the long term, growth in the number of establishments offering self-insured plans has been accompanied by increases in worker enrollment in these plans.