Self-Funded Health Insurance Plans Offer Employees Critical Consumer Protections Under the ACA but Need Oversight to Protect Enrollees, Subcommittee Hears Print
News Releases - Health, Medicine & Nutrition
Written by Brian Levin   
Thursday, 27 February 2014 10:02

WASHINGTON—Provisions within the Affordable Care Act are both boosting the economy and helping millions of Americans receive affordable, quality health care, but adequate oversight is needed for “self-funded” insurance plans, witnesses testified at a Health, Employment, Labor, and Pensions Subcommittee hearing today.

“Of the workers who get coverage through their jobs, about three in five work for an employer who self-funds their coverage, which means that they directly assume responsibility for covering the cost of their employees’ medical care,” said Rep. Dave Loebsack (D-IA), a senior Democrat on the subcommittee. “While the ACA provides employers who self-fund with greater flexibility, it also ensures that workers with this coverage have access to many of the law’s important new consumer protections.”

The landmark health care law protects workers in self-insured plans in a variety of ways. It allows, for example, parents to keep their children on their coverage until the age of 26; bans annual and lifetime limits on coverage so that battling a major chronic or catastrophic disease won’t lead to bankruptcy; and provides the right to an external review of a benefit denial and the right to a summary of benefits and coverage, which helps ensure insurance decisions are made fairly and empowers those comparing plan options.

Furthermore, the economy has improved since the ACA was enacted. More than 8 million new jobs have been added, and the law is reducing job lock. With increased flexibility in the labor market, workers can make career decisions, such as changing jobs or starting their own business, without worrying about their health insurance coverage.

Employers may benefit from self-funding their health insurance plans. However, there are risks to such insurance models that require sufficient governmental oversight. For example, protections may be needed to ensure that employers don’t repeatedly move back and forth between the fully insured and self-insured markets in a way that could raise costs and provide instability for workers. In addition, oversight of the insurance policies that businesses use to protect against occasionally higher costs in self-insured plans, called stop-loss insurance, will help ensure that this market is stable, especially for smaller employers and their employees.

“Ultimately, self-funding will likely lower costs for some employers who choose this path. But this trend will dramatically increase costs for other employers and their employees who remain in the insured market because self-funding is not a viable alternative,” said Maura D. Calsyn, Director of Health Policy at the Center for American Progress. “We must acknowledge this and other trade-offs as part of the discussion about self-funding and affordability. Oversight and regulation of stop-loss insurance, which is extremely limited today, will help stabilize the small-group market and protect both employers and employees.”

For more information on the hearing, click here.

For more information on the benefits and consumer protections of the Affordable Care Act, click here.

Committee on Education and the Workforce Democrats

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