The Employee Retirement Income and Security Act (ERISA) of 1974 exempts self-insured plans from state regulation, including reserve requirements, mandated benefits, premium taxes, and consumer potection regulations. Self-insurance is common among large empoyers but is less prevalent and a far riskier undertaking for smaller firms, who have fewer employees over which to spread the risk of costly claims.

Self-Insurance

• In 2003, 52% of covered employees are in a plan that that is completely or partially self-insured (Exhibit 10.1).
  
• • The percentage of all workers in self-insured firms has remained relatively stable over the last few years.
  • The likelihood that an employer self-insures is highly related to the size of the firm. Ten percent of covered workers in all small firms (3 to 199 workers) are in self-insured plans, compared to 50% of workers in mid-size firms (200-999 workers) and 79% of workers in jumbo firms (5,000 or more workers) (Exhibit 10.1).
  • Firms that self-insure are least likely to cover workers in HMO plans (29%), and most likely to cover workers in PPO plans (61%) (Exhibit 10.2).