Over the past decade, large employers increasingly have bypassed traditional health insurance for their workers, opting instead to assume the financial risk of enrollees’ medical care through self-insurance. Because self-insurance arrangements may offer advantages—such as lower costs, exemption from most state insurance regulation and greater flexibility in benefit design—they are especially attractive to large firms with enough employees to spread risk adequately to avoid the financial fallout from potentially catastrophic medical costs of some employees. Recently, with rising health care costs and changing market dynamics, more small firms—100 or fewer workers—are interested in self-insuring health benefits, according to a new qualitative study from the Center for Studying Health System Change (HSC). Self-insured firms typically use a third-party administrator (TPA) to process medical claims and provide access to provider networks. Firms also often purchase stop-loss insurance to cover medical costs exceeding a predefined amount. Increasingly competitive markets for TPA services and stop-loss insurance are making self-insurance attractive to more employers. The 2010 national health reform law imposes new requirements and taxes on health insurance that may spur more small firms to consider self-insurance. In turn, if more small firms opt to self-insure, certain health reform goals, such as strengthening consumer protections and making the small-group health insurance market more viable, may be undermined. Specifically, adverse selection—attracting sicker-than-average people—is a potential issue for the insurance exchanges created by reform.
Policy Research & Analysis
The National Institute for Health Care Reform (NIHCR) contracted with the Center for Studying Health System Change (HSC) between 2009 and 2013 to conduct health policy research and analyses to improve the organization, financing and delivery of health care in the United States. HSC ceased operations on Dec. 31, 2013, after merging with Mathematica Policy Research, which assumed the HSC contract to complete NIHCR projects. Beginning in 2014, NIHCR has contracted with Altarum Institute’s Center for Sustainable Health Spending and others, with a focus on research to improve health in Detroit.