Summary
The Employee Retirement Income Security Act (ERISA) — passed 50 years ago in 1974 — provides the legal framework for the uniform provision of benefits by employers doing business anywhere in the United States. This uniformity allows multistate companies to “self-insure” their health plans. These companies do not purchase insurance to cover the costs and financial risks associated with their employee health plans; instead, they act as their own insurance company, designing their own health plan and assuming the risks associated with use of health care services among their employees with health coverage.
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 plans. The rationale has been that several of the key ACA components 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.
What has happened to the availability of and enrollment in self-insured health plans since passage of the ACA? Using data from the Medical Expenditure Panel Survey - Insurance Component (MEPS-IC), this paper examines trends in offerings and utilization, with a particular focus on the time period from 2010 to 2023. And for the first time, this report looks at recent trends in stop-loss coverage.
Key findings:
- 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.
- There is much variation in the percentage of employers offering a self-insured plan by establishment size. Large firms are much more likely than small and medium-sized firms to self-insure at least one of their health plans.
- Since passage of the ACA, as the major portions of the legislation have been implemented, trends in self-insurance have differed by establishment size. Self-insurance has increased in small and medium-sized firms, while it has decreased in larger firms, though these trends may have reversed themselves in 2023.
- Over the long term, along with the increase in the percentage of establishments that self-insure at least one health plan, enrollment in those plans increased as well. There was a dramatic increase in the percentage of workers enrolled in a self-insured health plan in 2023 in large firms.
- The percentage of employees in self-insured health plans with stop-loss coverage has been relatively stable recently, but there are significant differences by firm size.