Self-insured, Level Funded, or an Insurance Captive Medical Plan Could be the Answer to Lowering Your Medical Insurance Costs

Employers are increasingly turning to the self-insured, level-funded, and captive insurance model of healthcare out of frustration with traditional fully-insured medical insurance — but they need to stop and think before diving in says, Bret Harding a self-funding veteran with Blackrock Benefits.

To combat employers’ growing financial responsibility, companies are switching to self-insured healthcare models to lower costs. Last year, Metro Nashville Public Schools designed a payment system for maternity care with Vanderbilt Medical. In 2019, social media giant Pinterest switched to a self-insured plan because “traditional insurance was letting us down.” The previous year, the Colorado city of Arvada contracted with Paladina Health to restructure its benefits offerings to be self-insured.

“Traditional insurance has just gotten so expensive for any size [employer,]" says Bret Harding, President of Blackrock Benefits. “Add a pandemic and it only gets worse; costs spread over all those people regardless of COVID incidents.”

Choosing an experienced third-party administrator that manages claims for the self-insured health plan is critical. In an interview, Harding shared how employers can determine whether the self-insured healthcare model is right for their workforce and which features they should look for in a provider.

How do know you know if a self-insured, level-funded, or captive insurance model of healthcare is the right choice?

Traditional insurance is a shared cost model, which could benefit a plan if they have a lot of sick or ill people. The insurance companies are going to increase their rates every year to cover their costs — they’re not in the business of losing money.

But in the self-funded space, you’re paying for the claims your employees and their dependents incur and service processing — so you’re paying for what you need, not what might happen. Yes, you’re absorbing some of the risks, but you can mitigate that through a stop-loss policy.

Also, most traditional health insurance won’t share healthcare data with their employers, whereas, in self-funded plans, the data belongs to you. The data is HIPAA compliant, you won’t be able to see what your employees’ health problems are. However, you’ll get a snapshot of your entire workforce, which can help steer you to the wellness plans your employees need.

Does this model help reduce spending for employers of all sizes?

It can for many different employers, but if you have a large population of very sick people, then it won’t necessarily be cheaper for you — you might break even. But employers who actively engage their employees with wellness programs tend to perform the best with self-funded programs because they’re focused on improving the health of their employees.

Benefits of a captive insurance plan

Members participate in an innovative insurance and funding solution that takes the profits that health insurance carriers make on individual plans and pays that money back to them as owners of the Captive. The result is significantly lower insurance costs for the same level of benefits.

Improved Employee Health

Captives works with members to move beyond standard “well being” programs and focus on sophisticated wellness and disease management, population health, and data analytics initiatives. The result is healthier, happier employees—and further reduced health care costs over the long-term.

The Captive is owned by its Members, and as owners, employers have greater control over how their health plans are funded and transparency into everything from their own claims costs to Captive operations. Members retain the flexibility to choose how their health plans are structured as well as the vendors and service providers they work with.

A good captive is composed of employers with smart, forward-thinking broker-consultants who are willing to adopt a better way to control their health care costs and improve employee health. Members and their brokers gather twice a year for The Summit, a two-day event at a select location where they share experiences and explore the latest innovative practices and programs to improve employee health.

Do employers lose access to providers through alternative medical plan models?

Not at all. Some can be limited, but many self-insured providers contract with popular health systems and PBMs to deliver care. Employers just need to work with their brokers to find someone who can offer them the services they want.

Which features should employers look for in a self-insured, level-funded, or captive insurance model?

Pick a partner that’s truly going to be a partner, someone who can help educate your employees when they have questions about their plan. There are some providers that specialize in that, but not all of them have that arm. You should also find someone who is willing to give you your data on a regular basis and partner with you to make the plan as efficient as it can be.

Using an employee benefits broker in Utah with a proven track record in self-insured, level-funded, and captive insurance models is critical.?These medical plan models are not a good fit for every group. Your broker should be able to help you find a provider that will work with you on an annual basis to review the plan, your overall costs, PBM options, and methods to reduce costs.?If you’re not having those conversations, you might want to start looking for somebody who will do that with you. You are paying your broker, so make them work for it.