Business consulting company Spooner found itself facing the same challenge its clients and many other employers across the country are grappling with: rapidly rising health plan costs.
Many of the Westlake, Ohio-based company's clients were on what chief marketing officer Andy Lembach calls the “hamster wheel”
“Every year, everyone dreads shopping for the next plan (during) open enrollment,” Lembach said. “And you get a bunch of quotes from people, you go with the cheapest one, and then the next year they jack up the rates, and then you're in this vicious (cycle) and you're doing it all over again. There's seemingly no control.”
Last year, Spooner, which employs about 130 people, switched to self-funded health insurance, a model in which an employer provides health benefits to employees with its own funds. It's typically a cheaper option, but the employer then assumes the risk for paying claims, versus the traditional fully insured model in which insurance carriers bear that risk.
The self-funded option emerged for large, multistate employers after the Employee Retirement Income Security Act of 1974 exempted self-funded plans from state regulation, said Mike Ferguson, president of the Self-Insurance Institute of America.
The option has migrated down market ever since, with midsize and smaller companies making the switch from fully insured benefits. That has accelerated through health care reform.
“Companies are certainly seeing a lot of disruption in the marketplace over the last several years,” Ferguson said. “They want to be able to insulate themselves somewhat from that and by setting up your own health plan, you have more control over your future in terms of costs and how benefits are provided to your employees.”