An increased number of small to midsize companies are opting to self-insure their employee health plans, partly to avoid the coverage mandates and costs imposed by the Affordable Care Act (ACA).

Of course, there isn’t data that conclusively demonstrates the ACA is the sole reason for the shift, but findings do support it is a big driver. Employer-sponsored health plans are categorized into two different groups – fully insured plans and self-insured plans.

Fully insured plans mean employers pay premiums to an insurance company, which in turn pays health care providers for enrollees’ claims based on the outlined benefits in the plan.

Self-insured plans mean employers keep the plan premiums and pay the actual cost of the claims. An insurance company is contracted to process claims and provide admin services. Employers who opt for this type of insurance typically purchase a separate stop-loss policy from an insurance company to help cover very large claims.

Between 1996 and 2015 the percentage of United States private sector employers offering at least one self-insurance health plan massively increased to 39%.

Overall, HR experts explain that when it comes to self-insurance many companies will save money most of the time, but lose money in scattered years when some employees suffer any kind of major illness. Some companies will find this type of self-insurance advantageous in the long run, but not all.