Self-Funding: The Future of Employer Healthcare

May 23, 2023

Record carrier profits, skyrocketing medication prices, and accelerating annual healthcare costs continue to force employers to raise deductibles and out-of-pocket maximums or pass along those cost increases to employees and their families.

Carrier-controlled healthcare is heavily slated in the carrier’s favor. Carrier contracts, carrier stop-loss insurance, carrier-owned pharmacy benefit managers (PBM), carrier-controlled networks, and care coordination – all these critical aspects of healthcare must break free from a carrier-centric approach.

Employer-Sponsored Healthcare By the Numbers

The current state of employer-sponsored healthcare is simply an unsustainable situation that demands change. Consider this:

• The Kaiser Family Foundation reports that average premiums have risen 20% over the last five years and 43% over the last decade.
• Healthcare costs continue to outpace inflation and wage increases.
• Smaller employers experienced the sharpest increase in healthcare costs.
  • Those with 50 to 499 employees saw a 9.6% increase, while larger employers (those with 500 or more employees) reported average cost growth of 5%.
• 61% of U.S. adults with employer-provided insurance carry medical debt.

Benefits of the Self-Funded Model

What’s an employer to do? Many mid-market employers recognize that a design-build, self-funded model is a better product for the business and its employees.

Self-funded healthcare programs allow employers to create a data-driven, employer-controlled program that offers transparency and control. Employers experience a wide range of benefits, including:

• Integrating a PBM that provides transparent or pass-through pricing to reduce cost
• Recognizing claims trends and creating active claims management solutions
• Protecting themselves from catastrophic claims through stop-loss insurance
• Enhanced care-coordination services for the employees and their families

In addition, employers can use “narrow” network strategies, direct provider contracting and on-site clinics, in addition to national PPO networks to provide cost transparency and allow the plan sponsor to control all aspects of plan design.

A Forward-Thinking Model to Support Sustainable Success

By moving to a self-funded model, employers can contain long-term costs, financially protect their employees, identify claims trends, and implement solutions designed to manage those claims.

Self-funding is not only a great way to strengthen a company’s financial position, but it also has vital personal benefits. Employers can deepen their connections with employees and drive engagement through enhanced educational opportunities and customized benefit offerings by designing a health plan specific to their group’s wants and needs. When employees have access to tailored resources and benefits, they are empowered to make better healthcare decisions for themselves and their families.

Employer-sponsored healthcare programs are overdue for an overhaul. Companies must evolve if they want to drive financial success, attract and retain top talent, and stay competitive today and in the future.

If you have questions about self-funded programs for your organization, reach out to Andrew Gibbs, CCIG Senior Insurance Advisor, at andrew.gibbs@thinkccig.com

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