Using self-funded health plans to cut costs for company health plans

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Providing employees with health insurance is expensive, but employers shouldn’t be passing those costs onto their workers through high-deductibles, says the CEO of health insurance company Centivo.

The New York-based company rolled out a new health plan last week that allows employers to adopt a self-insured model. The company claims their new offering will save employers 15% compared to traditional health insurance, and employees won’t have to pay a deductible. Centivo’s self-funded offering is available in New York, Orlando and Jacksonville — with plans to expand to other cities.

“Rising health care costs are an ever-increasing burden for employers, and so far, the answer to addressing them has simply been to shift more and more of the cost to employees with high-deductible health plans,” says Ashok Subramanian, CEO of Centivo. “We’re thrilled to bring lower-cost, easy-to-use healthcare to the modern American workforce and their families.”

Centivo’s self-funded plan contracts with healthcare systems and private primary care providers within each employer’s city to negotiate pricing. Instead of a deductible, employees receive free primary care and are charged copays for all other services, which range from $30 for an office visit, to a few hundred dollars for a hospital. Centivo uses data analytics to determine how much employers should pay for healthcare.

“Members will know what they owe before going to the doctor, and won’t have the barrier of a large deductible or hidden, unpredictable costs hindering them from getting the care they need,” Subramanian says. “Our goal with this model is to make high-value health care more accessible to more people living in the United States.”

In 2019, large employers projected that healthcare costs were going to rise by 5% for the sixth year in a row, according to a survey by the Business Group on Health. The cost of providing employer-sponsored healthcare in 2019 was around $15,000 per employee, and it’s not expected to decrease in following years — especially with the COVID-19 pandemic taking up so many resources.

To combat the growing financial responsibility on employers, companies are increasingly turning to self-insured healthcare models to lower costs. Last year, social media giant Pinterest switched to a self-insured plan because “traditional insurance was letting us down.” In 2018, Amazon partnered with JPMorgan Chase and Berkshire Hathaway to form an independent healthcare company — Haven — to serve their collective 1.2 million U.S. employees. The same year, the Colorado city of Arvada contracted with Paladina Health to restructure its benefit offerings to be self-insured.

“We were getting double digit increases every year, but by becoming self-funded we were able to take control of our plan,” said Mark Deven, city manager of Arvada, in a previous report. “We challenged ourselves to reduce our annual increases to somewhere around 4-6%, and we definitely beat it.”

Before launching the self-insured model, Centivo conducted a pilot study in 2019 to determine if the product was feasible. Employers involved in the study saw cost savings; emergency room visits decreased 30%, routine primary care visits increased 23% and preventive care visits increased 64%.

“We don’t believe people should be severely financially penalized when they need care,” Subramanian says. “Research has shown that people use care very differently before they have satisfied their deductible; people tend to avoid care, both necessary and unnecessary, when they have to pay a lot for it. And even a deductible of a few hundred dollars is more than many Americans can afford.”

Healthcare providers working with Centivo say self-insured models make it easier for them to deliver quality care by communicating directly with employers. Provider partners include Mount Sinai Health System, ProHealth, Orlando Health and Cigna — which allows some employers outside of New York and Florida to participate in the plan.

“When we were offered the opportunity to be part of a plan that works closely with employers to align incentives with providers and deliver better healthcare, we knew we found a partner in Centivo that recognizes our strengths and shares our vision,” says Michael Stubee, assistant vice president of managed care for Orlando Health — a provider contracting with Centivo.

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