self-funded insurance plan
Employee Benefits

Self-Funding: Don’t Leave the Faucet On!

Colin McLain
Colin McLain
Vice President

At Holmes Murphy, I have had the unique experience of working with a variety of different employer groups. From culture, to size, to industry…each one uniquely different. Those differences have also provided me the opportunity to develop different benefit strategies based on each client’s specific goals and core beliefs. Looking back, I feel as though I’ve helped implement and manage every type of medical plan there is — from small group fully-insured plans to full blown self-funded plans (and every variation in between).

With the pressures of rising healthcare costs and trends, we’re seeing more and more small to mid-size employer groups gravitating toward some type of self-funded or partially self-funded medical plan in hopes that the funding mechanism alone will save their company money over time. While it’s true self-funding can bring immediate savings (i.e. relief from state health regulations, mandates, ACA’s health insurance tax, a la carte administration, etc.), these are hard dollars and don’t account for the big picture opportunity to address the root cause of the rising healthcare costs: unhealthy behaviors.

I recently met with a mid-size employer that’s considering moving from a fully-insured medical plan to a partially self-funded medical plan. Initially, they were enamored with the idea of having more control over benefits, plan design, contributions, and access to better health data. Those are all “wins” in terms of being able to truly customize their medical plans through self-funding, but they were also hesitant to place any behavioral/engagement requirements on their enrolled employees (in their words, it felt “too Big Brother”). I explained that while they may have access to more data, what good is that data if you’re not willing to do something with it…like holding employees accountable to how they manage their own health and the healthcare system?

The analogy I provided was that of a home water bill. Knowing the CFO had three young children, I asked him if he was OK with his child leaving the water faucet on overnight in the backyard? His immediate response was “Absolutely not! I pay for every drop of water that comes out of that faucet.” I explained that having a self-funded plan wasn’t very different than his home water bill. Further, if he wasn’t willing to implement specific measures to control how the plan was utilized by his employees (i.e. how much water was coming out of the faucet), then you may as well let someone else pay the bill (i.e. remain fully-insured). This analogy seemed to shine a light on what he admittedly stated he was originally missing.

While self-funding may not be the right solution for every employer group, with a self-funded health plan, employers do have the ability to “control the faucet.” And with the right benefits partner, employers can reduce healthcare costs and improve employee health. For those of you who may already have a self-funded plan in place, the real question is “Have you left the faucet on?”

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