America's Benefit Specialist November 2022

CONSIDER SELF-FUNDING

ness, you’re paying even more than large companies for the same health coverage. 4 Another reality: Your clients have op tions… but it’s really important to separate fact from inaction surrounding these four misconceptions: Perception: The risk outweighs any reward. Reality: Self-funding doesn’t have to be so risky. It’s true, in a self-insured model, the em ployer assumes most of the financial risk in the plan. And that’s where many employers just stop the discussion. Unpredictability and the fear of catastrophic claims are a powerful deterrent, but they don’t reflect actual data around self-funding, which shows otherwise. With tools like stop-loss insurance to blunt or offset most of the risk, self-fund ing has been shown to lower employers’ costs—often significantly—over time. 5 And in a lower-claims year, the company gets to keep unspent dollars for other mission-crit ical business needs. Plus, self-funding gives companies transparency in claims data, which allows them to make better plan and financial decisions. With fully insured plans, they forego flexibility and they what they get. Perception: Our company isn’t large enough to self-fund. Reality: It’s not just for the big guys. Self-funding has traditionally been seen in larger businesses, for various reasons. 6 But that was then. Now, with record-breaking inflation, the Great Resignation and crush ing health plan rate hikes, the flexibility, control and transparency of self-funding may be an ideal fit for small to midsize busi nesses. 7 That doesn’t make it the right choice for every business, but self-funding is worth exploring regardless of company size. 8 Perception: We don’t have the time or skills to administer a plan. Reality: You don’t have to do it all. Companies may think they lack the time, resources and expertise to set up and ad minister a self-funded plan. This roadblock goes away, however, by partnering with an advisor and the right health plan or

controlling, and even reducing, costs for both the company AND its employees. Personally, I believe all employers with 51 or more employees have a responsibility to evaluate the benefits of self-funding. Health care is likely one of the highest line-item costs in their budget and has a considerable impact on the health and financial wellness of their employees. If annual rate hikes mean rising deductibles and copays for workers and less cash for salaries, benefits and other business investments, it’s time to break the cycle and talk about self-funding. 2 www.corpsyn.com/self-funding-details/ 3 www.selffundingsuccess.com/self-fund ing-101/why-choose-self-funding/ma ny-advantages-an-overview/ 4 www.associationhealthplans.com/group health/large-group/ 5 www.shrm.org/resourcesandtools/hr-top ics/benefits/pages/consider-self-fund ing-options-when-renegotiating-health-be nefits.aspx 6 www.griffinbenefits.com/blog/what-is-self funded-insurance-is-it-right-for-my-small business 7 https://roundstoneinsurance.com/blog/ is-self-funded-health-insurance-right-for your-business/ 8 https://bcsf.com/blog/self-funding-basics/ 9 www.skylinebenefit.com/how-self-funding helps-employers/ 10 www.siefonline.org/_assets/self-fund ing-brochure.pdf 1 https://greenimaging.net/health care-self-funding/

third-party plan administrator that can pro cess claims, build quality provider networks, support member inquiries and, in general, simplify the entire process for employers. Perception: It’s less disruptive to just stick with what we know. Reality: Embracing the unknown may provide a new level of clarity and control. It’s common for employers to start down the self-funding road but then take a U-turn for fear of the unknown. Change can be scary; keeping the status quo can feel comfortable. But you know what’s scarier? Getting a fully insured rate hike with no data to back up why it’s gone up or where/when it might stop. There’s nothing comforting about nav igating healthcare costs in a fully insured fog. There’s no safety in rate increases with no reasoning. It’s frustrating to realize there are massive price and quality differentials for the same services depending on the pro vider—with no clear lens into the numbers. A self-insured plan, however, offers that view into cost drivers and price points and can actually help employers gain control of health benefits expenses. 9 FACE THE FACTS I already presented four assumptions keep ing employers from self-funding, but since that’s just one opinion, I’ll sum up with four fact-based reasons to strongly consider the switch. With a self-funded plan: • Employers pay for actual claims. In a fully insured plan, your costs are fixed regardless of employees’ claim history, and any end-of-plan-year excess remains with the insurer instead of the company. • Employers have access to data to make informed decisions. With insight into claims history and flexibility in plan reserves, they decide how and where to direct company assets. • Employers save on state premium taxes and avoid state-mandated benefits. • Employers can customize their benefit plan design to meet employee needs via quality providers and programs while

Drew Burns is mid-market sales leader for Centivo. He is an experienced sales leader focusing on the employee benefits industry for his entire career. His work experience includes

sales and leadership roles at Blue Cross and Blue Shield of Kansas City, Aetna, Liazon and Sun Life. Drew completed his MBA from Missouri State University and earned his bachelor’s degree in business with an emphasis in marketing at the University of Missouri. He and his family live in Kansas City and are active members in making their community a better place to live.

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