As health care costs continue to climb, employers are actively looking for impactful mitigation strategies. Expanding cost-sharing methods has been one approach; yet, shifting costs onto employees might affect recruitment in a tight labor market. Instead, some employers are switching to self-insurance to reduce costs and improve service.

However, employers considering self-insured health plans must keep compliance in mind, specifically regarding the Affordable Care Act (ACA). In this article, we discuss what self-insurance is and how select ACA requirements apply to these plans.

What Is Self-Insurance?

A self-insured health plan is funded entirely by an employer who pays for employee health claims instead of an insurance company. This gives employers greater control over their plan designs. For instance, they can set employee cost-sharing limits, choose their health care networks and establish stop-loss limits so they’re guaranteed to never spend over a certain amount in any given year.

Self-Insurance & ACA Compliance

The Affordable Care Act (ACA) includes numerous reforms affecting the health coverage that employers provide to their employees. Many of these ACA reforms apply to all group health plans, regardless of their method of funding.

For example, self-insured plans must comply with the following ACA provisions, among many others:

• Dependent coverage for adult children up to age 26
• Coverage of preventive health services without cost-sharing (grandfathered plans are exempt)
• No rescissions of coverage, except in the case of fraud, intentional misrepresentation of material fact or non-payment of premiums
• No lifetime or annual dollar limits on essential health benefits (EHBs)
• Improved internal claims and appeals process and minimum requirements for external review (grandfathered plans are exempt)
• No waiting periods exceeding 90 days
• No pre-existing condition exclusions for any enrollees
• No discrimination against participants who participate in clinical trials (grandfathered plans are exempt)
• Participants’ maximum out-of-pocket expenses for covered EHBs cannot exceed specified amounts (grandfathered plans are exempt). To determine which benefits are EHB, a self-insured group health plan may choose any state benchmark plan that was approved by the Department of Health and Human Services (HHS).
• Regardless of an employer’s size, ACA employer reporting requirements are applicable (for an employer with less than 50 FTEs, Forms 1094/1095-B; for Applicable Large Employers (ALEs) Forms 1094/1095-C, including all individuals covered) for self-insured plans.
• Annual filing of Form 720 (due July 31) and payment of Patient Centered Outcomes Research Institute fee (PCORI)

Keeping up with all applicable ACA reforms can be a challenge. Our consultants at CBIZ Employee Benefits understand this, which is why we offer employee tracking, measurement and ACA reporting services through our CBIZ ACA CheckPoint tool. Learn more about the CheckPoint tool by connecting with our experts.

While it may seem like the list of reforms that apply to self-insured plans is never-ending, there are a select few reforms that do not apply to self-insured plans, including:

• EHB package requirement, which states that non-grandfathered insurance plans in the individual and small group markets must offer a comprehensive package of items and services
• Medical Loss Ratio (MLR) rules, which require health insurance issuers to spend 80 to 85% of their premium dollars on medical care and health care quality improvement, rather than administrative costs
• Small Employer Tax Credit, which is only available for the purchase of health care through a Small Business Health Options Program exchange
• Review process for unreasonable increases in premiums for health insurance coverage
• Annual insurance fee required by the ACA’s revenue-raising provisions
• Variety of insurance market reforms, including guaranteed issue and renewability and insurance premium restrictions

When determining whether self-insurance is the right strategy for your organization, it’s important to keep the pros and cons in mind. While self-insuring requires a greater assumption of risk and increased administrative obligations, it can also allow employers to avoid state insurance taxes and benefit mandates, retain more control over plan design and control reserves.

Did you know that CBIZ Human Capital Management offers ACA-specific solutions for payroll clients? Learn more about how our experts at CBIZ are helping thousands of organizations implement systems to track ACA reporting requirements — download our ACA Services Overview today.