More and More Companies are Moving to Self Funded Insurance – Here’s Why

If only a crystal ball or portal to another time could help us predict the future of American health care. Heck, even a Magic 8 ball with a high rate of accuracy could be useful.

Alas, no such magic device exists (we think), so the confusion and uncertainty that surround health care and insurance aren’t ending anytime soon. Many people agree that our current system is broken, but no simple solution exists to bring down costs and give all Americans access to the care they need. Considering the political discord around this issue, it seems unlikely that a major change – like a move to a single-payer system – is just around the corner. So what does that have to do with self funded insurance?

Companies are left with the current options, knowing that no quick fix is coming to the marketplace. Their employees need health insurance, and it’s in the company’s best interest to provide its workers with high-quality care. How can they cut costs over the coming years, while giving their employees access to the care that will keep them healthy and working?

Self-funding is emerging as the best option for more and more employers. The trend toward self-funding has been ongoing for years. The number of private businesses offering a self-funded health plan increased by 36.8 percent between 1996 and 2015, according to the Employee Benefit Research Institute (EBRI). There are plenty of reasons for this trend. One of the biggest is the same thing that shapes all our lives: technology.

Technology Opens Doors

Technological advancements have changed virtually every industry in the last century, but few have been as radically altered by the rise in technology as health care. New devices and apps have the power to disrupt the entire industry, improve patient results and yield massive profits. (Look no further than the Elizabeth Holmes/Theranos saga to see the financial possibilities of new health care inventions!)

Within the last decade, telemedicine has changed the way patients and physicians connect and allowed homebound or rural patients to get the care they need. Web portals have allowed patients more access to their own records and benefits information. Advancements in software have made it easier for researchers to track, study and share data.

Considering its power, it’s no wonder that technology is one of the driving forces behind the self-funding trend. Embracing new tech can be an effective way to cut costs without sacrificing quality of care. For example, employees who have access to telemedicine programs can get quick diagnoses and treatment plans for minor issues, keeping them out of ERs and physician’s offices. An employee who has a sinus infection could connect with a licensed doctor and get a prescription within an hour, instead of missing half a day of work for a doctor’s appointment or being charged at the hospital for unnecessary testing.

Ultimately, technology is driving employers to self-funding because it opens up so many possibilities. Access to new treatments and other industry improvements isn’t restricted to members of fully-funded plans. Employers who opt for self-funding don’t have to commit to hefty premiums that insurers set and then raise every year. They can tailor their coverage to suit their needs, while giving their employees ways to directly connect with their health care providers and cut out the middlemen. Operating a self-funded plan also allows the employer to track its own claims data and predict future costs.

Self-Funding is Now More Accessible to All

It’s not just technology that’s driving the trend toward self funding. You may be hearing and seeing more about this insurance strategy now than in previous years, but that’s in part because it just wasn’t a viable option for many employers before the ACA. The ACA established a set of federal standards that gave small businesses more and better insurance options. For small businesses that have relatively young and healthy employees, self-funding may be the most financially sound choice, especially when paired with stop-loss coverage to limit the employer’s liability. A decade ago, self-funding just wasn’t feasible for many small businesses the way it is today. Switching from a fully-funded plan to a self-funded one is something businesses do every day, but it’s a big change. If you’re considering making that move, we know you have questions. Contact Stop Loss Insurance to learn more.


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    In 2011, the top 5 most expensive medical conditions treated in US hospitals were: Septicemia, Osteoarthritis, Complication of device, implant or graft, Liveborn, and Acute myocardial infarction

    From 2010 to 2013, the number of claims that were individually $1 million or above rose by 1,000%

    In 2017 approximately 18% of the American public will purchase insurance through exchanges, radically transforming the health insurance landscape.

    In 2014, 98% of large firms (= 200 Workers) offer 1+ wellness programs to their employees.

    The most costly 1% of patients account for 20% of national health expenditures – accruing average annual expenses of nearly $90,000 per person.

    6% of firms offering fully-insured plans report they intend to self-insure because of Obamacare.

    In 2014, PPO plans remained the most common plan type, enrolling 58% of covered workers.

    In 2012, 93% of businesses with 5,000+ employees and 80% of companies with 1,000-4,999 employees were self-funded

    Massachusetts has the third-highest prevalence of self-funded insurance in the small-group market (Fewer than 50 employees).

    In 2013, the average deductible was $2,906 for individuals selecting plans from marketplaces. This compares with average deductibles of $1,135 for an individual with employer coverage.

    In 2013, the average annual premiums for employer-sponsored health insurance are $5,884 for single coverage and $16,351 for family coverage, up 5% and 4% respectively from 2012.

    From 2010 – 2013, cancer followed by chronic/end stage renal disease and leukemia accounted for the top 3 costliest illnesses.