A Decision to Make: Self-Funding Part I
Over the past few years, the trend towards self-funding has accelerated as more, and smaller groups, have chosen to self-fund their medical plans. This trend has taken place across the country and across all industries.
When I started in the insurance industry in the early 2000s, we rarely considered self-funding for a group under 200 lives. That’s not to say that there weren’t much smaller groups that chose to self-fund, there were, but I can say that as their broker-consultants, the team of which I was part was nervous on their behalf.
What has driven more and smaller groups to self-fund? There are three factors.
The first factor is the pricing structure in which the rates for fully-insured programs have drastically increased over the years, while deductibles and out-of-pocket maxima have increased too, essentially forcing a level of self-insurance on the individual – and company or organization - at a greater personal cost. In addition, the rates don’t really reset back to a norm even if certain health risks are no longer present in the population.
The second factor is a fully-insured organization’s lack of control over the rates as well as the plan design. Organizations are put in the position of having an increasingly limited suite of fully-insured plans from which to choose and then having to swallow the bitter pill of a plan with higher deductibles and out-of-pocket maxima . . . not to mention having to communicate the new plan to the employees.
And, finally, third, is a fully-insured organization’s lack of access to any meaningful data or information on health risks present in the insured population or such things as utilization patterns. Even larger groups, say, groups over 100 lives, who may have access to what some carriers refer to as the “key account package” still lack what a self-insured organization, or for that matter a stop-loss carrier, would consider truly meaningful data. With meaningful data, a group can better design the plan or target a wellness program to better bend the cost curve downwards.
Each of these factors often drives the decision makers at a fully-insured group to a moment of ultimate frustration with their fully-insured situation, that moment when the decision makers think “enough is enough, there has to be a better way.”
How many of us know groups that have reached that moment?