BY RYAN SPENCER
Many businesses falsely believe that self-funding their benefits plan is not an option for them because they are “too small.” The reality is that your benefits options are not that black and white. Regardless of your size, you have options to self-fund or to partially self-fund to dramatically reduce your healthcare costs. And, in that process, you can give your people access to better care.
What is Self-Funding?
If you aren’t familiar with self-funding, it is an approach to benefits that can be described as “pay as you go.” With a traditional benefits plan, you always pay full price, and you can expect your costs to increase by 10 to 20% each year. No matter what. With self-funding, you take on the management of your benefits costs to regain control of the expense and lower overall costs.
For example, prescription drug costs are a universal opportunity for businesses to reduce costs. With alternative sourcing, we can often provide the exact same drug in a way that lowers or entirely eliminates the out-of-pocket costs for the employee and reduces the overall cost to the plan by several orders of magnitude, such as providing an $80,000 prescription for $30,000.
With a traditional plan, you would not get to realize the potential of that savings.
For smaller plans--and we have clients with as few as 10 and 2 lives on self-funded plans--you can still safely pursue self-funded alternatives. Your plan may not be fully self-funded, but any adjustment of your plan can lead to significant returns.
How to De-Risk Self-Funding Your Benefits Plan
As for the risk, here is how to de-risk self-funding if you’re a small business:
- Stop-loss insurance - This caps your total potential costs. If you have a bad year and end up needing to pay more claims than you anticipated, stop-loss insurance gives you the stability and security of not being trapped by out-of-control healthcare expenses.
- Pharmaceutical programs - As we shared in our example, prescription drug costs can almost always be addressed, even if you are on a traditional benefits plan.
- Collective buying power - Through coalition and alliances, several small businesses can come together to negotiate better benefits terms and to diversify their plans.
- Direct medical contracts and reference-based pricing - Employees can often receive higher quality care at a lower cost if you are able to access data on costs and quality ratings, which we can do.
- Alternative delivery models - Programs like telemedicine and prescriptions by mail can actually increase employee access to care while lowering costs. These options are almost always a boon to every business.
- Progressive change - You do not have to choose between a traditional plan and a self-funded plan. You can gradually make the shift over time, and you can start the process without canceling your current plan.
- The right partner - The right advisor for your business will take your concerns seriously and collaborate with you to customize an approach that meets your needs.
Find the Right Path for Your Business
Many of these ideas are likely new to you, but they should help you reconsider your perspective of what might be available to your small business. Not every option will be a perfect fit for your business, but know that you do have options for wrangling your healthcare spend. If you’d like our perspective, we’re available to share what we’ve learned.