Self-insured companies have been around a long time, but it’s still a new idea for a lot of people who have only experienced the traditional model of health insurance.
In the traditional model, also known as fully funded insurance, the company pays a set premium per employee to a health insurance company. The premium paid for all members helps cover the actual costs of medical care for everyone.
There’s a lot of math and projections involved in how insurance companies set their premiums. And in nearly every case, the math works in their favor. If the premiums paid exceed the amount actually needed for care, that money stays with the insurance company. And, more often than not, the premiums go up every year.
Some companies will work with a broker to help identify plan options and costs from different insurance providers, but there might not be a lot of choices based on your location and your budget. Your traditional insurance plan will likely bundle all services together and simply tell you the premium.
When companies decide they want more choice and more control over their healthcare, they often turn to the self-funded model. With this approach, companies pay for medical costs as they’re incurred rather than paying an upfront premium that may or may not get used.
This approach does require understanding the risks and having the assets to cover both expected and unexpected medical costs of your employees. Companies may spend several years transitioning from the traditional model to a self-funded or self-insured model. There are options available to support that in-between period, and companies will typically purchase stop loss insurance that helps cover more catastrophic and unexpected medical expenses.
The reason so many companies are embracing the self-funded model is that it gives them more control over costs and greater transparency in pricing. With a self-funded plan, they can choose their providers, including many surgery centers with transparent pricing. They also have more control over the prescription benefits plan by using a PBM like MaxCare. We work closely with our clients to help them create a prescription plan that meets the needs of their employees while also controlling costs to the employer.
Transitioning to self-funded insurance requires a lot of careful thought and analysis, and it does take some time as well, but it’s a great option to reclaim control of your healthcare costs. If you have questions about pharmacy benefits work in the self-funded model, reach out to our team today.