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When deciding whether to move from a fully insured health plan to a self-insured health plan (or vice versa), employers should consider the different compliance requirements for each type of plan.
A self-insured health plan shifts most of the financial responsibility onto the employer. Rather than making fixed premium payments to an insurance company, the employer covers the costs of medical claims as they arise throughout the year. While level funded health plans may have different designs, they are typically classified as self-insured for compliance purposes.
A fully insured health plan shifts the majority of financial risk from the employer to the insurance carrier, freeing them from extensive liability for healthcare expenses. The employer's responsibility is limited to paying the insurance premiums, allowing them to focus on other aspects of their business.
The chart below outlines key compliance requirements that apply differently to fully insured and self-insured health plans.
| Compliance Requirement |
Applicability |
Description |
| Nondiscrimination Rules |
Self-insured health plans |
Self-insured health plans are subject to nondiscrimination rules. These rules state that self-insured health plans cannot discriminate in favor of highly compensated employees with respect to eligibility or benefits. Although the ACA included nondiscrimination requirements for non-grandfathered, fully insured health plans, these rules have been delayed and are not enforced at this time. |
| PCORI Fees |
Self-insured health plans |
The ACA imposes a fee on health insurance issuers and employers with self-insured health plans to help fund the PCORI. The PCORI fee is calculated based on the average number of lives covered under the plan. These fees must be reported and paid each year by July 31. Employers with fully insured health plans are not required to pay PCORI fees. |
| State Continuation Coverage (mini-COBRA) |
Fully insured health plans |
Fully insured health plans must comply with applicable state continuation coverage requirements. Self-insured health plans maintained by a single employer are not subject to mini-COBRA laws due to ERISA’s preemption provision. |
| EHB Package |
Fully insured health plans in the small group market |
Non-grandfathered fully insured health plans (in the small group market) must offer a comprehensive package of items and services (EHB package). Fully insured health plans in the large group market and self-insured health plans don’t need to follow this requirement. |
| State Insurance Mandates |
Fully insured health plans |
Fully insured health plans must comply with applicable state insurance mandates, which require these plans to provide coverage for certain benefits, providers, and individuals. Self-insured health plans maintained by a single employer are not subject to state insurance mandates. |
| Premium Rating Restrictions |
Fully insured health plans in the small group market |
Non-grandfathered fully insured health plans in the small group market are subject to the ACA’s premium rating restrictions. Premium rates may only vary based on age, geography, family size, and tobacco use. Fully insured health plans in the large group market and self-insured health plans are not subject to these restrictions. |
| HIPAA Privacy and Security Rules (HIPAA Rules) |
All health plans, but most fully insured health plans have minimal compliance obligations |
The HIPAA Rules apply to both plan types. Most employers with fully insured health plans have minimal compliance responsibilities under the HIPAA Rules because they do not have access to protected health information from their insurance carriers. In this situation, almost all the HIPAA compliance requirements fall on the carrier, not the employer. |
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