The Self-Funding Tipping Point with Katrina Johnson of Gallagher

Many mid-market employers believe they cannot afford to self-fund. Katrina Johnson of Gallagher explains why that is often wrong and what it takes to make the switch.

About this episode

Self-funding is gaining traction with mid-market employers. Katrina Johnson, Senior Vice President of Employee Benefits at Gallagher, starts with the most common misconception: many employers believe they cannot afford to self-fund, when in most cases they have been misinformed about what self-funding actually costs compared with what they already pay.

In a fully insured plan, the employer pays the carrier a fixed premium and the carrier bets it will collect more than it pays out in claims. In a self-funded plan, the employer pays claims directly, keeps the savings when claims run low, and gains visibility into where the money goes. Katrina notes that roughly 20% of employers with fewer than 200 employees now self-fund.

She explains why headcount alone does not decide the question. Claims history and industry matter, groups of 100 employees and up can be genuine candidates, and employers spending more than about $800,000 a year in total premium should take a serious look.

The conversation closes on execution: self-funding requires real engagement from the employer and the broker, contracts must be read carefully, stop-loss renewals are more expensive and more restrictive than they were a few years ago, and the PBM relationship can directly affect what a plan pays for stop-loss coverage.

Control requires major engagement by not only the employer but the broker.

Topics covered

• Why mid-market employers misjudge the cost of self-funding
• Fully insured versus self-funded plans
• Which employers are real candidates
• Engagement the transition requires
• The post-pandemic stop-loss market
• How the PBM relationship affects stop-loss pricing

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