The Employee Retirement Income and Security Act (ERISA) of 1974 exempts self-insured plans from state regulation, including reserve requirement, mandated benefits, premium taxes, and consumer protection regulations.10 Self-funding is common among all large firms (200 or more wokers) but is less prevalent and a far riskier undertaking for all small firms (3-199 workers), who have fewer employees over whom to spread the risk of costly claims.
Self Funding
- Fifty-four percent of covered workers in 2004 are in a plan that is completely or partially self-funded (Exhibits 10.1, 10.2).
- The percentage of covered workers in self-funded plans is similar to last year (52% in 2003 vs. 54% in 2004) (Exhibit 10.1).
- Covered workers in all small firms (3-199 workers) are less likely than covered workers in larger firms to be in a self-insured plan. Ten percent of covered workers in all small firms are in self-funded plans, compared to 50% of workers in midsize firms (200-999 workers) and 80% of workers in jumbo firms (5,000 or more workers) (Exhibit 10.1).
- The prevalence of self-funded plans is relatively high in PPO plans (64% of workers covered in PPOs) and relatively low in HMO plans (29% of workers covered in HMOs) (Exhibit 10.2).
