How Self-Funded Health Plans Can Help Employers Control Rising Healthcare Costs

Employers across North Carolina and beyond face year-over-year health insurance premium increases of up to 20%, yet many accept these hikes as inevitable. Zach Brock, chief executive officer at Cypress Benefit Solutions, argues that the fully insured health insurance market is fundamentally broken and that employers have more control over healthcare costs than they realize through self-funded plan arrangements.

The Case Against Fully Insured Plans

Traditional fully insured health plans purchase coverage from external carriers, leaving employers with limited visibility into costs and little control over plan design. While this arrangement may seem convenient, Brock contends it costs employers significantly more than necessary and conditions them to accept annual premium increases without question.

Self-funded plans operate differently. Employers directly reimburse medical claims rather than paying fixed premiums to insurers. This model requires assuming greater responsibility for the employee health plan but delivers increased control, flexibility, and transparency in return.

67% of covered workers in 2024 were enrolled in self-funded plans, with larger employers more likely to self-fund because they can spread risk across larger employee populations. However, self-funding options increasingly appeal to mid-sized employers seeking cost control.

Addressing the Pharmacy Cost Crisis

Pharmacy expenses represent a growing concern for employers. Business Group on Health’s 2025 Employer Health Care Strategy Survey reports that 76% of employers are very concerned about rising pharmacy costs, yet only 1% believe meaningful competition for affordability exists in the market.

Specialty drug prices continue rising sharply. Formularies restrict choices. Transparency remains limited. The National Alliance of Healthcare Purchasers Coalition found that one-third of employers cannot access data from their pharmacy benefit managers, preventing informed decision-making about pharmacy spend.

For healthcare organizations and employers, understanding pharmacy utilization patterns and implementing transparent PBM offerings can drive significant cost reductions. However, this requires advisors who actively educate clients about pharmacy spend rather than simply managing annual renewals.

Opaque PBM practices, including spread pricing and rebate retention, contribute substantially to rising drug costs. Employers benefit from demanding transparency and considering alternative PBM arrangements that align financial incentives with cost containment.

Beyond Annual Renewals

Brock criticizes the common broker practice of disappearing after implementation and reappearing only at renewal time. His firm implements a 12-month hands-on engagement cycle, actively guiding employees and HR teams through every stage of the benefits journey.

This approach helps employers understand how self-funded plans work and watch savings materialize throughout the year. Benefits packages represent one of the largest investments companies make in their people, making ongoing advisor engagement essential to maximizing value.

For employers evaluating broker relationships, the level of ongoing support and education provided should factor heavily into selection decisions. Advisors should function as strategic partners who understand the business, its people, and its goals—not merely vendors who process transactions.

Strategic Planning and Market Positioning

An effective benefits strategy requires understanding current plan performance, how it compares to market trends, and where the market is heading. This process focuses on creating a roadmap for success rather than selling products.

Self-funded arrangements enable customized benefit design tailored to workforce needs. Employers can implement reference-based pricing, direct primary care arrangements, and proactive pharmacy strategies that would be difficult or impossible under fully insured plans.

However, self-funding isn’t appropriate for every organization. Smaller employers may lack the claims volume to reliably predict costs, making stop-loss insurance critical but potentially expensive. Healthcare financial advisors can help employers evaluate whether self-funding makes financial sense given their specific circumstances.

The Role of Data and Transparency

Self-funded plans provide employers access to detailed claims data, enabling identification of cost drivers and opportunities for targeted interventions. This transparency allows for employers to design wellness programs, disease management initiatives, and other strategies to address specific employee health needs.

Traditional fully insured arrangements typically provide limited claims data, preventing employers from understanding where healthcare dollars go or how to effectively influence spending patterns.

Access to data also enables employers to evaluate provider performance, identify high-cost, low-value services, and steer employees toward higher-quality care options. These capabilities can produce substantial savings while improving health outcomes.

Building Trust Through Results

Brock emphasizes that trust represents the cornerstone of effective broker relationships. Employers must trust advisors enough to let them lead rather than viewing them as vendors processing transactions.

This trust develops through transparency, education, and demonstrated results. It requires showing employers how self-funding transforms benefits strategy, helping employees engage with their plans, and being present throughout the year rather than just at renewal.

For employers, selecting advisors based on their commitment to ongoing partnership and education rather than lowest-cost premiums can produce better long-term outcomes. The cheapest option often proves most expensive when accounting for poor plan design, inadequate support, and missed savings opportunities.

Financial Considerations for Employers

Self-funded plans require careful financial planning. Employers must ensure adequate cash reserves or credit facilities to cover unexpected spikes in claims. Stop-loss insurance protects against catastrophic claims but adds cost that must be factored into total plan expenses.

Finance teams should model various claim scenarios to understand potential cash flow impacts. Working with experienced benefits advisors and financial consultants helps employers structure self-funded arrangements that appropriately balance risk and reward.

Strategic Implications for Healthcare Organizations

For healthcare providers, the growth of self-funded employer plans affects contracting strategies and revenue cycle management. Self-funded plans increasingly use reference-based pricing and direct contracting rather than accepting traditional network discounts.

Providers benefit from understanding how self-funded plans differ from fully insured arrangements and adapting contracting approaches accordingly. Direct employer contracts can provide stable patient volumes and more predictable reimbursement but require different negotiation strategies.

Looking to strengthen your organization’s financial health as benefit plan structures continue changing? Our healthcare CPAs and consultants help organizations navigate employer benefit trends, evaluate self-funding options, and optimize financial strategies. Connect with our team to explore how we can support your strategic planning.

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