The Herman Trend Alert

October 19, 2016

Employer Self-Insurance is Surging

In the last year, virtually every person in the United States carrying health insurance has seen either premium costs rise or copays increase or both. No one in the country would dispute that the Affordable Care Act (ACA), also known as Obamacare, is a mess. While the ACA has resulted in a higher percentage of US citizens being covered and it provides a safety net for those with pre-existing conditions who previously found health insurance unavailable, its evolution has become a payday for insurance companies and a nightmare for US consumers.

The major problems

Unfortunately, too few healthy uninsured young people chose to sign up for this insurance. After a year, insurance companies that found themselves with too many unhealthy folks on their rolls were able to simply move to lower-cost healthcare providers. Moreover, some stopped offering any plans in certain areas, where it was impossible to make adequate margins. Consumers who had at one time been promised they would be able to stay with their doctors, suddenly discovered those doctors were no longer "in network" and would now cost a lot more money to see. Some areas were left without insurance coverage at any price, because the companies concluded they couldn't make sufficient money there.Affordable care has become unaffordable---not only for consumers, but especially for companies as well.

The history of employer self-insurance

(Employer self-insurance occurs when employers, themselves, assume the risk normally carried by health insurance companies.)

In the past self-insurance was always attractive for large employers. They were able to save millions of dollars (USD) by launching wellness initiatives and taking on the insurance of their own employees. But now, due to several loopholes in the ACA legislation (and just plain greed), that were forced upon the bill's drafters, insurance companies have been able to significantly raise their rates, making self-insurance now in many cases far less expensive for medium- and smaller-size businesses than buying traditional insurance.

What else is affecting this situation?

Along with some featured exemptions for employers' self-insurance plans, the ACA offered such innovation in the allowed plans themselves that it considerably reduced the risk for medium and small companies. On top of these ACA attributes, a growing economy has given companies more confidence in their overall financial health.

Why does this matter to employers worldwide?

Though many countries around the world offer national health insurance, we expect an increasing number of employers to offer additional insurance to include treatment by healthcare professionals abroad, including in the US (e.g., VovagerMed, as featured in a previous Herman Trend Alert). When we see rising numbers of employers in the US investing in the health of their employees, it suggests that employers across the globe will not be far behind.

What's Next for ACA?

The answer to this question depends almost entirely on the upcoming election. However, clearly, the ACA as it is currently constituted, is not working for anyone except the insurance companies; and they are enjoying a windfall.

Special thanks to Ernie Clevenger and his MyHealthGuide, a weekly newsletter for the employer self-funded insurance community, and Scott Wooldridge writing for Benefits Pro.

*********