The uncertainty around healthcare leaves businesses unsure about their options for employee benefits in 2018. Congress is focused on ideology, partisan advantage and the right way to pay for healthcare. They’re not making any progress because they’re missing the most important point.
Our elected leaders are arguing about how to pay for healthcare when they should be focusing on how much we are paying for it – and the fact we’re grossly overpaying. Evidence suggests nearly 30 percent of all healthcare spending in the United States is waste – including unnecessary services, excessive administrative and inflated prices – and it’s built right into traditional health insurance models. But, no one is paying attention.
Whether it’s Trumpcare, Obamacare or something in between, all signs indicate insurance costs will continue to skyrocket. Next year marks the fifth-consecutive year that health insurance rates will increase by at least five percent – and it’s all because we’re trying to solve the wrong problem. Healthcare costs (and waste) will continue to increase our deficit and command a larger share of our nation’s gross domestic product.
What’s worse, the impact on businesses and employees will be disastrous.
Health insurance is among a company’s biggest expenses. An average employer-provided insurance plan costs about $6,500 a year in premiums with a $6,000 deductible. But, even if the business covers the lion’s share of the premium, the deductible simply isn’t affordable for the nearly half of our nation’s employees earning less than $15 an hour.
The result is that 48 percent of U.S. employees are not insured through their workplace. To make matters worse, Trump’s new executive order will make it more difficult to buy insurance on the exchange.
Despite the volatility, one aspect of the law remains stable: self-insurance. It’s an innovative solution that’s quickly gaining momentum among employers of all sizes.
Self-insurance allows employers to reduce their costs without cutting benefits. They can create their own benefits plan and pay claims directly or through a third-party administrator. Benefits can be customized and may include medical, dental, vision, prescription medications and workers’ compensation. For employees, the plan may look and operate in exactly the same way. In addition, self-insured companies often purchase stop-loss insurance to limit their risk.
Companies that self-insure benefit in numerous ways:
• They’re not on the hook for marketing costs or profit margins built into traditional insurance. The Self Insurance Educational Foundation has estimated these cost savings at 10-25 percent.
• Cash flow improves because employers don’t pre-pay for coverage – they pay when claims are incurred. They keep any extra money they’ve put into their claims bucket.
• Self-funded plans are regulated under federal law (ERISA), so employers are not subject to state health insurance premium taxes.
• Companies that self-fund own their claims data, allowing businesses to benchmark their utilization against other companies’, and react to the data as needed.
Self-insurance gives employers a new option for providing quality health benefits without straining their bottom line.
Paul Johnson is co-founder and CEO of Redirect Health, a Scottsdale-based company that makes healthcare easy and affordable for individuals, employers and brokers. More at redirecthealth.com.