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CCH® BENEFITS — 06/3/11

More Than 40% Of Firms At Least Partially Self-Fund Health Care

from Spencer’s Benefits Reports: More than 40% of plans filing a Form 5500 are fully or partially self-funded, according to a recent report from Deloitte Financial Advisory Services LLP and Advanced Analytical Consulting Group, Inc. (AACG).

The report was requested by the Department of Labor under Sec. 1253 of the Patient Protection and Affordable Care Act (ACA), which requires a report on self-insured group health plans. The report analyzes such characteristics as plan type, number of participants, costs, funding mechanisms, and financial health, based on plans’ annual Form 5500 filings and financial data on sponsoring firms.

Among other results, the report found that firms in relatively poor financial health were less likely to self-insure than better-performing companies. Dr. Stan Panis, AACG principal said, “There was no evidence of companies at risk of insolvency gambling with health expenses. If anything, we found the opposite.”

Primary findings of the report include the following:

• In 2008, 29.5% of plans that filed a Form 5500 were self-insured, while 13.2% were funded through a mixture of insurance and self-insurance, resulting in 42.7% of plans filing a Form 5500 having a self-insured component.
• By contrast, 34.7% of participants in plans filing a Form 5500 were self-insured and 37.5% had a mixture of full-insurance and self-insurance resulting in the majority (72.2%) of participants in plans filing the Form 5500 that had a self-insurance component.
• The fraction of mixed-funded or self-insured plans has declined slightly from 45.3% in 2000 to 42.7% in 2008. However, the number of plan participants covered by self-insured plans has increased over this period.
• Most plans with fewer than 100 participants that file a Form 5500 were self-insured. This is presumably due to Form 5500 filing requirements and not reflective of all small plans.
• Among plans with 100 or more participants, the prevalence of self-insurance generally increases with plan size. For example, 26.8% of plans with 100 to 199 participants were mixed-funded or self-insured in 2008, compared with 76.4% of plans with 5,000 or more participants.
• Larger plans were more likely to have a mixture of funding mechanisms, that is, some plan components were self-insured, whereas others were fully-insured. For example, 5.4% of plans with 100 to 199 participants had mixed-funding in 2008, compared with 43% of plans with 5,000 or more participants.
• For plans with trusts, median per-participant benefit payments and other expenses of self-insured plans were lower than those of mixed-funded plans. This is particularly the case for plans with fewer than 100 participants. Also, participants in self-insured plans contributed to a greater extent to their health benefit plans than those in mixed-funded plans.
• Multiemployer and multiple-employer plans were more likely to self-insure than single employer plans. In 2008, 68.0% of multiemployer or multiple-employer plans were self-insured or mixed-funded, compared with 40.7% of single employer plans.
• Self-insurance varied by industry, with agriculture, mining, construction, and utilities firms having the highest prevalence of self-insurance.

For more information, visit http://www.aacg.com/static/extras/ACASelfFundedHealthPlansReport032811.pdf.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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