HoldCo, a holding company with 184 employees on their fully-insured medical plan, was presented with a 23% renewal increase for 2010. Frustrated with their lack of options, and knowing that adding employees through planned acquisitions would only compound future increases, they needed a better solution.

Their broker-consultant worked with management to develop a strategy to take control of their health plan.

The first step was to transition the company from fully insured to self-funded so they could gain insight into and control over their actual claims costs. As a result of this move, HoldCo was able to achieve a 4% decrease in medical plan costs in 2010 vs the 23% increase. This was accomplished with no change to the plan designs.

The broker-consultant also had HoldCo join Everlong. In the Captive, the company could participate in the innovative insurance and funding solution that takes the profits that health insurance carriers make on individual plans and pays that money back to members as owners of the Captive. This innovative funding solution, plus Everlong’s group purchasing power, helped keep HoldCo’s future health plan increases far below what they would have been had the company remained fully insured.

In addition, self-funding and moving to Everlong enabled HoldCo and their broker-consultant to analyze and project claims costs and to take innovative steps to better manage risk and further control costs in their health plan.

In eight years, the number of employees in the plan grew to 426. Over this period, Everlong’s innovative solutions enabled HoldCo to save a cumulative total of $15.3 million compared to what the company would have spent had they remained fully insured—all without cutting benefits for the employees.

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The latest Kaiser Family Foundation Survey of Employer-Sponsored Health Benefits provides a detailed look at trends in employer-sponsored health coverage, including premiums, employee contributions, cost-sharing provisions, offer rates, wellness programs, and employer practices, as well as historical information dating back to 1999.

The 2018 survey included 2,160 interviews with non-federal public and private firms.

Annual premiums for employer-sponsored family health coverage reached $19,616 this year, up 5% from last year, with workers on average paying $5,547 toward the cost of their coverage. The average deductible among covered workers in a plan with a general annual deductible is $1,573 for single coverage. Fifty-six percent of small firms and 98% of large firms offer health benefits to at least some of their workers, with an overall offer rate of 57%.

Survey results are released in several formats, including a full report with downloadable tables on a variety of topics, a summary of findings, and an article published in the journal Health Affairs.

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The question isn’t should employers self-fund their health plan—it’s why haven’t they already? Self-funding is by far the most important thing employers can do to get control over their health plan’s costs and provide better benefits to their employees.

With the Everlong Group Medical Captive, there are self-funding options for employers with as few as 50 employees on the plan. If an employer has more than 150 employees on the plan, it’s hard to think of a reason not to self-fund. Maybe if their medical loss ratio, less high claimants, is consistently greater than 90% (assuming they can get that data from their health insurance carrier).

The percent of large employers who self-fund their plan rose dramatically between 1999 and 2018, but for mid-sized employers it remained flat. It’s not that self-funding makes less financial sense for mid-sized employers, it’s that they don’t understand the long-term risk and reward aspects.

In a nutshell, with self-funding, an employer pays an administrative fee to have an insurer or TPA administer their health plan—deal with providers, claims, etc.—and a premium for stop-loss insurance to protect them against really large claims costs.

The big difference is the employers pay their own claims. This means they get to see every claim and know exactly where every dollar is going. And they no longer pay the hefty margin above claims costs that carriers bake into their fully insured premium. Over a multi-year period, the savings are significant.

The Biggest Myth in Health Insurance

Typically, employer health plans will have one year out of every five where claims are abnormally high. Many employers are under the impression that a fully insured plan is less risky because the carrier will absorb or pool these high claims and cushion the employer. This is one of the biggest myths in health insurance.

The carriers do not “absorb” these costs; they recoup them by raising premiums the next year—sometimes by 30% to 50%. The employer is cushioned from the high claims costs only in the year they are paid. They get hit with them the following year in the form of a premium increase. Compounding the problem for employers is the fact that when claims costs come down, fully insured premiums rarely do, and future rate increases are based on the new higher baseline premium.

With a self-funded health plan, the employer will pay a portion of the additional costs during a high claims year, and stop-loss insurance will cover the rest. When claims costs come down in following years, so will the employer’s costs. The stop-loss premium may increase, but nowhere near as dramatically as a fully insured premium would have. The employer retains the margins above claims costs rather than giving that money to the fully insured carrier.

Everlong: Added Stability and Cost Control

Self-funding in the Everlong Captive provides an extra level of protection against volatility and premium increases. Everlong’s innovative risk pooling solution dampens the volatility in claims costs during the high claims years and even enables Members to get a portion of the stop-loss premium returned in good years. In addition, as Members of the Captive, employers have group purchasing power when negotiating stop-loss renewals, which helps to lower premium increases.

Self-funding in the Captive also enables employers to take advantage of Everlong’s best-in-class solutions to lower claims costs themselves. These include leading population health analytics and predictive modeling to drive effective disease management programs, a cost-effective and completely transparent Pharmacy Benefits Manager, and an innovative specialty drug program to rein in spiraling drug costs.

The Everlong Captive makes it easy and effective for mid-sized employers to enjoy the same benefits of self-funding as large organizations. Employers have saved hundreds of thousands—sometimes millions—of dollars over the years by self-funding in the Everlong Captive. That’s money that can be reinvested in better health benefits for the employees

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