Self-financed healthcare is helping companies fight inflation and fears of recession

Corporate finance chief jobs could soon get harder. Inflation shows no signs of slowing down. No wonder seven out of ten CFOs believe a recession is imminent.

And then there’s the cost of employee health insurance, which has risen 47% over the past decade to an average of $22,000 per year per family.

But this is one of the costs that CFOs can control — if they reject the traditional health insurance model and take direct financial control of their healthcare plans. Self-financing can give companies more control over their healthcare delivery – while offering better care at a lower cost.

Conventional health insurers charge a fixed monthly premium per employee. The advantage lies in the ability to plan. Businesses know what they’re spending, even if an employee falls ill.

But predictability has its price. When losses are less than expected, insurers reap unexpected profits.

When claims increase, insurers simply increase premiums. They have no real incentive to work to reduce health care costs.

With self-financed health insurance, on the other hand, a company pays the health costs of its employees piece by piece. So it has a strong incentive to keep employees healthy — and to actively manage its health plan to that end. Every dollar saved can be reinvested in the company and its employees.

Businesses don’t have to manage their own plans. Many businesses, especially small and medium-sized ones, work with external administrators to process claims, build vendor networks, and perform other back-office tasks.

Our company switched to self-financing three years ago. We now have detailed data on how our healthcare plan is performing – what is driving healthcare costs in our employee population and which solutions provide the most value for our members. This enabled us to develop a health plan tailored to the individual needs of our employees.

The savings from self-financing can be huge. My health plan has about 200 employees. In our first year of self-funding, we saved $600,000. Now in our third year, we’ve saved a total of $1.2 million.

As I’ve seen firsthand, any CFO who doesn’t actively manage their company’s claims expenses is leaving hundreds of thousands, if not millions, of dollars on the table.

Here’s an example of where the savings are coming from. Our old insurer approved a $60,000 per year per patient fee for the arthritis drug Humira without trying to come up with a better deal.

Our self-funded healthcare plan was able to source the drug for half that price.

We’ve been able to achieve similar savings elsewhere by training and mentoring our people to become high-quality, often world-class, providers. After all, a successful procedure is much more cost-effective in the long run than one with postoperative complications.

For example, after self-funding, we discovered that knee surgery at a hospital near us cost nearly $80,000. Our outside admin, WellNet, found another, higher-quality provider five miles away — and charged just $20,000 for the same process.

To incentivize our employees to visit the lower-cost, higher-quality provider, we have offered to waive the $2,500 employee deductible — essentially reducing their cost to zero while the company saves $57,500. dollars saved.

Self-funding has long been popular with larger employers. A Kaiser survey found that 64% of workers with employer insurance are enrolled in self-funded plans. But only 21% of workers in small businesses are covered by them. This means tens of thousands of companies are missing out on a golden opportunity to save money, improve their corporate culture and save money.

Self-funding has enabled our finance team to take care of healthcare and run it like another division of our company. At a time when CFOs are preparing for an economic downturn, the savings generated by self-insurance could be key to staying in business.

Hilton Sher is the Chief Financial Officer of Consolidated Credit Solutions ( Self-financed healthcare is helping companies fight inflation and fears of recession

Fry Electronics Team

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