Self-Funded, and Proud of It
By: Ron E. Peck
I still recall how one summer, when I was twelve years old, I insisted that I be allowed to stay home and relax rather than attend camp. For years prior – every summer – I’d be forcibly enrolled in camp. My parents would insist that it’s “so much fun” and that “I’d be bored at home.” When, at the ripe age of twelve I was able to protest, my mother explained that she would be working and couldn’t entertain me all summer. I promised her that I would be fine on my own. What followed was a summer of lounging in a hammock, taking walks around the neighborhood, catching up on my favorite comic books, and – for the first time in my life – choosing my own agenda. It was the best summer of my life. To this day, decades later, my mother still shakes her head and admits that she wrongfully assumed that she knew what I wanted, based on past experiences and wrongful assumptions. What she had failed to take account of was that times and attitudes change.
The history of employer-sponsored health benefits in the US is a story of gradual development, driven by a confluence of factors including industrialization, labor laws, competition, creativity, capitalism and the desire to attract and retain workers. As industrialization brought with it more hazardous work, employers responded by offering means for obtaining healthcare. When unions emerged and demanded more consideration, employers had to offer things of value in addition to salary when the dollars ran short. When wages were frozen during World War II, alternative forms of compensation were a must, and when an influx of talent returned from the front lines, better health plans were the difference makers when salaries were comparable.
Regardless of their funding status (whether the plan is self-funded by the employer and employees – meaning the employer and employees pool contributions into a trust and pay medical bills with their own money, or, fully insured – meaning the employer and employees pay premiums to a carrier who then pays medical bills with the carrier’s money), the employees likely didn’t know (or care) – as long as they knew they had a nationally renowned network. The logo (and the network it represented) was all that mattered.
Consider this example. A person working for Jon’s Bakery, paying premiums to – for instance – Blue Cross Blue Shield, in exchange for traditional insurance, has “Blue Cross Blue Shield Insurance.” They participate in that carrier’s network and that carrier pays their medical bills. Meanwhile, a person working for General Electric, participating in that company’s self-funded health plan “technically” is insured by the General Electric Self-Funded Health Plan. If that plan paid to access the Blue Cross Blue Shield network, that wouldn’t change the fact that they were self-funded by their employer’s plan. Yet, if both employees showed up to the same hospital and whipped out their insurance cards, the admitting nurse would say the same thing to both of them – “You have Blue Cross.”
This illustrates two things. First, that people – both providers and plan members – conflate the network with the source of funds. They mistakenly refer to the network as the insurance. The network negotiates the rates and secures discounts. Networks don’t pay bills. The plan or insurance does. Second, people love to look for – and point to – well-known brands. Or do they?
Somewhere along the way, employers – like my mother – began to make assumptions. These assumptions were based on past facts, that may not be true today. Consider this . . . prior generations couldn’t wait to come home and enjoy a bowl of Campbell’s Chicken Soup, a bottle of Budweiser, and a scoop of Breyers vanilla ice cream – ice cold out of their Frigidaire freezer. These generations placed value on brand names with national reputations. Leveraging this mentality, employers scrambled to secure well-known logos for their health plans. Yet, today’s young professionals are eating organic free range chicken soup hand crafted with love by the neighborhood potager, alongside a quadruple IPA they home brewed in their bathroom, followed by a scoop of vegan garlic clove and peanut butter ice cream-ish.
Humor aside, the value employees and prospective employees place on brand names – especially when it comes to insurance carriers – may be diminished. In the wake of the December 2024 murder of Brian Thompson – UnitedHealthcare’s CEO – social media was rife with messages in support of the suspected killer, and other anti-health insurance sentiment. Throughout pop culture, media, and general discourse, health insurance is routinely cast as the villain. Politicians, when running short on ideas, find it is always easy – and bipartisan – to bash health insurance. Whether it is accusing carriers of wrongfully denying claims, delaying life-saving care, or raising costs for no reason other than to drive up profits and enrich shareholders, it is easy (and lazy) to cast health insurance as the “bad guy.”
The reason I bring this up is as follows. Around 54% of Americans receive health insurance coverage through their employer, and of those, approximately 65% participate in a self-funded health plan. Based on these numbers, that means more than a third of Americans get their health benefits from a self-funded health plan. That’s more than one hundred million people. Yet, I challenge you to find one hundred people who can tell you what self-funded health benefits are. I can’t think of anything else that impacts so many people, but which is so unknown. Even more maddening – we need people to understand their self-funded status, as their behavior has a direct impact on the well-being of their plan. Ignorance of their self-funded status is actually harmful!
Consider this . . . Some studies suggest that 25% of people have “joint hypermobility,” (commonly referred to as “double-jointedness”). Let’s say – however – for argument’s sake, that one-third of Americans were double-jointed. If not a single person knew it, or knew about it, what impact would that ignorance have? None. We would blissfully live our lives in harmless ignorance. Yet, when it comes to self-funded health plan status, the opposite is true. Contemplate this all-too-common scenario . . . A person visits the emergency room to get a rash looked at. The ER doctor takes a look and determines that it’s harmless and will go away on its own. While there, a nurse asks the patient if anything else is bothering them. The patient mentions they have a headache. The nurse offers to grab the patient a couple Tylenol pills. The patient says, “Thanks but no . . . I have some at home. I’ll grab them once I get back.” The nurse responds, “Don’t be silly! Save those for later and take these. Please. That’s what insurance is for.” The patient smiles and agrees that this is indeed what insurance is for. After all, the greedy “insurance company” has been “stealing” her salary for years. If they don’t pay for this Tylenol, the money will just end up going to their profits anyway. She takes the Tylenol. The hospital subsequently charges the patient’s self-funded health plan $50 for the two pills. The plan uses the employee’s money to pay that bill – along with other wasteful bills – before being forced to increase how much the employees need to contribute the following year, to adequately fund the plan.
Maybe . . . just maybe . . . had the patient KNOWN that her plan is self-funded, and that the bills would be paid with HER money, might she have passed on the Tylenol? This isn’t a hypothetical question. At The Phia Group, our employees are well aware of our health plan’s self-funded status. We all understand how our actions help or harm the plan, and how that impacts our own financial well-being. Moreover, as an employer, we provide our employees with tools and resources to facilitate educated healthcare consumerism. We want our employees to secure the best care for the best cost. They know that they can shop around, get second opinions, consider options, and beyond. We combine price transparency with quality data, education, and actually caring about the plan. The result? A plan that offers tremendously generous “platinum” level coverage (and a brand name network) for a rate that beats the lowest “bronze” level premiums.
I am sure that there were – and perhaps there still are – reasons to hide a plan’s self-funded status from employees. Yet, as the cost of healthcare continues to skyrocket, and public sentiment towards health insurance carriers continues to sour, the time has come to reconsider our messaging and begin proclaiming that we are self-funded, and proud of it.