Self-Funding a Solid Solution to Savings for Employers

Many employers are moving from fully insured plans to self-funding in order to realize significant savings. We’ve actually been able to help many employers reduce their year-over-year benefits costs by 15% or more.

If an employer has a good claims year, they are more likely to look at self-funding realizing they can likely save dollars in the form of unspent claims dollars traditionally kept by the carrier in a fully insured plan. In a self-funded plan, you as the employer are able to keep these unspent dollars.

We do see the major motivation for moving to self-funding as cost savings, which is fair in a market where health care costs are sky rocketing. An estimated 15% of any group’s health plan costs are fixed costs or administrative costs, according to the Congressional Budget Office. Therefore, claims make up the remaining 85% of the variable plan costs otherwise referred to as “claims costs”. An example may be if the employer funds their plan at $1.5 Million, their fixed costs — or administrative costs — would be around $225,000 leaving $2.275 Million in the claims bucket to pay medical claims.

If employees spend less than what’s in the claims bucket and there are monies left over, the employer is able to retain those dollars rather than having them go back to the carriers — like in a fully insured plan. This is not a strategy but a hope when structuring a solid self-funded plan and we can’t assist your efforts based on hope. We must always put a plan together that will reduce the frequency and severity of claims. So when does the real work start? It begins after the move to self-funding.

Here at The Starr Group we understand that Self-Funding is not solely about savings but more about control. Control of claims data, plan designs and the healthcare supply chain. We manage the healthcare supply chain, made up of the things employees purchase, e.g., prescription drugs, hospitalization, doctor visits and surgeries.

Being the healthcare supply chain manager is essential for our Consultants to do their role. They have many management tools including, utilization and medical management, referenced based re-pricing, direct hospital contracting, direct primary care, specialty medication costs, and fiduciary pharmacy benefits management.

For our self-funded clients and prospects, our Consultants are managing the healthcare supply chain in order to reduce their year-over-year spending by 15% or more. Let’s forget the traditional low renewal increases or hoping for them – our Consultants can assist you in delivering real cost savings – significant bottom line results that brokers just can’t compete with.

Ultimately, Self-Funding is the only way to have year- over-year reduction in healthcare spend!