Employer Self-Funded Health Insurance Is Taking Us in The Wrong Direction
Alain Enthoven (Health Affairs Blog 8/13/21)
The 2020 Kaiser Family Foundation Survey of Employer Health Benefits reports that 67 percent of employed, insured workers are covered under self-insured, or self-funded, arrangements. Under these arrangements, the employer, not an external insurer, directly bears the financial risk for the cost of employee health care.
Self-funded arrangements have grown steadily as a share of the insurance market over the past 15 years and now include many employers with less than 200 employees. While this may be the most cost-effective decision for individual employers under the current regulatory framework, it has the effect of locking in uncoordinated, open-ended fee-for-service (FFS) and locking out comparatively economical Integrated Delivery Systems (IDS).
Using standardized assessments, analyses consistently demonstrate significant and persistent quality and total-cost-of-care advantages for integrated care models, exemplified by the recent recurring assessments performed by the Integrated Healthcare Association in California. Similarly, in the RAND Health Insurance Experiment, a randomized control trial, Group Health Cooperative, a prepaid group practice now a part of Kaiser Permanente, reduced per-member cost 28 percent compared to traditional FFS in Seattle. UnitedHealth Group, a large national health insurance company, reported a 39 percent reduction in annual health care costs for beneficiaries in Medicare Advantage (MA) compared to similar FFS Medicare beneficiaries. The potential cost savings offered by IDS far exceed the costs to employers of state benefit mandates, taxes, and insurance company profits.
Below, I describe the flaws in our health care system and the choices we have made to produce those flaws. I outline a better approach, managed competition, that would produce more efficient coverage arrangements such as IDS.
