Small firms are not self-insuring to avoid ACA compliance

After the Patient Protection and Affordable Care Act (ACA) was passed into law, there was some speculation that small firms might start self-insuring to avoid some of the costs of complying with the law. However, recent research from the Employee Benefit Research Institute (EBRI) has found that so far (up to 2013, the latest data available), there is no evidence that they are doing so. Although the instance of self-insured plans is growing, it is not among small employers.

In 2013, EBRI found that 58.2 percent of workers with health coverage were in self-insured plans, up from 40.9 percent in 1998. Large employers (those with 1,000 or more workers) have generally driven up this trend. EBRI noted that there is no evidence that small firms are increasingly self-insuring. The percentage of workers in self-insured plans in firms with fewer than 50 employees has hovered around 12 percent since 1996.

Since enactment of ACA in 2010, there has been speculation that the law would result in an increasing number of smaller employers offering self-insured plans. Some employers think that components of ACA, such as the grandfathering requirements; the minimum-creditable coverage requirement; the breadth of essential-health benefits; the taxes on insurers, medical device manufacturers, and pharmaceutical companies; the affordability requirements; and the reinsurance fees will all drive up the cost of health coverage. To the degree small employers are concerned about the rising cost of providing health coverage, self-insurance could become a way to mitigate any expected regulatory cost increases.

“So far, there is no sign smaller firms are moving to self-insure, even though more large firms are doing so,” said Paul Fronstin, director of EBRI’s Health Research and Education program. “This analysis provides a baseline to measure any future changes.”


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