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3 ways self-funding your health insurance plan provides critical flexibility

Why do you shop at Costco? Simple, right? Because you know it will lower your costs.

It's the same reason employers self-fund their health insurance plan. But can you imagine going to Costco and the only thing you ever bought there was toilet paper? You would definitely save on that item...but in the grand scheme of things, it's not going materially impact your bottom line.

Think of self-funding like getting the Costco card and using it for one item. If self-funding is the only change you make, don't expect a big impact. You have to take advantage of the full flexibility it offers. At Costco, that could be groceries, tires, flooring, etc.

With self-funding, these 3 areas of flexibility unlock the power of self-funding:

1.) Plan Design

2.) Vendor Partners

3.) Financial Risk

Watch the video above to learn more about each.

Another pro of going self-funded is the flexibility you get as an employer. What do I mean by flexibility? Well, there's a few different things there to explore. The first and probably most visible is just the plan designs. So when you're in a fully insured environment as an employer, you may or may not know that there are stock plan designs that carriers file with states that you can only offer a certain set of designs. You can't necessarily customize the deductible from a thousand to 1,025 or 1,050. You're subject to what that specific insurance carrier offers. But when you move into a self-funded plan, you can remove things like state mandated benefits, but you can also set your own deductibles, your own out-of-pocket maximums, and your own co-insurance, your own copays, et cetera. You as the employer, control the different components of the health plan. Now, you do need to make sure you stay in compliance with certain things, but for the most part, you control the various different aspects of the plan design. The other piece of flexibility that is super important in a self-funded health plan is you get a control that different partners that are involved within the health plan, and what do I mean there? So you can sell fund with a major insurance carrier like Blue Cross Blue Shield, or UnitedHealthcare, Cigna or Aetna. And to be clear, they control the entire process, right? They control the medical claims, the pharmacy claims, the customer service, the medical management, everything all together. But the other piece you get when you move into a self-funded environment is you don't have to necessarily choose that option. You can carve out to different players that have your best interests in mind. Maybe it's a different pharmacy player than a medical player. Maybe it's a vendor that does specific medical management. You can start to carve these different pieces out and control your health plan, align with partners that have your best interests in mind, and that can have a significant impact on the bottom line of your health plan. You are also flexible in terms of the amount of risk that you take on when an employer moves into a self-funded health plan. There are still portions of insurance, like a fully insured plan that you're gonna buy specifically for stop loss, and there's individual stop loss and aggregate stop loss. And on the individual stop loss side, you as the employer, control how much you are gonna be liable for. For every single member or belly button on the plan. That might be $30,000, $50,000, $500,000, but that level is up to you as the employer you fund, how much you are comfortable with, and then you fully ensure the rest with stop loss.

About the Author

Mike Kroupa, Self-Funding Insurance Expert

I grew up in a house that was constantly under construction and the experience helped me uncover one of my passions, remodeling. After running a successful remodeling business with my brother during college, I decided I wanted to keep this as a hobby. Instead, I took my advisor’s recommendation and started down the actuarial path, which ultimately led me to insurance.
Since then, I have focused my career teaching employers how to better manage their health insurance plans. I found myself frustrated year after year of doing the same thing because it didn’t feel like I was making an impact. Healthcare costs were continuing to increase, and it felt like the only options employers were left with was increasing deductibles, increasing contributions, and switching carriers.

There was a turning point for me in 2020 as I found Health Rosetta, an ecosystem for scaling adoption of practical fixes to our health care system. As my clients started adopting these fixes, I found myself getting passionate about what I was doing for the first time. Then I realized my hobby of remodeling was driving the passion because I was remodeling health plans. Even better, I was having an impact because patients (employees, spouses and children) were getting the best care they ever have and saving a lot of money in the process.

Get in contact with Mike: 

Phone: 630.738.1835     Email: mkroupa@gocgo.com     LinkedIn: Mike Kroupa

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