Why Self-Insured Small Businesses Would Harm Minority Employees

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Despite the Affordable Care Act’s, or ACA, sweeping reforms, which are making health care more accessible and bringing Americans greater protections and increased benefits, people of color may still be at risk of facing the problems that plagued the system before. Under the ACA, millions of Americans have already gained coverage and protections that they did not have previously, saving many from some of the hardships of illness or injury. Unfortunately, employees of small businesses—particularly minority employees—may not enjoy the positive changes that the ACA is bringing to the country. Evidence shows that small-business employers may be considering a practice called self-insurance, which could jeopardize the quality, affordability, and accessibility of health care for employees of color.

When offering health care plans to their employees, employers can choose to fully insure or self-insure, meaning that the business either buys health insurance from a traditional provider or the business itself acts as the insurer. When employers buy insurance from a traditional insurer, the insurer takes on the financial risk of employees accumulating more in health care costs than what they pay into the plan. In a self-insured structure, that financial risk is put on the business, but the business does not have to pay premiums to a traditional insurer; during times when employees are healthy and pay more into the plan than they take out, the business—not an outside insurer—gets to keep those savings. This can make a self-insured plan appealing to a small business, especially if it has a young or generally healthy staff. But self-insured plans can have negative consequences for employees, especially those of color.

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