[Congressional Record Volume 142, Number 25 (Wednesday, February 28, 1996)]
[Extensions of Remarks]
[Page E237]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       SELF-INSURANCE IS WORKING

                                 ______


                         HON. HARRIS W. FAWELL

                              of illinois

                    in the house of representatives

                      Wednesday, February 28, 1996

  Mr. FAWELL. Mr. Speaker, I wish to call my colleague's attention to 
an article from ``The Self-Insurer'' summarizing the 1994 National 
Survey of Employer-Sponsored Health Plans showing the continued growth 
of self-insured plans. The Foster-Higgins study indicates that 74 
percent of large employers now chose to self-fund their plans, up 16 
percent from the previous year. Not surprisingly, the study reveals 
that the larger the employer, the more likely it is to self-insure: 91 
percent of companies with 20,000 or more workers self-insure, 82 
percent of those with 5,000 to 9,999 workers, but only 44 percent of 
those with 200 to 499, and dropping down to just 13 percent for 
businesses with fewer than 50 employees.
  Today, there is a revolution in the delivery of private health care 
in America. Self-insured employer plans under the Employee Retirement 
Income Security Act [ERISA] are in the thick of that revolution. And 
these plans are working. These ERISA group health plans are now the 
primary provider of care in the private market. They cover 70 percent 
of all employees--70 million workers--and represent a distinct success 
story in modern American private health care.
  Mr. Speaker, by paying their claims directly, rather than purchasing 
an insurance policy, self-insured employers have escaped excessive 
regulation and been able to keep their health care costs down during 
health costs' upward spiral of the past several years. Self-insured 
employers have the flexibility to design coverage that fit their 
workers' needs, at a price they can afford. Self-insurance is keeping 
costs down and can be expected to continue to be part of the health 
care solution.

                   [From the Self-Insurer, July 1995]

       The 1994 National Survey of Employer-Sponsored Health 
     Plans, an annual report analyzing employee health benefits 
     statistics, bases its finding on data collected from 2,097 
     employers throughout the United States. This study, released 
     in June, is the research firm's ninth report on the subject.
       Although the survey included large employers (those with 
     500+ employees) and small employers (those with 1-499 
     employees), many of the results provided in the report 
     summary are geared toward the large-employer market. 
     According to Frank DiBernardino, a principal at A. Foster 
     Higgins, the reason for this is that overall statistics are 
     often skewed when small employer data is included.
       ``We split the data between large and small employers 
     because so many small employers were included in the survey 
     that [their data would] distort the results,'' DiBernardino 
     said.


                             self-insurance

       Last year's growth was most pronounced in the small and 
     medium-sized markets, according to the report.
       With respect to large employers and traditional indemnity 
     plans, 74 percent of the companies surveyed chose to self-
     fund their plans, up from 64 percent a year before. Of that 
     74 percent, 82 percent purchased some from of stop-loss 
     coverage.
       For large employers utilizing PPO plans, the statistics 
     show that 77 percent chose to self-insure those plans in 
     1994, compared with 62 percent in 1993. Of the self-insurers, 
     83 percent used some form of stop-loss coverage with their 
     self-funded plans.
       DiBernardino points out that, while the stop-loss data was 
     not broken down into large and small employer groups, the 12-
     percent to 13 percent of employers who do not purchase stop-
     loss are most likely those with 10,000 or more employees.
       According to the survey, half of all point-of-service (POS) 
     plans were self-funded in 1994. For DiBernardino, this proves 
     that it is possible to marry capitated and non-capitated 
     services in one plan and make them fundamental with respect 
     to a self-funded environment.


                       third party administrators

       The study also shows that more large employers are using 
     TPAs. Thirty-nine percent of all the large employers with 
     indemnity plans in the survey used TPAs; the percentage was 
     even higher (45 percent) when only companies with 500 to 999 
     employees were considered. For large employers choosing PPO 
     benefit plans, the figures indicated that 33 percent used TPA 
     services, a substantial increase from 17 percent in 1993.
       TPAs have also continued the trend of low administrative 
     costs, with 7 percent of all claims costs being attributed to 
     the administration of self-funded benefits, versus 15 percent 
     of paid claims costs on administration for fully insured 
     benefit plans. TPAs are a popular choice for self-funded 
     employers, DiBernardino said, because they are more sensitive 
     to the needs of their clients.
       ``TPAs tend to be more responsive to the needs of their 
     customer than the commercial insurance companies or the Blue 
     Cross/Blue Shield companies. TPAs tend to process claims more 
     quickly and with a lower error rate than commercial carriers, 
     plus they tend to be more connected to the market,'' he said.


                  managed care enrollment on the rise

       The figures also indicate that an increasing number of 
     employers are utilizing managed care to help control rising 
     health care costs. In 1994, 23 percent of all employees 
     covered were enrolled in HMOs, compared with 19 percent in 
     1993. POS plans showed the greatest increase, however, with 
     the number of participating employees at 15 percent in 1994--
     more than double the 7 percent enrolled in 1993.
       Fifty-five percent of all employers surveyed in 1994 
     offered HMO plans, a 9 percent rise from 1993. That 
     percentage is even higher among larger employers, with 87 
     percent of the companies that employ more than 20,000 workers 
     offering one or more HMOs in their health plans.


                     drop in total costs short-term

       Glancing at the report, it may seem that 1994 was a 
     landmark year for health care costs in the United States, as 
     it was the first year that costs actually declined from the 
     previous year. But according to DiBernardino, the drop 
     indicated by the survey results was influenced by short-term 
     factors and does not represent real savings for the industry. 
     He attributed this disparity to three major causes.
       The first is the massive shift from indemnity plans to 
     managed care plans that occurred last year. The second: an 
     increase of more than 100 percent in the use of carve-out 
     plans to cover areas such as prescription drug or mental 
     health benefits (where costs are growing).
       DiBernardino estimates that the number of carve-out plans 
     more than doubled in 1994. Third, actions to stem the growth 
     of retiree benefits caused health care costs to drop, he 
     said, but he predicts those savings will be a one-time-only 
     occurrence.
       ``These are the reasons why costs decreased last year. It 
     was, in a sense, a lie. A statistical anomaly,'' said 
     DiBernardino.
       ``Does it mean the problem is behind us? No. It was a one-
     time advantage.''

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