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You may have heard that self funding is the way to go when it comes to saving your organization some money and improving the health benefits offered to employees. In a nutshell, self-insured employers take on the risk for their employees’ medical and pharmacy claims by paying the claims out of pocket as they are incurred, rather than making payments monthly to a carrier in a fully funded scenario.
While there are many advantages to self-funding, not every organization is “self-funding ready.” Below are 5 signs your organization simply may not be prepared to make the move.
- You have no interest in understanding or leveraging claims data
Do you want to use claims data to improve your company’s bottom line? If you answer “no”, then you’re not ready for self funding. Reviewing claims data on a regular basis, however, will provide you with a better understanding of your workforce’s health status and plan utilization. It provides important clues regarding current payment trends and patterns, as well as future costs and savings.
Let’s say you answer “yes” – you may have some challenges. First, if you haven’t been offering benefits to your employees for very long, you likely do not have a significant enough paid claims history to determine whether or not self funding is right for you. Second, as a fully funded organization, you don’t have easy access to that data. In fact, you possibly have never seen this detailed information from your carriers.
- You and your employees are happy with your current insurance benefits
If your leadership team and employees have nothing negative to say about your benefits, then maybe you don’t need to explore the possibilities of self funding. A significant advantage of self-funding, however, is that you have greater flexibility over what benefits you offer employees. You can mix and match the insurance benefit package to offer more options.
Instead of being limited to the standard fare offered by insurance companies, you can actually customize your benefits package to coincide with your company values, recruitment and retention goals, and employee needs.
- Cash flow is not a concern – or it’s a major concern
Self funding is not for the risk averse. Truly – whether your company has abundant cash flow or struggles to maintain cash reserves, self-funding creates a bit of uncertainty and unpredictability which makes many organizations uncomfortable with the notion of moving to self funding.
It is possible that self funding could actually leave you with more cash on hand and at your disposal than under the traditional fully insured model because you’re only paying out when claims are incurred. Instead of making regular large payments up front to carriers to cover potential claims, you only pay claims as they are incurred. The flip side is that your payouts are unpredictably timed. And you must be proactive in monitoring and understanding your employees’ claims histories so you can potentially predict and prevent high-cost claims that could drain cash reserves.
- You are not interested in offering a more effective wellness program
Do your company’s employees all get an “A+” when it comes to healthy living? Perhaps your workforce is super healthy and free of chronic illnesses that often lead to high-cost claims. In most cases, a disease-free workforce is a bit of a unicorn.
Effective wellness programs reward employees with better health, and better health means lower healthcare claims. Typically, under the fully insured model that savings goes to the insurance company and not to you, the employer. Flip the tables and utilize data-driven wellness programs to improve profit margin and quality of life.
- You are completely confident what you’re paying your carrier is fair
When you don’t see your claims data, you just can’t know if what your organization is paying for benefits is fair.
When you pay for claims directly as a self-funded organization, however, you have greater transparency into and control over what you’re paying. You can ensure that you are paying only once for each claim, for example, and you can easily verify that each claim you receive is for a service that one of your employees actually received.
If after reviewing these signs you think your organization is ready for self funding, or if you would like help in assessing your self-funding readiness, contact Apex for more information.