Expanding Your Practice

Self-Insured Health Plans: A Potential Cost-Saving Solution

Article Summary

  • A Trend in Rising Healthcare Costs as prescription and healthcare expenses continue to increase1, burdening employers.
  • Self-Insured Plans are a viable option for employers seeking to optimize benefits and reduce costs.
  • Benefits may include potential cost savings, tailored benefit structures and increased control.
  • Challenges are financial risks, administrative burdens and employee communication.
  • Strategies include direct contracting, stop-loss insurance and captive insurance arrangements.
  • Empower Pharmacy offers affordable compound medications to help reduce employer healthcare costs.

As typically the second largest business expense after payroll, employers are bearing the weight of increasingly expensive healthcare plans for their employees.

Exploring alternative benefit options like self-insured or self-funded plans may help employers find a more cost-effective solution.

Self-insured plans give employers more flexibility, offering plans with creative, money-saving solutions.

Take a glimpse into the trends, benefits, challenges, possible solutions and how Empower Pharmacy can help provide comprehensive, affordable health options.

The Rising Cost of Healthcare

The escalating price of prescription drugs and healthcare has become a significant concern in recent years, impacting patients and employers.

The average drug price increased by 15% from 2022 to 2023, according to a report.

Prescription costs have steadily increased year over year. According to a report by the U.S. Department of Health and Human Services, between January 2022 and January 2023, over 4,200 prescriptions increased in price. During that year, the average drug price increased by about 15% or around $590 per drug product.

Furthermore, in 2023, the average annual premium for employer-sponsored family health coverage reached $23,968, according to the Kaiser Family Foundation. Employers often take on most of this cost, typically covering around three-fourths of premium costs.

As a result, some employers are turning to self-insured health plans as a potential cost-saving strategy.

What is a Self-Insured Health Plan?

A self-insured health plan is a model where the employer is financially responsible for providing healthcare benefits to its employees. Instead of paying a fixed premium to an insurance company, the employer pays for each claim as it arises. To mitigate risk, employers may implement stop-loss insurance, so their spending won’t exceed their budget2.

Managing the administrative load as a self-insured employer can be cumbersome for a small company. In that case, a third-party administrator (TPA) can facilitate in designing plan benefits, enrolling employees and dependents, approving and paying claims, and more3.

Mitigating risks and optimizing self-insured health plans requires careful consideration of various strategies5.

Potential Benefits

Potential for lower costs: Companies could save money by avoiding state health insurance regulations and purchasing stop-loss insurance to protect against high claims.

Tailored benefits: Offering a benefit plan designed around employees’ specific needs can be a significant advantage in recruiting and retaining talent.

Increased cost control strategies: With new insurer transparency rules, employers have access to the cost of healthcare services4.

Employers may also access employee claims to determine a more suitable plan that fits their budgets3.

Drawbacks and Challenges

Financial risk: Probably the most significant drawback is associated with unpredictable claims. If there is no adequate stop-loss insurance in place, high-cost claims can significantly impact a company’s finances5.

Administrative burden: Managing a self-insured plan requires in-house expertise or third-party administrators, which can add to the complexity and administrative workload2.

Not appropriate for all businesses: Certain businesses with limited financial resources may not benefit from a self-funded health plan structure6.

Possible Strategies and Solutions

One of the primary benefits of self-insured health plans is that they allow for financing solutions to help mitigate risk and optimize cost savings. Possible strategies and solutions include:

Partner with a Compounding Pharmacy:
Exploring alternative medication options, like using a compounding pharmacy, can contribute to cost savings.
Direct Contracting with Healthcare Providers: Collaborating directly with healthcare providers or networks can help reduce costs by eliminating intermediaries and negotiating lower rates7.
Risk Mitigation:
Self-insured employers may purchase stop-loss insurance to protect them from excessive claims that may exceed their budget.
Captive Insurance Arrangements: Smaller employers can explore captive insurance arrangements where multiple companies pool their risks together while still benefiting from self-insured plans8.

Empower Pharmacy: Affordable Rx Options

Amid rising prescription costs, Empower Pharmacy offers affordable compound pharmaceutical solutions. Provide your employees with access to innovative prescription therapies at an affordable price. Your employees can receive compounded medications specific to their health needs and lifestyle.

Reduce health benefits costs with innovative, high-quality, accessible medications.

Contact a client liaison today to discuss potential cost-saving options.

Contact us

  1. Luhby, T. (2023, October 31). Employers face steep jump in health care costs for 2024 | CNN Politics. CNN. https://www.cnn.com/2023/10/31/politics/health-care-costs-job/index.html
  2. Employer self-funding of employee health benefits. (2024). Texas Department of Insurance. https://www.tdi.texas.gov/pubs/consumer/cb108.html#stoploss
  3. Wehrwein, P. (2024). The Leap to Self-Insurance. Managed Healthcare Executive, 34. https://www.managedhealthcareexecutive.com/view/the-leap-to-self-insurance
  4. “Insurer Price Transparency Rule: What Has Been Disclosed?”, Health Affairs Forefront, February 2, 2023. DOI: 10.1377/forefront.20230127.553761
  5. Tech, A. (2023, August 16). Should Your Company Consider Self-Insurance? – APP Tech. APP Tech. https://apptechllc.com/should-your-company-consider-self-insurance/
  6. Campbell, M. (2021, April 22). Self-funded health insurance pros and cons. Sana Benefits. https://www.sanabenefits.com/blog/self-funded-health-insurance-pros-and-cons/
  7. Gallagher, M. (2023, November 10). Self-Insured vs. Fully Insured Employee Health Benefits: How Do They Differ? Roundstone Insurance. https://roundstoneinsurance.com/blog/self-insured-vs-fully-insured/
  8. Winter, L. (2022, September 7). Understanding Captive Insurance Arrangements – Meritain Health. Meritain Health. https://www.meritain.com/understanding-captive-insurance-arrangements/