For many business-owners self funding can be difficult to understand. It can feel intimidating and even risky. But here’s the reality: unless your deductible is 0, you are technically self-funding. The difference is you can pay more for the “ease” that comes with a fully insured plan.

Keep it simple.

Not ready for self-funded programs right away? Start small. Transitioning from a fully insured plan to a self-funded one will take time and commitment, but when you make minor changes to start, you can begin to gain control and utilize the flexibility a self-funded plan offers in a more confident way.

When you approach self-funding this way, you can begin to lower your costs. At the same time you can provide better service with the same, or better, care for your employees. And by giving your people an improved experience that also meets their unique needs, you can produce a healthier, happier workforce.

Where to make changes.

Using a transparent Pharmacy Benefits Manager, which is a small and manageable change, could be the best place for you to start. Capturing the overspend created in pharmacy is an easy, relatively painless first step to move into self-funding. A PBM is not disruptive and won’t create conflicts, it can even lower costs for everyone across the board.

As an advocate in the health care system, a PBM works to lower your prescription drug costs by negotiating with drug companies and securing discounts that can save you money and reduce your cost. Read more about how a pharmacy benefits manager can be a great addition to your health insurance plan here.

You can do something similar with diagnosis tests such as MRI’s, X-rays, bloodwork, and in some cases — surgery bundles, by working with Preferred Provider Organizations. This can allow you to negotiate direct agreements that ultimately cost you less. Essentially, you get better rates for these services.

This change can give your employees more flexibility and options, allowing them to see any doctor, even some specialists, without going through the primary care doctor. This flexibility is often seen as a significant perk for many employees because they are not limited to just one doctor or hospital, allowing more freedom to control their healthcare decisions.

These are all options you can implement without abandoning your traditional plan. 

Yet education and awareness for these options is intentionally limited by carriers for several reasons. One of which is hidden incentives for brokers to recommend traditional options. These incentives can make the cost saving options seem more complicated when they don’t have to be, creating muddy waters.

Clear the water.

If you work with the right broker and advisor, these solutions can be implemented in a successful way, one that allows you to control costs without disrupting the current plan or sacrificing employee’s health coverage.

Making adjustments to your insurance plan can be intimidating, however with the right advisors and the right options, you can be on your way to a cost saving self-funded plan, one that your employees can use with confidence and ease.

Cost saving and employee satisfaction. Connect those two and make the magic happen!

We recently had a major health insurance provider offer us a $15,000 bonus to bring back a pharmacy program that we took outside of their company. And although we don’t have the exact numbers, you can imagine how many brokers would be tempted to take the deal. 

After all, that is a significant amount of money to get paid for a client’s signature, who may never know the deal wasn’t in their best interest. For us, the move to the new program was in the best interest of our client and therefore was non-negotiable for movement back to the original provider, and we hope that most professionals would make the same decision.

Incentives like this are not uncommon in the health insurance industry. This example shows just how easy it is to offer a program, plan or policy that is not ideal for clients and how unfair these hidden commissions can be. 

Transparency in the health insurance industry

Under the new legislation, brokers, agents and advisors are required to disclose this information to their existing and potential clients. This allows employers to make better decisions about the health insurance they provide. The legislation also comes with new reporting requirements for your business, making transparency between providers and clients essential.

The Consolidated Appropriations Act requires brokers and agents to inform their clients of direct and indirect commissions, including any bonuses and incentives they may receive. These benefits, that are paid to brokers by insurance companies, have been around for a long time and can come in the form of luxury vacations, six figure bonuses, and yearly commission percentages. 

The earnings are legal and considered, by some, to be a cost of doing business. However, with the transparency act, employers will now have the opportunity to see information about what they are paying for and most importantly, if there are any conflicts of interest.

Employers are the ones who pay

Knowing this information is important for employers, because they, and their employees, are the ones that will pay for these incentives in the end. Sometimes the costs become wrapped up in the ever increasing yearly premiums. 

Not only are employers potentially paying more, they’re also at risk of being penalized for unreported information. Employers can be held responsible for any unclaimed taxes, costs and data that is not reported to the IRS or related institutions, which may lead to fines and charges for non-compliance. To avoid these circumstances, the necessary data and information must be provided by the broker and done so in a timely manner.

Know the questions to ask your broker

There are several questions that will help you get the answers you need from your broker such as:

• Are they receiving any outcome that is not commission based?
• Are they receiving a bonus for selling a certain kind of product?
• Are there hidden revenue streams and if so, are any of them contingent on selling a particular product?
• Are they able to give the data required to you in a timely manner?
• What is their process so you can complete any IRS forms that may be required?

Ultimately, if your broker isn’t truthful or responsive, you could end up being penalized. Our job as insurance advisors is to help you get the information you need, while also providing complete transparency about your health insurance recommendations and plans. If you have questions regarding your health insurance plan, how the new The Consolidated Appropriations Act affects you, or what questions to ask your broker, don’t hesitate to reach out. 

The legislation that went into effect in December of 2020 is important to brokers, agents, advisors as well as employers and their employees. Transparency in the health insurance industry like this allows employers to get one step closer to getting important data they need to make the right choices.