The Shift to Self-Funded Health Plans in the U.S. Insurance Market
As the Affordable Care Act (ACA) subsidy provisions evolve, the U.S. health insurance industry faces a significant transformation. The drop in ACA plan re-enrollment, driven by rising premiums, highlights a shift towards alternative healthcare funding solutions, particularly employer-sponsored self-funded health plans. By 2026, ACA enrollment is expected to decrease to around 23 million due to premium increases from $888 annually in 2025 to $1,904 in 2026, according to industry estimates.
Rising Costs in Employer-Sponsored Health Plans
Employer-sponsored health insurance has experienced a notable rise in costs. By 2025, average annual premiums for family coverage reached nearly $27,000, driven by changing healthcare market conditions and increased insurance utilization. This represents a 26% increase over the past five years, outpacing general inflation. Ongoing cost escalations pose significant challenges for employers in efficiently managing healthcare provisions.
Insurers Adapt to Market Dynamics
As insurers face these market dynamics, many are raising premiums for group plans or exiting the group market, with some experiencing nearly double-digit annual premium hikes. This situation has increased the appeal of self-funded plans, offering employers greater control over plan design and risk management. "Employers and plan sponsors are now exploring these alternatives to manage their healthcare budgets predictably while also improving member outcomes," stated Paul Ford, CEO of Quilt Benefits.
The Shift Towards Self-Funded Plans
Self-funded plans empower companies to manage health spending directly by handling claims risk, offering flexibility in plan customization, and utilizing data analytics for cost efficiency. The share of employees covered by self-funded schemes grew from 44% in 1999 to over 65% in 2023, marking a strategic shift from traditional fully insured models as businesses seek stability amid escalating premiums.
As premiums continue to rise, the insurance industry sees increased adoption of self-funded health plans as cost management solutions and to maintain employee coverage. These plans are critical for employers aiming to contain costs while ensuring comprehensive care and financial stability.
Quilt Benefits specializes in administering self-funded healthcare solutions, assisting employers in navigating healthcare expenses through strategic plan management and data-driven insights. For more information, visit www.quiltbenefits.com.