Episode 6: The Self-Funding Tipping Point

# Unpacking Self-Funding: Insights with Katrina Johnson

> Understanding the shift to self-funded health plans for mid-market employers.

Good to have you here. Today, we dive into the world of self-funding health plans, a topic that's gaining traction among mid-market employers. With insights from Katrina Johnson, Senior Vice President of Employee Benefits at Gallagher, we explore the realities of self-funding and what it means for your organization.

## The Misunderstanding of Self-Funding Katrina starts by addressing a common misconception: many mid-market employers believe they can't afford to self-fund.

> "In most cases they've been misinformed about what self-funding actually costs versus what they're already paying."

The truth is, when you self-fund, you might actually save money while gaining visibility into your healthcare spending.

## What Does Self-Funding Mean? For those unfamiliar, self-funding involves a company paying for its employees' healthcare claims directly instead of paying a fixed premium to an insurance carrier. Katrina highlights that about 20% of employers with under 200 employees are now self-funding, marking a significant trend.

> "When you're fully insured, you're paying a carrier fixed premium every month, and they are betting that they will collect more in premiums than they had to pay out in claims."

In contrast, self-funding eliminates the middleman, allowing companies to keep the savings when claims are low.

## Key Considerations for Employers Katrina emphasizes that the decision to self-fund is not solely about headcount. Factors such as claims history and industry play a pivotal role.

> "Groups at 100 employees and above are genuinely candidates depending on claims history and industry."

Employers spending over $800,000 annually on total premiums should seriously consider self-funding, as the administrative costs typically become negligible compared to the savings potential.

## The Transition to Self-Funding When making the switch, employers must engage actively in the process. Katrina warns against treating self-funding like a fully insured plan.

> "Control requires major engagement by not only the employer but the broker."

Employers often fail to read their contracts carefully, leading to unexpected costs and challenges.

## Navigating the Stop Loss Market As the conversation shifts to the stop loss market, Katrina notes that it has significantly changed, especially post-pandemic. Employers should brace for higher costs and stricter terms during renewal periods.

> "Employers going to renewal should expect stop loss quotes to be more expensive and potentially more restrictive than their initial quotes were three or four years ago."

Understanding your pharmacy benefit manager (PBM) relationship is crucial, as it can directly affect what you pay for stop loss coverage.

## Final Thoughts The shift to self-funding can seem daunting, but with the right information and proactive management, it can lead to significant benefits for mid-market employers. The key takeaway? Transparency and engagement are vital for success in this model.

For a deeper dive into this essential topic, listen to the full episode with Katrina Johnson and gain insights that could transform your approach to employee benefits.