As employers look to bend health care trend, consultants are often asked by decision makers, “Should we move to a self-funded platform?” Unfortunately, this is not a black and white question. If it was, my canned response would be, “Sure, if you want to save 6-8%, have more plan design flexibility and typically access to more data, then let’s make the change.”
In a perfect world, every client would move to a self-funded arrangement and reap the benefits of reduced fixed cost, reduced taxes and fees and more plan flexibility, but many businesses operate on a budget. Budgets are hard to stick to with variable expenses. Fully insuring your health care plan offers you consistent payment streams, which finance appreciates, but they come at a cost…..
Insurance companies recognize the increased demand from the market to offer self-funded options, so they are creating creative solutions to try and mesh the best of both worlds. Beyond a typical self-funded option, where an employer is responsible for paying their own claims (which can be very volatile for cash flow budgeting purposes), we now have options that create level payment streams, but also allow groups to take advantage of the benefits of self-funding. Purchasing catastrophic risk, otherwise know as stop loss insurance, also offers employers a way to hedge their losses and create financial consistency.
If you haven’t looked at a self-funded plan dressed in fully insured cloths, I encourage you to do so. You might be pleasantly surprised at the opportunity to take control of your plan, all while capping your risk at a level that is consistent with the fully insured path you are on today.