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ACA could push more companies to self-insure workers

Posted on February 22nd, 2013 Read time: 1 minutes

Lawmakers and consumer advocacy groups have stated companies with young, healthy employees may refrain from participating in insurance coverage markets to avoid the minimum benefits required by the Affordable Care Act, The New York Times reports.

Instead of purchasing coverage from insurers on the exchange, employers can choose to self-insure their workers instead.

"The new health care law created powerful incentives for smaller employers to self-insure," Deborah J. Chollet, a senior fellow at Mathematica Policy Research, told the newspaper. "This trend could destabilize small-group insurance markets and erode protections provided by the Affordable Care Act."

The rate of businesses insuring their employees has grown in the past decade, but some experts believe the law is still appealing for smaller entities because self-insuring costs can add up for sick or older employees.

Self-insurance makes employers responsible for associated financial risks. Rather than paying premiums to insurers, employers cover employee and healthcare provider claims. To avoid costs as large as $100,000 for one claim, these companies can purchase "stop loss" insurance. 

Meanwhile, lawmakers are also worried about premium rates on the market, which could experience a "shock," because of requirements aimed at making coverage more affordable for older, sicker exchange participants, The Los Angeles Times reports. Paradoxically, this could drive up costs for young, healthy Americans who do not currently have employer-sponsored coverage.

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