» A Different Mindset for Small/Mid-Market Employers

What is the Mindset Shift? Self-Funding!

In the context of medical health insurance, self-funding refers to a type of health insurance plan where the employer or organization assumes the financial risk for providing healthcare benefits to its employees or members. Instead of paying a fixed premium to an insurance company, the employer or organization funds the claims for medical expenses incurred by their employees or members directly.

Under a self-funded plan, the employer or organization sets aside funds to pay for medical expenses incurred by their employees or members. These funds are used to pay for healthcare expenses, such as doctor visits, prescription medications, and hospitalizations. If the claims exceed the amount set aside, the employer or organization is responsible for covering the additional costs.

Self-funded health insurance plans can be attractive to employers because they offer more flexibility and control over the benefits provided to their employees. Employers can customize the plan design and coverage options based on the needs of their workforce. However, self-funded plans can also be risky for employers if they underestimate the cost of medical claims, which can lead to financial losses.

Why the Mindset Shift? Costs!

For employers, the problem has reached a national crisis. Healthcare costs continue to rise to record levels, driven largely by inflation, misaligned incentives, and the ongoing impact of COVID. Worse, many experts say these costs will accelerate over the next several years.

There are several reasons why there has been a shift towards self-funding health insurance plans.

1. Cost Control: Self-funded plans can be less expensive than fully insured plans. This is because the employer has more control over the design of the plan and can tailor it to the specific needs of their employees, potentially reducing costs.
2. Flexibility: Self-funded plans offer more flexibility in terms of plan design and administration. Employers can choose which benefits to offer, and how they are structured, which can help to attract and retain employees.
3. Data Analytics: Self-funded plans offer more access to data analytics, which can be used to identify trends and patterns in healthcare utilization. This information can be used to identify areas of high utilization and develop strategies to address them.
4. Reduced Regulation: Self-funded plans are often subject to less regulation than fully insured plans. This can make it easier for employers to customize their plans and avoid state insurance mandates that may increase costs.
5. Risk Management: Self-funded plans give employers more control over their healthcare spending, which can help to manage financial risk. Employers can set aside reserves to cover expected and unexpected costs, and they have the ability to adjust benefits and cost-sharing structures as needed to manage costs.

Overall, self-funding health insurance plans can offer employers more control and flexibility over their healthcare spending, potentially reducing costs and improving the value of benefits offered to employees.

Questions you can ask the LBL team:

1. Do you recommend the ASO model or captive model?
2. What TPA’s and PBM’s are preferred and what should I look for in them?
3. What are the odds I hit my specific and aggregate deductibles?
4. Can I get a quote without claims?
5. Is this similar to level-funded?
6. Where do I see savings?
7. What is the average renewal increase?
8. Are other groups going to impact me negatively if I am in the same pool as them?
9. What is the implementation process like?
10. What does all this mean?

No question is a dumb question, feel free to set up a meeting with us to discuss further!

• Eleanor Schroeder

Posted by John Hansbrough in Acrisure, Human Resources, Self-Funding