On March 23, 2010, President Barack Obama signed into law the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act of 2010, known as the Affordable Care Act (ACA), a sweeping set of health care policy changes intended to expand insurance coverage in the United States. Among its many provisions, the ACA includes a mandate requiring all individuals to either obtain health coverage or pay a fine, potential penalties for employers that do not offer health coverage to their workers, an expansion of eligibility for the Medicaid program, and major regulatory changes in...

Employers with fully insured plans pay a set premium to a commercial insurer or health maintenance organization (HMO), and the insurer or HMO assumes full risk for all health insurance claims made by the firm’s employees. Employers with self-insured plans bear some or all of the risk for the health insurance claims of their employees and typically pay a third-party administrator (TPA) to perform administrative functions (such as claims adjudication, utilization review, collection of premiums, and customer service). Some firms offer both fully insured and self-insured health plans to their employees. For example, in some areas, a firm with a...

To obtain information about the prevalence of self-insurance, we analyzed Kaiser/HRET data from 2006 to 2010. Appendix A provides details of the analysis. Table 3.1 presents estimates over time of the percentage of firms offering health insurance that had at least one self-insured health plan and the proportion of workers enrolled in self-insured plans.

The proportion of firms offering a self-insured plan increased from 8.4 percent in 2006 to 10.9 percent in 2010, while the share of enrollment in self-insured plans rose from 52.6 percent to 58.0 percent over the same time period.

Table 3.2 presents estimates of the percentage...

Employers that offer self-insured health plans are not subject to state insurance laws relating to insurer solvency, including laws prescribing reserve requirements or investment limitations, or other laws regulating the specifics of health plan financing. Instead, self-insured health plans are subject to ERISA’s general fiduciary requirements, including the requirement that the plan be prudently managed and administered. Further, while some plans report to the U.S. Department of Labor (DOL) through Form 5500, not all plans are required to do so. Unfunded, fully insured, and combination unfunded/insured welfare plans covering fewer than 100 participants at the beginning of the plan year...

As described in Chapter Two, some employers may choose to self-insure to avoid costs associated with covering certain benefits mandated as part of state insurance regulation. Perceptions about the frequency of employers self-insuring in order to avoid mandates were widespread in our stakeholder interviews. Some stakeholders believe that even when mandated benefits are not covered, self-funded plans are no less generous than fully insured plans overall, because employers choose more generous benefits in other areas, such as specialty care, that best meet the needs of their employees.

This chapter provides empirical analyses of the actuarial values associated with self-insured and...

The value of consumers’ health insurance coverage depends in large part on the ability to access the benefits specified in the terms of the plan. Submitting a medical claim does not guarantee payment, and insurance companies routinely review claims for errors and retain the right to deny payment for claims outside the scope of the plan. Claims denial rates can provide additional information about the quality of plans with identical contract terms. Plans with higher claims denial rates are of lower value to consumers. This chapter explores the relationship between self-funding and claims denial rates by investigating the potential conflicts...

This chapter describes the main recourse options available to consumers with employer-sponsored group health plan coverage who experience denied medical claims. These options are internal appeals, external appeals, and litigation. For each type of recourse, we contrast the rights of consumers with self-insured group health plan coverage to those with fully insured coverage under the relevant state and federal laws and describe key changes that will result from the implementation of the ACA. Table 7.1 summarizes the main results of this analysis.

Any discussion of consumer recourse options for denied claims in employer-sponsored group health plans must begin with ERISA,...

The ACA makes substantial changes to the regulations governing fully insured small-group plans. Under the laws that existed prior to passage of the ACA, small-group insurance regulations were determined on a state-by-state basis (small-group plans are also generally governed by HIPAA and ERISA). While several states have adopted modified community rating laws that substantially restrict insurers’ ability to charge different prices to different groups, the majority of states allow small-group premiums to vary by as much as 30 percent.³° In addition, there is substantial variation across states in the number and type of benefits that insurance plans are mandated to...

The ACA makes substantial regulatory changes for the small-group insurance market that may influence employers’ decisions to self-insure. To determine whether those changes could have adverse, unintended consequences related to employers’ decisions to self-insure or fully insure, we held discussions with industry experts, analyzed secondary data from the Kaiser/HRET annual survey and data on claims denials from athenahealth (a company that offers electronic billing services to health care providers), and predicted changes in self-insurance rates, using the COMPARE microsimulation model.

In the current environment (prior to ACA implementation), regulatory differences of self-insured and fully insured plans that affect the cost...