Dispelling the Myths of Self Insurance

By Stephen Hansen
March 17, 2023

My role at ParetoHealth is to help employers and brokers find the most valuable benefits packages for their company and clients. Simple enough, right?

The reality is a bit more complex. A key function of my success hinges on educating people. However, before I can talk about ParetoHealth’s advantages, I need to establish my credibility. I understand that my affable disposition lends itself to your run-of-the-mill sales guy, but I assure you, I’m not out there to smash my quota and get a bonus. I can’t sell something I don’t truly believe in myself.

I believe there’s a better way to obtain the quality benefits that employees deserve, and it doesn’t have to come at a cost that shortchanges the future of mid-sized businesses.

That’s why I’m taking this opportunity to address one of the most common misconceptions: transitioning to a self-insured model is too difficult. Many think it’s an endeavor that rivals a Greek epic poem, with all parties at the mercy of an overcomplicated and tedious process.

TL;DR – it’s not.

Every employer’s situation is different, from scale to location. However, I’ve found what makes employers wary of self-funding generally comes from one of three myths:

Myth 1: It’s too complicated.

Reality: While our turnkey cost-management approach might be disruptive for the current state of the archaic insurance industry, making the transition from your current carrier to ParetoHealth is seamless. Most of our Members see no interruptions - major or minor - to their existing benefit structure. Employees can stick with almost every provider they know and trust without restrictions. The one big change: Members gain access to an enhanced benefits experience.

They enjoy the freedom of creating plans customized to their needs - or they can keep the exact plan designs they currently have in place. We make it easy because we understand that keeping employees happy is just as important as keeping them healthy.

But this is insurance – so surely implementation means a mountain of paperwork, red tape, and endless meetings?

Generally speaking, this part of the process is over in two or three brief meetings to sign some documents. It’s that easy.

Myth 2: It’s too risky

Reality: ParetoHealth’s mission is to remove the commonly associated risks of self-insurance to the benefit of small to medium-sized businesses.

Members of our captives are closely vetted to make sure only the right companies with the right leadership teams are joining. Then, after they join, our size and scale mean that we protect Members from unpredictable catastrophic claims better than anyone in the industry. This is how ParetoHeath mitigates the risk of self-funding.

Ironically, the real risk comes from remaining fully insured. Not only are you powerless to prevent big claims, but when one does happen (because it’s inevitable), your fully insured renewal will be through the roof! That terrible renewal will be your burden to bear – indefinitely. Because your current premium is the launching point for calculating your next renewal. In that way, the costs snowball, and you lose ground each year, and there’s no way to make up for it. It’s a financial catastrophe. So the sooner you switch to self-insurance, the better – which brings us to our next myth...

Myth 3: It’s not a good time

Reality: If you’re operating under a fully insured model, whether you had a good or bad year of claims, your annual premium will always increase. In a good year, your reward is a 2% increase…and that equates to a ton of profit for your carrier. On the other hand, if you’re running poorly and think, “I’ll wait until my claims clean up to move to self-funding,” I hate to be the bearer of bad news, but there’s simply no feasible way anyone can predict all the illnesses or prevent another catastrophic claim from happening.

What happens during month 13 if you stay fully-insured for another year? The scenario of the prior year repeats.

Once you step out from the blind alley that a fully-insured model kept you cornered in, you begin to see a bigger picture. You can build long-term strategies with predictable renewal rates and room to grow your business. NOW is always the best time to join ParetoHealth and get the protections and predictability that have alluded you for all these years.

Like all my colleagues at ParetoHealth, I take pride in my work and am here to help. I know the people behind the numbers. I see that HR director’s daughter who needs a monthly prescribed injection, I see the line worker’s wife battling cancer, and I will do whatever I can to ensure they have access to the best care possible. No matter how often I help unpack the same concerns for people, I still find purpose in it because, like the rest of my colleagues at ParetoHealth, I’m in this for the greater good.

There’s a Better Way to Do Employee Health Benefits

Join an upcoming webinar to learn how ParetoHealth turnkey employee health benefits solutions deliver the scale and resources mid-sized businesses need to self-insure with total confidence. By combining a captive model with comprehensive medical and pharmacy cost containment strategies, our members realize significant cost savings with multi-year protection.

Learn why 97% of members who join ParetoHealth, stay with ParetoHealth.

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