Readers need details if their employer self-insures

by February 12, 2014

AOL’s about-face on cuts to its 401(k) program raises some other interesting issues regarding employee privacy and employers that self-insure for the medical benefits they extend to workers.

hospital visit

Photo by iStock

Self-insurance is when employers pay medical benefits claims directly rather than paying premiums to a health insurance firm which would then cover the bills employees incur when obtaining health care services.  In other words, the employer pays out of pocket and generally hires a third party to administer the claims – which, by the way, is a big-bucks industry.

Here’s a Business Insurance chart ranking the big claims administrators by 2010 revenue; note that the top player took in $800 million that year.  It’s kind of an interesting niche; if you want to seek out local companies check with the National Association of Third Party Claims Administrators or the Society of Professional Benefits Administrators for leads.

You might want to do an explainer for consumers who may be unfamiliar with the concept and perhaps alarmed at some of the implications of self-insurance, from privacy to cost-control, that are making news this week.  Or, you could aim a story at small business owners considering the move in lieu of paying insurance premiums.

First, privacy

This New York Times piece “Revelations by AOL boss raise concerns over privacy,” is an eye-opener about how corporate management can parse reports to identify costs of specific employees, specific medications or illnesses, etc.   Wellness programs that survey workers about health habits and such are of concern; many employers are rolling those out each year, tempting workers with cash in exchange for info – what are the privacy pros and cons to workers of those programs?  You might check with HR consultants, privacy rights groups and others to outline the issues employees should consider before signing up.

Health careSome other questions to answer for readers, particularly with the fluctuating deadlines for Affordable Care Act implementation – some businesses just got another reprieve from the White House – involve the different compliance rules for self-insured plans, which are exempt from some aspects of the ACA.

Here’s a Lexology briefing, for example, about the regulations regarding the “essential health benefits” required by the ACA (keep in mind states also mandate benefits; be sure to get the updated list on that) but not of the self-insured plans.  Of course, many self-insured employers offer more than the bare minimum required by law but you should clarify with state regulators what is required, and what isn’t, in a sort of primer for readers.  Most states appear to have an office that deals with self-insured plans and do publish online directories, such as this one on the Washington state website.

Here’s an FAQ from Cigna, for businesses that outlines some of the ACA-related exemptions.  (Also a tidbit I hadn’t been aware of:  This fact sheet says that while the ACA prohibits lifetime dollar-amount caps, it does not prohibit claims caps based on other metrics, like number of prescriptions an employee can fill, or number of provider visits covered.  That’s an eye opener and an angle you might want to look out for as you review the health plans of big local employers.)

Self-insuring and Obamacare

So is self-insuring an “Escape Hatch from Obamacare,” as a vehement op-ed by former New York Gov. George Pataki insists?  This New York Times essay says self-insured employers are busily employing advisors to get tips on how to craft insurance options that won’t subject them to ACA rules.

It’s not too popular an option with small employers yet, according to some reports, though this Kaiser Health report from last year says “Small businesses pursue health law ‘loophole,’” another reference to the mandate exemptions noted above.  And check out this primer from the Association of Health Care Journalists, “Reporting on how employers might use self-insurance to sidestep Affordable Care Act rules.”  

Here’s a November 2012 paper from the Employee Benefits Research Institute, “Self-insured health plans: State variation and recent trends by firm size,” which says that nearly 60 percent of workers nationwide are in self-insured plans, with an upward trend among large employers.  The report gives state-by-state percentages and notes the impact of state mandates for companies self-insuring; obviously that is complicated now by Affordable Care Act provisions.

This Deloitte report from 2011 notes that employers in certain industries like agriculture, construction and utlities are more likely to self-insure; that’s a pattern you could look for locally.

Here is the U.S. Department of Labor’s 2013 report on self-insured health plans; as this Minnesota consumer guide notes, the DOL investigates consumer complaints about self-insured plans, which fall under ERISA rules.

The Self-Insurance Institute of America may be a resource.