Popularity of Self-Funding Health Insurance Continues to Rise

The concept of pooling risk among like-minded businesses, outside of the traditional insurance marketplace, has been around for decades. By pooling healthcare risks, employers achieve greater stability and predictability in healthcare costs.  Which, in turn, allows them to continue offering a robust benefit package to attract and retain employees.

Self-funding health insurance is a common practice for many large employers, but it can have catastrophic consequences for smaller employers if not implemented properly.  Group self-funding overcomes these challenges and, in most instances, is less risky than a fully insured program.

Rising Healthcare Costs Continue to Challenge Employers

Rising healthcare costs persist as a significant challenge for employers across all industries.  There are several factors that contribute to this ongoing issue such as:

Medical Inflation: Healthcare costs consistently outpace general inflation rates due to factors such as advancements in medical technology, rising drug prices, and increased demand for healthcare services.

Chronic Diseases: The prevalence of chronic conditions such as diabetes, heart disease, and obesity continue to rise, driving up healthcare utilization and costs associated with managing these conditions.

Aging Workforce: As the workforce ages, employers face higher healthcare costs due to increased healthcare utilization among older employees who require more frequent medical care and treatment for age-related health conditions.

Prescription Drug Prices: Prescription drug costs, particularly specialty drugs and biologics, are rising faster than medical trend.  This significantly impacts employer-sponsored health plans, leading to higher premiums and out-of-pocket expenses for both employers and employees.

Better Protection and the Ability to Control Healthcare Costs

Group self-funding programs give employers more control over healthcare costs allowing them to implement various cost containment strategies designed to combat rising premiums.

Group Purchasing Power:  By pooling risk with other like-minded businesses, employers gain greater economies of scale and increased purchasing power.  Having the ability to negotiate as a larger entity, these groups can often secure better rates, coverage options, and benefits than employers can on their own.

Stability: Having tens of thousands of employees insured under one program creates tremendous stability and allows the group, as a whole, to absorb large shock claims much more effectively than an employer by themselves.

Transparency: In a group self-funded program, you will receive 100% access to de-identified data and complete reporting of where every dollar is spent allowing you to retain any premium not spent.

Healthcare Concierge and Wellness Services:  Group self-funding programs have a singular goal of better controlling an employer’s health insurance spend.  Most of these programs provide access to healthcare concierge and wellness programs that are designed to reduce and control the total cost of health.

More and more employers are leaving the traditional health insurance market and embracing alternatives to better control their healthcare costs.  The Safegard Group has extensive experience in building and managing group self-funded programs for numerous employers in Delaware and the tri-state area.

Roger Kirtley is Vice President of The Safegard Group specializing in Employee Benefits Consulting for Mid-Market Employers.