MORE INFORMATION ON EMPLOYER- SPONSORED
HEALTH CARE
EMPLOYER-BASED HEALTH COVERAGE:
HEALTHY WORKERS AND EMPLOYEE RETENTION
Employers want healthy workers, and know that providing them with the access and resources needed means to support good health, seek preventative care, treat illnesses and injuries, and take their prescribed medication. Health benefits that provide access to affordable care and medication are also powerful employee retention tools. This is why employer-based health insurance is foundational to Kansas health care as well as our economy.
There are at least 1.73 million Kansans with private health coverage, compared with almost 900,000 with public health coverage and 247,000 uninsured.
Private, employer-based health insurance can be either fully-insured or self-funded.
Source: https://www.khi.org/articles/insurance-coverage-by-kansas-congressional-district-2023/
Public
health care coverage
Private
health care coverage
Uninsured
FULLY-INSURED PLANS MEAN:
SELF-FUNDED PLANS MEAN:
In a fully-insured health plan, the employer pays a premium to a health insurance company. The health insurance company administers the plan and assumes the risk for large claims.
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Potentially higher costs for employers
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Less risk to employers
In a self-funded health plan, an employer uses its own funds to provide health coverage. A self-funded plan can reduce costs to an employer, especially if employees are relatively healthy and do not use the plan benefits very much. It also assumes a level of risk for the employer.
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Potentially lower costs for employers
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More risk for employers
Both fully-insured and self-funded plans are used by employers to support good health among employees and as a job recruitment and retention tool.
SELF-FUNDED PLANS:
HISTORY AND IMPLICATIONS OF ERISA LAW
Self-funded plans are traditionally governed by federal, not state law.
Self-funded health plans have traditionally been governed by the provisions of the Employee Retirement Income Security Act (ERISA). According to the U.S. Department of Labor, the provisions of ERISA “were enacted to address public concern that funds of private pension plans were being mismanaged and abused. ERISA was the culmination of a long line of legislation concerned with the labor and tax aspects of employee benefit plans. Since its enactment in 1974, ERISA has been amended to meet the changing retirement and health care needs of employees and their families.”
Employers sometimes choose self-funded ERISA-governed plans to provide savings, stability, and consistency across multiple states.
Because self-funded plans are governed by federal ERISA law, they have traditionally been exempt from many new mandates and red tape proposed by state lawmakers and regulators. For companies with younger, healthier workforces, ERISA plans may offer savings over fully-insured options.
Companies with self-funded plans operating in multiple states have been able to operate under one regulatory framework governed by federal ERISA law. However, companies with fully-insured plans have had to fight back against cost-hiking mandates in multiple states for years. Multi-state companies with fully-insured plans must navigate a complicated patchwork of state laws governing health insurance requirements. This can present compliance challenges, introduce significant variance in costs from one state to another, and create an environment where employees in one state receive different benefits than employees in another.
For nearly 50 years, ERISA has prevented state legislators from preempting federal laws governing self-funded plans. However, a 2020 U.S. Supreme Court decision in Rutledge v. PCMA has jeopardized those federal protections. The decision has emboldened a wave of state-level activism driven by special interests who are looking to boost their profits by undermining self-funded plans, further diminishing ERISA law, and undercutting options to negotiate lower drug prices.
Now, both fully-insured employers and employers with self-funded plans are in the same boat, trying to stay above water while state policymakers release a flood of mandates and regulatory requirements that would drown employers in high costs. The good news is that Kansas employers have a new ally in the fight against price hikes on their employer-sponsored health coverage: Kansas Employers for Affordable Healthcare.