Self-funded plans represent one alternative to conventional risk-based insurance. In addition, healthcare providers (eg, hospital systems) are offering another option, provider-owned plans.
Healthcare insurers offer two types of products: traditional risk-based (or fully insured) plans and self-funded plans. Individuals and smaller employers typically utilize risk-based plans, while larger employers prefer self-funded plans. In risk-based plans, insurers assume the responsibility for administrative tasks – ie, contracting with a network of physicians and facilities – and medical costs in exchange for monthly premiums. In self-funded plans, insurers receive a monthly fee for providing services such as administrative tasks and contracting with a network of physicians and facilities, while employers assume the risk for medical costs.
Due to the high and rising cost of healthcare, many companies, including some smaller firms, opt to self-fund as it can be less expensive. The largest healthcare insurers report that large proportions of their members are enrolled in self-funded plans. For example, in 2016:
- UnitedHealth Group, the leading US insurer, reported that 71% of its commercial members enrolled in self-funded plans
- Anthem, the second-largest US insurer, reported that self-funded plans represented 62% of its membership
- Aetna saw self-funded plans amount to 71% of its commercial membership
- Cigna’s self-funded plan membership amounted to 79% of its total enrollment.
According to the 2016 Employer Health Benefits survey by the Kaiser Family Foundation, about 61% of those enrolled in employer-sponsored private insurance are in a completely or partially self-insured plan. Many self-insured employers maintain partially self-insured plans, meaning they purchase stop-loss coverage from insurers to protect themselves from large claims.
Some provider networks (eg, large hospital systems) are offering insurance, termed “provider-owned plans”. They are attempting to offer a better value compared to traditional insurers by virtue of exerting direct control over a captive and narrow provider network. For example, Premier Health, a hospital and physician network in Ohio, began offering its Premier Health Plan to employees in 2013 and has expanded to offer Medicare Advantage, individual, and commercial plans to third-party companies and individuals. According to the American Hospital Association, about 90 US healthcare providers offer insurance plans as of February 2017 that cover their employees as well as third-party companies and individuals. Estimates place the total number of individuals served by provider-owned plans at more than 15 million, creating a source of competition for traditional insurance companies.
For more insights into the US healthcare insurance industry, see Healthcare Insurance: United States, a report published by the Freedonia Focus Reports division of the Freedonia Group. This report forecasts US healthcare insurance coverage and healthcare funding in US dollars to 2021. Total healthcare insurance coverage is provided in terms of the number of persons insured and uninsured. Also forecast to 2021 is the number of persons enrolled in the following major insurance types:
- employer-sponsored private insurance
- direct-purchase private insurance
- Children’s Health Insurance Program (CHIP)
US healthcare funding is also forecasted to 2021 in US dollars and segmented by source:
- private healthcare insurance
- healthcare investment
- other healthcare insurance programs, other third-party payers and programs, and public health activity.
To illustrate historical trends, healthcare insurance coverage, healthcare funding, and the various segments are provided in annual series from 2006 to 2016.
Related Focus Reports include Healthcare: United States, Medical Implants: United States, Medical Services: United States, Medical Equipment & Supplies: United States, and Pharmaceuticals: United States.
About the Author
Leon Mengri is a Senior Market Research Analyst with Freedonia Focus Reports. He conducts research and writes a variety of Focus Reports, which offer concise overviews of market size, product segmentation, business trends, and more.