If you’ve heard of self-funded insurance, you may have also heard that it’s complicated or only suitable for large companies. There are certainly some pros and cons to consider when deciding if self-funded insurance is right for your business, but what you’ve heard isn’t necessarily true. Before you write off self-funding, make sure you have the facts.
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. 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 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.
You Can’t Impact The Past: ↑ Advocacy + ↑ Quality = ↓ Cost
Thursday, May 20, 2021, 2:00 PM ET / 11 AM PT
Unlike most things, healthcare services have an inverse relationship between cost and quality: the better the quality, the lower the cost. Unfortunately, the current health benefits market is completely opaque and lacking any meaningful, realistic transparency. Additionally, we have always been taught that easy = better when designing health benefits programs for employers and their employees. However, the cost and quality of healthcare can vary dramatically within the same city. Utilization Management for example, where your members access healthcare, is one of the single most important additions to your health plan design.
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. Having the right partners takes the pressure off employers. 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.
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. You can cap what you’ll pay per participant (or per family), or per year.
You may have to put some thought into whether self-funding is right for you, but even if what you’ve heard is a little scary, is it any worse than the never-ending premium increases of a fully insured plan?