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PPACA spurs rising interest in self-funded plans

Health insurers are predicting an increase in self-funded health insurance plans by U.S. employers in response to the Patient Protection and Affordable Care Act (PPACA).

According to a study released Monday by Munich Health North America, a subsidiary of reinsurer Munich Re, employers are expected to increasingly do away with providing group health insurance to their employees and are expected to instead self-fund their plans.

“The trend toward self-funding stems from employers’ desire to maintain a level of flexibility and control in the design and financing of their employees’ health benefits,” said Richard Phillips, president of Munich Health North America’s Reinsurance Division.

Among the 326 industry executives surveyed, 82 percent said they have seen a growing level of interest among employers in self-funding their group health insurance plans over the past 12 months, with nearly one-third saying that interest has increased “significantly.”

Nearly 70 percent of health insurance organizations plan on growing their self-funding portfolios over the next year, the survey also found.

Self-funding differs from fully insured health insurance in a number of ways. In a self-funding arrangement, an employer basically agrees to cover all claims in the health care plan.

Employees still pay premiums and deductibles, but the employer covers claims up to a certain level called an aggregate attachment point, which are based on the total number of expected claims over a year.

Though self-funded models used to be generally more popular with large employers, in the past decade, more and more small- to mid-size employers have turned to self-funding as a way to control costs. Many in the industry expect reform will spur even greater interest among employers.

“A properly designed self-funded health plan can allow a company to directly reap the benefits of their cost containment and wellness activities as opposed to having to pay a monthly premium based on an arbitrary set of rating restrictions,” Phillips said. “As companies struggle with the growing cost of providing quality benefits, we expect self-funding to continue to grow in popularity.”

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