- INSIGHTS
Self-Funding: A Risk Worth Taking?
Self-funding your company’s health insurance can be scary. Filled with risks and uncertainties. Many employers and advisers shy away from it, fearing unpredictable costs and financial instability.
But what if I told you that self-funding, when done right, offers control, transparency, and savings for your business?
The Common Misconception: Self-funding is Risky
It’s natural to be cautious, especially when it comes to healthcare benefits for your employees. The narrative suggests that self-funding is risky for small to mid-sized businesses.
The fear of high claims, volatile costs, and the responsibility of managing a health plan is overwhelming.
But this perception is outdated. It’s dramatically changed post the Affordable Care Act.
With advancements in risk management strategies and the introduction of group purchasing consortiums, the landscape has changed significantly.
Fully Insured: The Real Risk
Contrary to popular belief, today, fully insured plans represent more risk than self-funding.
Here’s why:
- Lack of Control and Transparency: Fully insured plans offer little to no control over plan design or claims data. Employers must accept the carrier’s network, pharmacies, and coverage decisions without insight into the actual costs or the ability to make changes.
- Fixed Premiums with Hidden Costs: Fully insured plans come with fixed premiums, but these often include hidden costs like high administrative fees and profit margins for the insurer. Employers pay these premiums regardless of actual healthcare usage.
- Unpredictable Renewals: Fully insured plans are subject to annual renewals, which can bring unexpected premium hikes. For instance, many businesses have faced increases as high as 30% without any control or recourse.
Self-funded plans offer a more predictable and manageable approach to healthcare costs.
By taking control of your plan, you avoid the unpleasant surprises that come with fully insured renewals.
Why Self-Funding?
Self-funding allows employers to pay for actual healthcare costs rather than fixed premiums, often including a significant profit margin for insurers.
This model provides flexibility, control, and the potential for substantial savings. Here’s why:
- Control Over Plan Design: With self-funding, you have the flexibility to design a health plan tailored to your employees’ needs. You can choose your Third-Party Administrator (TPA), select specific benefits, and implement cost-containment measures.
- Transparency and Data Access: Unlike traditional insurance, self-funding provides access to detailed claims data, allowing you to better understand and manage healthcare expenses.
- Cost Savings: Businesses save significantly by eliminating the insurer’s profit margin and only paying for the healthcare services used. Additionally, any unused funds remain with the employer, not the insurer.
Mitigating The Risk
At Virtue Health, we’ve developed a self-funding model that addresses the risks and challenges associated with self-funding.
Our program is designed to provide stability, predictability, and peace of mind for employers.
Cost Containment Strategies
We control high-dollar claims by implementing mandatory cost-containment measures.
For instance, our program excludes certain specialty medications from coverage, allowing us to access manufacturer assistance programs that provide these drugs for free or at a reduced cost. This strategy alone leads to substantial savings. 95% of our employers pay $0 for specialty medications.
95% of our employers pay $0 for specialty medications.
No New Lasers and Rate Caps
Our policies feature no new lasers and rate caps, protecting you from unexpected high claims and ensuring your premiums remain stable.
These measures are crucial in providing a predictable financial environment for your business.
Private Consortium Model
Unlike public pool captives that allow any participant, Virtue Health’s consortium is a private pool with mandato cost-containment requirements.
This exclusivity eliminates abuse and ensures that all participants are aligned with our cost-saving strategies.
Real World Success
We’ve seen success with our clients.
For example, a group with 97 employees reduced their annual prescription costs from $200,000 to $72,000, saving $128,000 net of fees.
Self-Funding Doesn't Have to Be Risky
With the right partner, you gain control over healthcare costs, enhance your benefits package, and achieve stable financial outcomes.
If you’re ready to explore how self-funding can transform your business, reach out to us today.
Let’s take the first step towards a more secure, cost-effective future for your client’s health benefits.
John W. Sbrocco
@johnwsbrocco
SELF-FUNDED DOESN’T HAVE TO BE RISKY
Learn how to mitigate risks with self-funding. Schedule a 30-minute session here:
