A self-funded benefits plan means a business runs their own plan instead of purchasing a traditional fully-insured plan. Though many business owners and leaders have heard of this option, the perceived complexity of the process coupled with a fear of change deters them from fully exploring what’s possible with this approach.
With increased flexibility and greater control of their benefits plans a business can create true cost-saving opportunities as well as improved employee experience and retention. Historically, self-funding has been viewed as something that only large companies can do but with the advancements in predictive tools, this option is available for medium and even small companies.
The key to implementing self-funding into your business is to understand your business goals, estimate your timeline, and to consider the needs of your employees. The process doesn’t have to happen overnight, either. Each step can be done gradually over time.
Step 1: Understand Your Goals
Cost-savings is one of the biggest advantages to self-funding benefits plans. However, being self-funded means your company will assume the responsibility of paying for employee claim costs out of pocket. While this can sound intimidating, most businesses engage an advocate or third party administrator to help with analyzing plan data to create a cost-saving plan without sacrificing benefits or quality care for your employees. Additionally, your advisor should put mechanisms in place that safeguard your business if a radical increase in your benefits costs occurs.
In other words, self-funding can be de-risked to maximize your upside.
With risk addressed, self-funding allows freedom of choosing the benefits you offer to your employees, which presents the opportunity to increase employee retention and overall job satisfaction. For example, an industrial company with a large labor force will likely have different needs than a technology company where most employees work remotely. By offering wellness programs and benefits tailored to the needs of your employee population you reduce the number of health insurance claims made each year as well as eliminate the cost of under-utilized programs.
To reach these goals, you need to invest the time, gather and analyze your data (so that you understand your people and how your benefits have been used today). With that data and insight, you can create an appropriate timeline to transition from traditional benefits to a self-funded plan.
Step 2: Explore Employee Data and Engagement
Analyzing your employee’s data is a crucial part of structuring any health insurance plan. By analyzing the data within your plan you gain transparency by having complete access to employee claims (in a HIPPA compliant way, of course). This gives you the historical view of what your plan actually costs, enabling you to see the real value of your current plan.
You may find that you spend far more on premiums than is actually needed for care, but you may also discover that your plan has absorbed significant costs for the businesses and is actually delivering a great value for the business.
Using this data along with predictive and analytic tools can help identify potential areas of concern within your employee population. For example, a combination of health factors could create claims challenges down the road, but by tracking and analyzing the data produced by claims, you can plan for these challenges. For example, analyzing data to detect risks of diabetes amongst a population of employees can help an employer offer solutions to better manage the condition.
Having the ability to choose your healthcare benefits plans also means you determine which doctors, facilities and hospitals will be included in your plan. Employees may feel intimidated about this aspect of the new plan, but by providing a plan to educate and engage your employees you can ease this worry while actually improving the care they receive. Including information sessions and training courses to your employees is part of making self-funding successful.
Step 3: Identify Your Timeline
Different businesses will begin and complete the transition from fully insured to self-insured at different speeds. Knowing your business’s financial situation can help develop your unique timeline for self-funding. For example, by calculating your expected premium increases over the next several years, you can determine if the amount is feasible to pay. If not, you may need to consider a more aggressive plan, which will implement the self-funding model quickly, but may take more resources early on.
If done correctly, despite the speed of execution, the move towards self-funding insurance can generate long-term financial gains and overall employee satisfaction for your business. Mapping that timeline will enable you to match the process to your unique needs while eliminating potential obstacles.
Knowing Your Options
The ideal self-funded plan is one that minimizes risk and maximizes your return, one that provides cost savings without giving up the benefits your employees value. To achieve the advantages of self-funding, you need to be willing to break away from traditional insurance providers, to take back the profit they are making from you, and return it to your employees by offering benefits plans that are unique to them.
You won’t know if you’re making the right choice until you look at all of the options.