From 2020 to 2024, the number of individuals enrolled in fully insured employer-sponsored health plans dropped significantly. A recent report by Mark Farrah Associates (MFA), using data from the National Association of Insurance Commissioners (NAIC) and the California Department of Managed Health Care (CA DMHC), shows that major carriers such as Blue Cross Blue Shield (BCBS) lost over 5 million members in this segment over a four-year period.

This shift is not a signal that employees are becoming uninsured—it’s a reflection of a larger structural transformation in how employer-sponsored health coverage is being delivered.

Understanding the Decline

Fully insured group plans—where employers purchase health insurance from a carrier and pay a fixed premium—have long been a standard solution for providing employee health benefits. But this model has shown signs of contraction. According to MFA’s data:

• BCBS group enrollment dropped by 4.6%, losing 1.2 million members between 2020 and 2024.
• Non-BCBS carriers declined by 13.6%, shedding 3.8 million members in the same timeframe.

Despite this decline, total enrollment in fully insured plans grew over the period due to gains in the individual and Medicare Advantage markets. So where did these group members go?

The Alternatives Replacing Fully Insured Group Coverage

1. Self-Funded Plans

The most significant migration has been toward self-funded health plans, where employers take on the financial risk of providing healthcare to employees. According to the

2024 Kaiser Family Foundation Employer Health Benefits Survey:

• 63% of all covered workers in the U.S. are now in self-funded plans.
• Among large employers, the number jumps to 79%.
• Even though the carrier may still handle administration (e.g., claims processing), the employer pays for healthcare costs directly rather than via fixed premiums.

Employers prefer this model for its cost control, plan flexibility, and access to claims data. It’s particularly attractive in an era of rising healthcare inflation.

2. Level-Funded Plans

For small to mid-sized employers who want the benefits of self-funding without full risk exposure, level-funded plans have emerged as a popular hybrid. These plans offer:

• A fixed monthly payment structure (much like fully insured plans),
• Potential refunds if claims are low,
• Stop-loss protection for high-cost cases.

Carriers and platforms such as Allstate Health Solutions, ANGLE, and Centivo have aggressively marketed these solutions to employers with 10–200 employees. Adoption continues to grow rapidly as employers look for predictability without overpaying for unused coverage.

3. ICHRA (Individual Coverage Health Reimbursement Arrangements)

The introduction of ICHRA regulations in 2020 created a new model for employer coverage. Rather than sponsoring a group plan, employers provide a monthly tax-free reimbursement allowance that employees can use to buy their own ACA-compliant health plans on the individual market.

ICHRA offers advantages such as:

• Simplified administration,
• Greater choice for employees,
• Portability of coverage.

This model is especially appealing to industries with high turnover, decentralized workforces, or diverse plan needs (e.g., hospitality, retail, home services).

According to federal data, employer adoption of ICHRA tripled between 2021 and 2023.

4. Marketplace and Medicaid Coverage

Some employees formerly covered by group plans now access coverage through:

• The ACA Marketplace, especially if their employer’s offer is deemed unaffordable under federal rules.
• Medicaid, particularly in expansion states and among lower-income or part-time workers.
• Spouse or parent plans, if more cost-effective or comprehensive.

The end of the federal public health emergency in 2023 did lead to some disenrollment from Medicaid, but overall, these options have provided important safety nets as the employer-sponsored insurance market evolves.

Conclusion: A Market in Transition, Not in Decline

While fully insured group plans are shrinking, the overall employer health coverage market is not. It is being restructured. Employers are exploring new funding strategies that offer more flexibility, cost savings, and customization.

As we look ahead, the health insurance ecosystem will continue to diversify. Brokers, consultants, and HR leaders must be ready to educate clients on options like level funding, ICHRA, and self-funding models. These aren’t fringe concepts anymore—they’re becoming mainstream strategies.

Ready to explore how ICHRAs can work for your team? Let’s talk.

 

About the Author
Richard ‘Richie’ Seaberry is VP of Enterprise Sales at Decisely. With over a decade of experience in employee benefits and HR solutions, Richie partners with small businesses and associations to build scalable, tech-enabled strategies that reduce complexity and improve employee well-being.