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Roughly 40% of employers with three to 99 employees are escaping from the fully insured small-group health insurance market by using level-funded plans, an analyst told state insurance regulators earlier this month in Denver.
In 2018, fewer than 10% of small firms had level-funded health plans, according to Kelly Edmiston, policy research manager at the National Association of Insurance Commissioners' Center for Insurance Policy and Research.
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The designers of a level-funded plan set it up as a self-insured health plan operating under the Employee Retirement Income Security Act. The employers usually buy stop-loss insurance, or insurance of health plans, with low "attachment points," or low stop-loss deductibles.
Thanks to the stop-loss insurance, "small employers are often protected from any meaningful additional liability," Edmiston told the regulators. But, because the employer classifies the plan as a self-insured plan, the employer can avoid complying with state benefits mandates, Edmiston said.
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Small employers are shifting to level-funded plans because health insurance premiums have increased almost three times as fast as the overall rate of inflation since 1999, Edmiston said.
Edmiston talked about level-funded plans during a discussion of trends in the small group market, according to a copy of his slidedeck included in an NAIC meeting materials packet.
He gave the briefing at a session organized by that NAIC's Regulatory Framework Task Force at the NAIC's fall national meeting. The task force helps state regulators develop model acts and model regulations for state health care initiatives. It also helps regulators consider issues that affect state health insurance regulation.
In addition to discussing level-funded plans, Edmiston discussed the small-group plans available through the Affordable Care Act public exchanges programs and programs based on health reimbursement arrangements that let employers give workers cash the workers can use to buy their own individual coverage.
Only about eight states appear to have active small-group health plan programs available through their ACA exchange programs, Edmiston said.
In many states, HRA-based cash-for-coverage programs appear to be more popular because they tend to offer more attractive options and better experiences, Edmiston said.
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Allison Bell
Allison Bell, a senior reporter at ThinkAdvisor and BenefitsPRO, previously was an associate editor at National Underwriter Life & Health. She has a bachelor's degree in economics from Washington University in St. Louis and a master's degree in journalism from the Medill School of Journalism at Northwestern University. She can be reached through X at @Think_Allison.
