It’s commonly said that self-funded insurance is best suited for large firms. There are some inherent benefits to self-funding for larger firms — it’s easier to predict costs with more data, and more workers creates a bigger pool to cover risk — but it’s by no means out of reach for smaller firms. That means there’s a large pool of small companies that need to be educated on the truth about self-funding.
Alternative Reimbursement: You Can’t Pay Less For Healthcare Unless You Pay Less For Healthcare
Thursday, June 10, 2021, 2:00 PM ET / 11:00 AM ET
The only way to pay LESS for healthcare is to pay LESS for healthcare. This simple statement sounds obvious but is ignored by most employers as reflected in their health benefits. For years, we have depended on the carriers to negotiate the price we pay for healthcare, having a more direct and transparent reimbursement (provider compensation model) is the key to immediately lowering your health benefits cost.
In a post-COVID world, even zero change in employees’ healthcare costs will likely still result in them spending a greater percentage of their income on healthcare. Why? Most household incomes are down so the focus shouldn’t be on maintaining the status quo, but on fighting to reduce overall costs and expenditures.
Myth: Self-funded insurance doesn’t work for small companies.
It’s true that most self-funded companies are large firms, but that’s not because they’re the only companies that can benefit from this strategy. Partners like stop-loss carriers, TPAs and brokers are making it easier for small firms to benefit when they break away from fully insured plans.
In fact, Kaiser Family Foundation discovered that 31% of workers at small firms were covered by a self-funded plan or a level-funded plan (which combines self-funding with stop-loss insurance) in 2020, up from 24% the year before.
Show employers that they’re not alone in deciding they’ve had enough of traditional, fully insured plans.
Myth: Self-funded insurance is too much work.
The customization available in a self-funded plan is one of its major selling points, but for a small business just starting to investigate abandoning their fully insured plan, it can be intimidating. Advisors and plan design specialists help employers identify which benefits their employees will value most, and a TPA can administer and manage the plan, letting the employer focus on actually running their business.
Connect the dots for employers so they see that a self-funded plan doesn’t have to add huge new responsibilities to their workload.
Myth: Self-funded insurance is too much risk.
One of small companies’ first concerns with self-funded insurance is what they will do when one of their covered workers files a catastrophic claim. One claim for cancer treatment can cost $76,000 just for medications, Sun Life found. Stop-loss insurance puts a cap on what employers will pay for health claims.
Compare the cost of mitigating claims risk to the cost of staying in a fully insured plan to show employers how much they’re paying by not restrategizing.
Employers have heard a lot of misinformation about self-funded insurance. It might not be right for everyone, but advisors can set the record straight for employers. If they’re going to choose the never-ending premium increases of a fully insured plan, they should at least have all the facts.