Fact vs. Fiction: What Employers Need to Know About Self-Funding

In today's dynamic business environment, employers need benefits solutions that are as innovative and adaptable as the organizations they lead.

Each year, employers face significant increases in health insurance premiums and prescription drug spending, compelling them to make difficult decisions that impact their financial health and the quality of benefits they offer. Businesses often find themselves absorbing these costs, passing them on to employees, making changes to benefits, or employing a combination of these strategies.

Historically, self-funded health plans have been the domain of larger companies. However, as healthcare costs continue to rise, self-insurance has emerged as a viable and cost-effective option for employers of all sizes.

This approach allows businesses to manage their health plans more efficiently and tailor them to their specific needs. Despite its advantages, there are several misconceptions about self-funding that need to be addressed.

Here, we dispel four common myths about self-funding:

Fact vs. Fiction: Dispelling 4 Myths About Self-Funding

Myth #1: Self-funded plans over-expose my company to risk.

Fact #1: The risk associated with self-funded plans is not inherent to the plans themselves but rather to the lack of a strategic plan. Self-funded plans offer flexibility, allowing companies to control the level of risk they are comfortable with, unlike traditional plans where the insurance carrier dictates risk tolerance. With proper planning and the right strategy, self-funded plans can be a secure and beneficial option for businesses of all sizes.

Myth #2: Self-funded plans are not suitable for smaller companies.

Fact #2: While it is true that some self-funded plans offered by large national carriers may not fit smaller businesses, there are many options available that cater to companies with fewer employees. Mechanisms such as stop loss insurance (including captives) and monthly accommodation features can mitigate risks, making self-funding a feasible option for smaller businesses.

Myth #3: I will get stuck in a self-funded arrangement.

Fact #3: Modern self-funded plans, especially partially self-funded ones, are designed to be flexible. Unlike older plans with hidden costs and terminal liabilities, today's plans often spell out these costs upfront, allowing businesses to account for them from the beginning. This transparency ensures employers can switch carriers if a more competitive option becomes available without unexpected financial burdens.

Myth #4: Self-funded plans are too complex for my company to understand.

Fact #4: While self-funded plans can have additional facets, such as reserves and terminals, many are designed to mimic fully insured plans, simplifying the process for employers. The key is to have a knowledgeable consulting team that understands these triggers and can proactively manage the plan to benefit the company. This expertise ensures that the complexity is managed effectively, allowing businesses to focus on their core operations.

All in all, arguably the most significant asset offered by self-funding is the complete freedom to structure benefits according to the needs of your company—regardless of size.

For more information on strategies to reduce rising workforce costs, read our Cost Containment Playbook.

OneDigital stands out in the field of employee benefits consulting with its holistic approach. Our team of experts helps businesses develop customized, strategic, and effective benefits packages that align with their organizational goals. Here's how OneDigital can support your business:

• Customized Strategy: OneDigital works with you to create a multi-year benefits strategy that prepares your organization for future workforce challenges while controlling costs.

• Data-Driven Decisions: We harness the power of data to ensure your benefits strategy supports growth and fosters an exceptional workplace.

• Cost Containment: Our consultants help you understand your cost drivers and explore aggressive benefit strategies to optimize every dollar spent.

• Employee Engagement: We focus on delivering customized, multi-channel benefits education and engagement throughout the year, ensuring your employees are well informed and satisfied with their benefits.

Navigate the complexities of self-funding and other employee benefits strategies with confidence by partnering with OneDigital to ensure your business remains competitive and your employees are well-supported.