Self-funding, Catastrophic claims, and the ACA’s Death Spiral Problem

We are considered a leading expert in the national marketplace for health insurance design and consulting for small start-ups and growth companies. It’s amazing how quickly in the last 2-3 years especially, companies have pounded the table for something other than over-priced group health insurance products. Twenty or thirty years ago an advisor or consultant wouldn’t have considered self-insuring a client with less than 500 employees. That number now has fallen off of a cliff, down to 10 employees or so.

What’s amazing about self-funding is how it validates the 10 leading ailments that contribute to the majority of claims dollars – and they’ve been quite common over the last 10 to 20 years as well – 10. Septicemia, 9. Respiratory Failure, 8. Stroke 7. Congestive Heart Failure 6. Transplants 5. Pre-mature births 4. Congenital Anomalies 3. Renal Disease 2. Leukemia/Lymphoma/Myeloma 1. Malignant Neoplasms – these 10 contributed about 53% of the total 5.3bn between 2012-2015 (referenced attached  top 10 Ailments article).

So the good news is with self-funding employers have a much more transparent model with data available to assist with negotiations. It validates exactly what is going on and why costs are what they are, rather than getting sitting in a fully-insured insurance carriers “black box.”

More variable models are popping up all over the country – co-ops and Captives for example. So what does this mean for the ACA? It means very bad things for the ACA, something called the death spiral which has already been evident and growing fast in the land of Obamacare. As carriers pull out of the exchanges, prices soar, and savvy employers choose to go the route of a risk-reward re-balancing using self-funded methodologies it is more clear now than ever that the ACA exchanges (Obamacare) will be laden with terrible risk, and void of healthy young folks who pay an inflated premium to fund all of that terrible risk….those folks are running to the exits. Those exits say “Savvy employers fed up with the racket of fully-insured hyper-inflated products, exit here.”

For true benefits advisors there has never been a greater time to open doors with clients to shepherd them to more predictable plans, funded differently than the clearly broken products of the last 30 years.