Putting “Affordable” Back into the Affordable Care Act

If your company has yet to explore self-insuring, new provisions taking effect in 2016 provide even more incentive for healthy workforce companies to give self-insurance a look.  Beginning in 2016, insurance for large group employers with 51 to 100 employees is subject to the Affordable Care Act’s small group market rules. Insurers no longer can apply pricing variables traditionally used for large groups. Many of these: employer-specific historical claims, industry, and gender mix would likely have lowered an employer’s insurance premium.

The “three to one” limitation on age-rating factors and requirement for unisex rating create distortions. Groups heavily weighted to the young, males or single-only coverage are likely to see abnormally large premium increases. Employers with better risk profiles could see substantial savings by self-insuring.

Analysis performed by the Urban Institute estimates that employers electing to self-fund (those with better risk profiles) can be expected to see a 20-30% self-insurance price benefit over fully insurance.

In 2015, the American Academy of Actuaries released an issue brief outlining key considerations as larger employers are forced into the small group market. Congress is paying attention with some recommending that even smaller employers take a look:

“I know I am going to and the Committee will certainly be suggesting . . . to go out and take a look at self-insurance.”

Congressman Chris Collins, New York
November 14, 2013