April 1, 2011 - A report on the large group health insurance market published yesterday by the U.S. Department of Health & Human Services dispels negative misconceptions about self-insured group health plans according to the Self-Insurance Institute of America, Inc. (SIIA).

"It is very encouraging that HHS has effectively given its stamp of approval on self-insurance given that the Agency report concludes such plans do not create unique consumer protection concerns nor will they disrupt the implementation of the new health care law," said SIIA Chief Operating Officer Mike Ferguson.   "Our work educating HHS officials during the report development process has clearly proven worthwhile."

He noted that SIIA representatives met with HHS officials and their contracted researchers on multiple occasions to help them understand how self-insured health plans operate and why an increasing number of employers choose this approach.

The first misperception shot down in the report is that self-insured health plans are more cost effective because they deny claims at a higher rate than fully-insured plans.   HHS contracted researchers from RAND concluded that there is no evidence of such disparity.

In a related criticism, some have contended that there is more potential for conflict of interest violations within self-insured plans in connection with plan coverage decisions.   Again, RAND could not find evidence supporting this criticism.

Interestingly, the report did not consider the extent to which self-insured plans covered more (or fewer) benefits than fully-insured plans.  It is SIIA's position that as a general practice the benefits offered through self-insured plans are at least equal and often more generous than fully-insured plans.   Given that the report did not present any evidence to the contrary even though it had the opportunity to do so, SIIA's position remains undisputed.

The report did conclude that "there is no evidence of systematically lower or higher out-of-pocket payments at self-insured firms compared with fully-insured firms," so it is not correct that self-insured plan participants are subject to more out-of-pocket expenses as a general rule.

But even more striking is a statistic reported by Deloitte Advanced Analytical Consulting Group included as part of the DOL report on self-insured health plans published earlier this week.  Deloitte found that from 2009 to 2010 for employers with more than 200 lives, the average fully-insured premium increased by $808 compared to average increase of $248 for self-insured premiums.  

This demonstrates that the self-insured health plans are doing a better job at constraining costs without compromising quality of care.

Most recently, critics of self-insured health plans have suggested that such plans will contribute to adverse selection when insurance market reforms are fully implemented and therefore undermine stated public policy objectives.   The report largely discounts this contention.

On this last point, SIIA is critical of related HHS discussion contained in the report speculating that a primary motivation for smaller employers to switch to self-insurance is their ability to purchase stop-loss insurance with low attachment points.  They then suggest that low attachment point policies are becoming more widely available.

SIIA believes that as a general statement the stop-loss market strikes an optimal retention level on every group since the employer chooses the specific deductible and the rates are based on the risk assumed by the employer.  We will closely follow the department's efforts to "monitor the availability and pricing of stop loss and small employers to self-insure" in order to protect the rights of employers and stop loss providers to continue to meet this optimal balance of risk versus costs. 

"The association sees no reason to subject employers and/or stop-loss insurers to unnecessary regulations or restrictions that dictate how employers choose to finance employee health benefits," according to Ferguson.   

This HHS report was mandated by the Patient Protection & Affordable Care Act.  It can be accessed through the members' only section of the SIIA web site at www.siia.org.