Control What You Can Control

3 Minute Read - DISCLAIMER: This article is not for self-funded employers.

Have you ever heard the expression, "Focus only on what you can control"? We've all probably heard it at some point in our lives. This statement is meant to help us eliminate stress and concentrate on actions we can impact.

In the insurance industry, we often face the question, "What can we do to control our healthcare costs?" The answer seems simple: focus on what you can control.

The problem with that statement is that it won't benefit a fully insured health plan. As a fully insured health plan, you have no control. While you might argue that you have some control over your plan design and network, you're still at the mercy of the carrier you're with. They can choose to price and rate your health plan however they want. Let's consider historical trends:

In a good year: Companies receive a 0-5% increase

In a bad year: Companies receive a 15%+ increase

In an average year: Companies receive a trend 7-10% increase

In an average or bad year, you really only have three options:

• Try to negotiate down the renewal
• Market to different carriers
• Make plan design/network changes

Even in a good year, your costs won't necessarily go down! In my almost five years in the industry, I have witnessed only one decrease, and it was a mere -0.5%. (Keep in mind, this is before any plan design/network changes)

So if you are a fully insured employer and you ask the question, "How can we control our healthcare costs?" The answer is simple: you need to explore different types of funding. Here are four types worth considering:

• Baby Step 1 - Level Funded
• Baby Step 2 - Use of a HRA
• Baby Step 2 - Self-funded with a captive
• Baby Step 3 - Self-funded without a captive

While steps 1 or 2 may offer better financial performance compared to a fully insured plan, you still won't have the same level of control as with a self-funded plan (and there might be some exposure to volatility). Captives are a great way to limit the risk and volatility of being self-funded, especially if you are a small to mid-sized employer. They are typically designed for employer groups with 50-500 employees on the plan.

To offer a different perspective: Being fully insured is like renting a house. You get to pick your house and you might choose some furniture and decor, but at the end of the day, you don't have ownership so you don't control:

• What you pay
• The design/features of the house
• Equity investment into the house
• Any value once you are out

These are the underlying principles of a fully insured plan.

Now think about if you own your home. You gain control over all of those pieces, similar to a self-funded health plan. In a self-funded health plan you:

• Only pay for the expenses that are actually incurred, and you actually have the data and control over those expenses!
• Have complete flexibility in the design and features of the plan
• Can retain the dollars that you do not spend year-after-year, instead of paying everything to the insurance carrier
• Can build a plan that retains its value long-term to employees

A close business partner of ours analyzed the performance of all of their groups that transitioned from fully insured to self-funded in 2022. 82% of those groups saved money, and on average those companies saved 7.5%. I will let you do the math on what that could mean for your organization.

Bottom Line: The opportunities are there if you are an employer that wants to take back control of your health plan, but you cannot do it if you are fully insured.