2015 Employer Health Benefits Survey
Section Ten: Plan Funding
Federal law (the Employee Retirement Income Security Act of 1974, or ERISA) exempts self-funded plans from most state insurance laws, including reserve requirements, mandated benefits, premium taxes, and consumer protection regulations. Sixty-three percent of covered workers are in a self-funded health plan. Self-funding is common among larger firms because they can spread the risk of costly claims over a large number of employees and dependents. Many self-funded plans use insurance, often called stoploss coverage, to limit the plan sponsor’s liability for very large claims or an unexpected level of expenses. Three in five covered workers in fully or partially self-funded plans are in plans with stoploss protection.
Self-Funded Plan: An insurance arrangement in which the employer assumes direct financial responsibility for the costs of enrollees’ medical claims. Employers sponsoring self-funded plans typically contract with a third-party administrator or insurer to provide administrative services for the self-funded plan. In some cases, the employer may buy stoploss coverage from an insurer to protect the employer against very large claims.
Fully Insured Plan: An insurance arrangement in which the employer contracts with a health plan that assumes financial responsibility for the costs of enrollees’ medical claims.
- Sixty-three percent of covered workers are in a plan that is completely or partially self-funded, similar to last year. The percentage of covered workers who are in a self-funded plan has increased over time from 49% in 2000 and 54% in 2005. In recent years, the percentage of covered workers enrolled in a self-funded plan has remained steady: 59% of covered workers were in such an arrangement in 2010; similar to 63% in 2015 (Exhibit 10.1).
- The percentage of covered workers enrolled in self-funded plans has been stable in recent years in both small firms (3-199 workers) and large firms (Exhibit 10.2).
- The percentage of covered workers in self-funded plans differs by plan type: 70% of covered workers in PPOs, 68% in HDHP/SOs, 38% in HMOs, and 36% in POS plans are in a self-funded plan. The share of covered workers in self-funded HDHP/SOs increased from 60% to 68% in the last year (Exhibit 10.3).
- As expected, covered workers in large firms (200 or more workers) are significantly more likely to be in a self-funded plan than covered workers in small firms (3-199 workers) (83% vs. 17%). The percentage of covered workers in self-funded plans increases as the number of employees in a firm increases. Eighty-two percent of covered workers in firms with 1,000 to 4,999 workers and 94% of covered workers in firms with 5,000 or more workers are in self-funded plans in 2015 (Exhibit 10.4).
Stoploss Coverage and Attachment Points
- Sixty percent of workers in self-funded health plans are in plans that have stoploss insurance (Exhibit 10.10). Stoploss coverage limits the amount that a plan sponsor has to pay in claims. Stoploss coverage may limit the amount of claims that must be paid for each employee or may limit the total amount the plan sponsor must pay for all claims over the plan year.
- The percentage of workers in self-funded health plans with stoploss insurance is unchanged from 2011, when the survey first asked about stoploss insurance (58% in 2011 and 60% in 2015).
- Ninety-two percent of covered workers in self-funded plans that have stoploss protection are in plans where the stoploss insurance limits the amount that the plan must spend on each employee (Exhibit 10.11). This includes stoploss insurance plans that limit a firm’s per-employee spending and plans that limit both a firm’s overall spending and per-employee spending.
- Firms with per-enrollee stoploss coverage were asked for the dollar amount where the stoploss coverage would start to pay for most or all of the claim (called an attachment point). The average attachment point in firms with 3-199 workers is about $210,000. For large firms (200 or more workers) with a per-person limit, the average attachment point is about $340,000 (Exhibit 10.11).