With premiums constantly on the rise for employers offering fully insured health plans, brokers are searching for ways to convince their small and mid-size clients that switching to self funding can cut costs on their top line items.

Switching to one of these plans means that the employer assumes more risk, with stop-loss insurance providing financial protection against catastrophic claims. They can also pay medical claims as incurred as they would other corporate expenses, or can deposit expected or maximum costs into an account each month.

There are many ways brokers are going about convincing their clients to make the leap, from educating them on the cost of the medical loss ratio, highlighting the financial pressure health care is placing on their business, or just making them feel as uncomfortable as possible by explaining their fully insured payment methods.

Bob Gearhart Jr., partner at benefits brokerage DCW Group in Boardman, Ohio, says explaining the MLR and how it guarantees fully insured premiums will rise is a great starting point when initiating the conversation.

“Benefits is one of the few areas the CFO has not optimized and they are feeling pressure from the CEO to drive earnings to the bottom line,” Gearhart says. “This organizational pressure coupled with health care in the headlines is slowly changing the buyer within the organization.

Gearhart adds that leading HR professionals recognize this and proactively engage the C-suite in the buying decision.

Robson Baker, employee benefits and HR adviser for Clarus Benefits Group in Houston, Texas, says getting the C-suite and HR through the awareness phase of the conversation is the hardest part.

“The broker needs to educate and bring the pain points to the forefront of their minds,” Baker says. “Then it moves to consideration — which can be led by a strategic CFO and compassionate HR department.”

Framing health care cost as a financial decision allows the broker to approach the CFO first and then bring the self funding plan down to HR and out to the other employees.

“Showing ways to improve the employee experience and having a plan to implement and educate in the coming years will get the ear of HR,” Baker says. “But remember that the benefits industry has promised savings and great service for years, so what will be this adviser's unique result?”

Derek Winn, health care and benefits consultant at The Business Benefits Group in Fairfax, Virginia, says once the C-suite and HR are exposed to the high cost of their fully insured plan and the means to drive down that cost through self funding, the employer will feel empowered to make a change.

“They will also quickly realize the impact to not only for the company, but also their employees,” Winn says. “As the desire for control, compassion and sustainability overwhelm them, they can use that momentum to educate, empower and execute.”

For brokers like David Contorno, founder of E Powered Benefits, the decision to switch to self-funding should be an obvious one. He says if the CFO continues to push the health care cost issue down to the HR level, the broker needs to become more aggressive asking how the decision to have HR handle to cost problem has reduced their line-item budget costs.

“I love HR, we need their support, but their financial education and experience does not lend itself to decision making on a top five spend on the P&L,” Contorno says.

When brokers consistently present self-funding is the best possible option for the client, they'll find many small-business owners are listening with open ears. Jeff Chestnut, CEO at Coil Tubing Technology, was one such owner eager to learn more about his options.

“What is driving me is the cost,” Chestnut says. “The story needs to address the need to not only control, but improve quality.”

If the cost is high enough, small groups are more open to adopting new ideas, says Chris Corkran, national sales director at National Insurance Partners. “The brokers that I have seen have the most success have brought employers into the mindset of change completely and have immersed themselves in providing solutions to the group,” he says. “Sell on strategy, not rates.”

Instant Insights /

Transitioning small employers to self-funding strategies

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