In The Worksite

Self-funding: Helping Clients Save Money and Manage Financial Risk

How advisors can shorten the knowledge gap- and accelerate the conversion process

by Brad Nieland

Brad Nieland is Vice President, Stop-Loss & Health at Sun Life Financial. Visit

More employers in the medium- and small-group sector are considering self-funding as a way to better manage financial risk, healthcare costs and workforce health.

2016 research conducted by Sun Life showed that 40 percent of fully insured employers have indicated interest in transitioning to self-funding, which could result in 35,000 newly self-funded employers over the next 5 years. This represents a major market opportunity.

In the self-funding conversion discussion, brokers can play a significant role. Sun Life’s research shows that the decision to convert – once considered – can take up to two years. But, once employers discuss the self-funding transition with a broker, they tend to convert within six months to one year.

Yet some employers are still unsure. Sun Life’s research also shows that, although the main driver behind employer interest in self-funding is cost savings, their main concern is financial risk, especially high-dollar claims. These risks can be managed.

Stop-loss coverage is a critical consideration for self-funded employers in reducing exposure to high-dollar claims. With so much uncertainty playing a role in the decision to self-fund, selecting a stop-loss provider is an important component of the plan. Stop-loss not only reimburses the employer for claims above the selected deductible, but can also help lower the cost of claims.  The right stop-loss provider can work with the broker and their clients to identify savings opportunities and generate successful cost containment outcomes. There are several different ways to approach high-dollar cases.

Out-of-Network bill negotiation

Care from out-of-network providers can result in unnecessarily high-dollar claims, and often the patient doesn’t realize they are receiving out-of-network care. With more information and education, clients can better advise their employees on finding in-network providers.

In the case of one stop-loss client, two employees each had outpatient surgery at an out-of-network surgical center. After the client unsuccessfully attempted to negotiate the charges, the broker advised the client to seek support from Sun Life’s clinical staff. Review of the charges were determined to be in excess of a reasonable amount, and our clinical team worked with a preferred vendor to negotiate the billed charges with the provider. The client saved $283,717.

Treatment alternative

Medical treatment should be another area of focus for self-funded clients. The removal of lifetime limits on essential health benefits under the Affordable Care Act has been extremely helpful in getting people better access to life-saving care and medication previously inaccessible due to cost. However, higher use of care and specialty drugs also generates higher healthcare costs for the self-funded client, and the potential to encounter high-dollar claimants.

The removal of lifetime limits on essential health benefits under the Affordable Care Act has been extremely helpful in getting people better access to life-saving care and medication previously inaccessible due to cost

A client’s employee was receiving ongoing medication every eight weeks at a hospital-based infusion center at a cost of $57,024 per treatment. Upon review of the claims, our clinical team engaged the broker to discuss potential cost containment solutions. Sun Life’s clinical staff, in collaboration with the broker, worked with the claim administrator to create an action plan, and the result was a transition to home-based infusions. The employee gained more comfort and convenience while getting treatments, and the client saved $307,200 annually.

Due diligence

A second set of eyes never hurts, and that is especially true when it comes to high-dollar medical claims. A diligent claims team will review all claims for potential cost containment opportunities, and identify even simple cases of billing error.

After a claimant with a serious disease incurred nearly $2 million in claims costs, our claims team investigated the charges and found something wasn’t quite right.  Our clinical team initiated discussions with the broker, claim administrator and the medical facility, which determined that the $715,000 charge was largely due to a billing error. The price was adjusted to $28,818, and with a PPO discount, came to $12,579. In the end the employer saved $702,421.

Ongoing guidance

Although examples are helpful in illustrating cost containment methods, employers also need to know how their workforce’s health can support cost reductions and impact their plan design and stop-loss policy.

Workplace health and wellness can help prevent catastrophic health conditions and hundreds of thousands or even millions of dollars in medical claims. Conditions like heart disease and renal failure, two of the costliest conditions we have seen in our stop-loss claims, can be attributed to poorly managed type 2 diabetes – a disease that can be managed with focus on health and nutrition. Wellness education and activities can help foster a healthier workforce – one that is less likely to need medical attention for illness, racks up fewer absences, and contributes more productivity to the business.

Once the client converts to self-funding and has chosen a stop-loss partner, brokers continue to engage with clinical and claims specialists to strategize cost containment solutions. Preventing or even reversing excessive costs is a win for everyone. Clients can save thousands – even hundreds of thousands – of dollars, and receive actionable feedback on steps to take in proactively reducing future healthcare costs while still providing great healthcare for their employees. v

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