As healthcare benefit costs continue to skyrocket year after year, employers are looking for more effective ways to manage this ever-growing expense. A growing trend has been more employers considering self-funding for full visibility into their cost drivers and increased control over health plan decisions. In fact, since 2015, at least 63% of all employers and 83% of companies with over 200 employees were self-insured. With that number steadily increasing every year since then.
What is driving this trend? Here we give you five reasons that you should consider when it comes to self-funding your health plan.
Greater Control of Risk
Companies with fully-insured health plans offload full control of their plan and cost-management decisions to the carrier. This can result in overspending due to limited insight into true plan costs and meaningful data, which ultimately leaves your organization in the dark at renewal time. In Healthgram’s self-funded model, employers have complete access to data, which allows for more customized strategies to mitigate both costs and future risks; putting companies in the driver’s seat throughout the year and no longer crossing their fingers at renewal time.
A self-funded health plan has significant savings opportunities as opposed to its fully-insured counterpart. Rather than paying a pre-determined premium in a fully-insured model, claims are paid as they actually occur. The impact that makes on cash flow is significant, with fewer fixed costs and more control over the variable pool of claims expenses.
In addition, self-funded plans have significantly lower health plan administration costs (typically between 5-10%) than fully-insured plans (15-20%). That direct cost benefit, as well as additional potential state tax exemptions afforded to self-funded plans, can greatly drive your health plan costs down and eliminate wasteful spending.
True Transparency and Plan Visibility
The fixed costs baked into many fully-insured plans are oftentimes ambiguous, meaning your organization may be leaving money on the table. Many companies are not aware of the disparity that can exist between the premiums you pay and the actual claims incurred. Organizations that have moved to a self-funded plan enjoy line-item visibility into each paid claim, enabling them to actively manage their plan in a smarter and more transparent way.
In addition, self-funded companies have deep access to their health plan data. The key is aligning with a partner who can proactively act on that data versus using it for only retrospective reporting.
Custom Plan Design
Self-funded plans are not constrained by the “one size fits all” fully-insured carrier plans. Employers who transition to self-funding can create tailored health care solutions that fit their organization’s specific benefit goals. Having control over your personalized self-funded plan makes it easier to:
– Implement custom programs, like employee advocacy and pricing transparency solutions
– Make strategic decisions about unique cost-control strategies
– Customize plan options
– Control your pharmacy and medical network partners
When moving to a self-funded plan, employers partner with an insurance carrier for administrative services only (ASO), or third party administrator (TPA) to manage their plan. While the terms “Third Party Administrator” and “Administrative Services Only” suggest a purely administrative function, successful self-funded plan management is anything but. These entities should maintain capabilities in-house like robust medical departments, claims auditors, reporting and analytics, and advocacy support that helps employees find the right care at the right price. It is imperative that employers look for a health plan partner that has solid infrastructure and experience, as well as the ability to adapt to your organization’s unique needs.
Healthgram works to design a self-funded health plan based on your organization’s specifications and needs. Take a deeper dive into the advantages of self-funding with our downloadable self-funding guide. Discover what to expect in the transition to a self-insured model, access questions to ask potential vendors, and take the next steps towards implementation.