Is Healthcare Unaffordable? Why a Stop-Loss Captive May Be the Solution

Highlights
 

• Rising premiums, escalating medication costs, and mounting inflation make healthcare unaffordable for employers and workers.

• The challenges of access to timely and quality healthcare can worsen health issues, further driving up costs.

• Expensive healthcare often leads to employees taking on higher premiums, which can cause employee dissatisfaction and higher attrition rates.

• Spiraling pharmacy costs are straining SMB budgets and impacting individual health choices and claim costs.

• SMBs can break free from expensive healthcare by turning to a self-funded stop-loss captive, which offers direct control, tailored flexibility, and clear transparency for more affordable and sustainable healthcare.

Healthcare costs are skyrocketing, and companies and their employees are feeling the pinch. Many Americans find healthcare increasingly unaffordable, with 9% saying they have either delayed or skipped medical care due to high costs.

Nationwide inflation, increasing premiums, and pricey medications are making it harder for employers and workers to afford the cost of health services like primary care, hospital services, and chronic care management.

A solution to these issues for many small to midsize businesses (SMBs) is a self-funded stop-loss captive. Instead of paying costly insurance premiums, self-funding lets you directly cover employee healthcare costs, making changes based on your company’s needs. This offers more control, flexibility, and potential savings for your company.

Is Healthcare Unaffordable? Why Expensive Healthcare Has Become a National Crisis

Navigating healthcare affordability is a growing concern for all Americans. Roughly 14% of adults reported delaying or completely skipping prescription drugs, medical care, or mental health services because of the steep costs.

Major reasons driving healthcare’s affordability crisis include surging premiums, rising medication costs, limited access to needed services, and persistent inflation. These issues highlight the need for affordable health insurance for small businesses to provide a better life for everyone.

Increasing Premiums and Deductibles

Healthcare is getting pricier by the year, making it harder for many to keep up. In 2022, the annual premiums for family coverage under employer-sponsored plans reached $22,463. In 2023, the average price for family coverage rose to $23,968. On average, workers contributed $6,106 of the total premium amount for family plans and $1,327 for single coverage plans. This is a 20% increase in premium costs since 2017 and 43% since 2012.

Deductibles averaged $1,763 for single plans. Employees at smaller companies contributed around $2,000 more for family deductibles and $1,000 in higher deductibles than those at large organizations.

General Inflation

Over the past year, Americans have been dealing with rising prices due to inflation. Between July 2022 and July 2023, grocery bills climbed 4.9%, and overall inflation rose 3.2%. This has made the cost of living much more difficult to afford, especially for families facing a well-being crisis.

Although inflation for medical services dipped slightly by 1.5% during this period, the  Consumer Price Index shows that the cost of physician services grew by .4%, and hospital services saw a 3.1% bump. These subtle shifts can unexpectedly weigh on families, making regular healthcare visits a financial juggling act. Expensive healthcare has a significant impact on the budget of the average family, making the American dream increasingly difficult to afford.

Lack of Access

The rising costs of healthcare are not merely due to increased health insurance costs. Issues with accessible care also play a role. When individuals struggle to get medical attention due to challenges like taking time off work, transportation hurdles, or overcrowded clinics, their health can deteriorate.

As health issues worsen, more extensive and expensive interventions become necessary, which makes healthcare even more expensive. Broader economic pressures like inflation contribute to a scenario where diminished access to care indirectly pushes healthcare costs even higher, perpetuating a damaging cycle. The average American family has been pushed to the brink and cannot sustain much more.

Rising Pharmacy Costs

Pharmacy costs are fueling the rise in healthcare costs. A 2023 study projects that prescription drug spending will jump by 6.0% to 8.0%, with an increase of 8.0% to 10.0% in clinics and 1.0% to 3.0% in hospitals.

These costs have real-world consequences. In 2021, 5% of individuals didn’t obtain needed medication, 4% postponed it, 3% skipped doses, and 3% consumed less than advised. These practices don’t just compromise individual health; they result in higher claim costs for companies due to unresolved medical conditions.

Why a Self-Funded Stop-Loss Captive is the Solution for Affordable Healthcare

Controlling rising healthcare and pharmacy costs can be a challenge for SMBs when providing employee health benefits to workers. Traditional insurance plans trap companies into a cycle of increased premiums and reduced transparency. Unlike this model, a self-funded stop-loss captive offers control over your healthcare spending, letting you implement cost containment strategies to keep expenses down and employee satisfaction up.

A self-funded stop-loss captive levels risk so small to midsize companies can take advantage of the savings of a self-funded plan with the same confidence as a Fortune 500. A captive pools many small to midsize companies together to essentially give them the same risk predictability as a 1,000-head company, even if they only employ 25.

In a self-funded stop-loss captive, employers are responsible for healthcare costs up to a specific deductible, typically $16,000 to $25,000 per employee, or a set aggregate deductible. Expenses above the deductible are then paid out of stop-loss, covered by the captive, up to $500,000. Claims above $500,000 are paid by reinsurance to avoid the expense of catastrophic claims.

Let’s look at the benefits of a self-funded stop-loss captive.

Direct Cost Control

For SMBs, managing budgets is vital. Self-funding provides a direct handle on healthcare expenses. With transparent or pass-through pharmacy benefits managers (PBMs), SMBs can navigate medication costs effectively — they pay less and still get employees the medicine they need. Rather than pharmacy savings benefiting the vendor, the employer reaps 100% of the discounted costs directly.

These PBMs bypass the usual markups and provide direct access to actual drug prices, ensuring you aren’t overspending on medication for your employees. It’s an approach that directly challenges and often reduces the escalating costs that plague traditional insurance plans.

Enhanced Flexibility

Fully insured plans often come with a one-size-fits-all structure. Self-funding under a stop-loss captive allows SMBs to customize their health plans to better fit their workforce’s unique needs.

For instance, if you have a younger demographic, you might choose different coverage levels or prioritize different types of care than a business with an older workforce. This means you can partner with vendors for well-being programs, healthcare benefits apps, and services that meet your employees’ needs.

This tailored approach ensures you are only paying for what you truly need. You spend less but end up getting higher quality care for your employees — a win–win.

Built-In Access to Care

Access to care is a critical factor in patient health outcomes. With a self-funded stop-loss captive, SMBs can directly integrate services into their plans. Consider the rising importance of mental health; businesses can directly incorporate behavioral healthcare services for employees to address concerns like anxiety, depression, and substance use disorders.

You can also build access to care through the convenience of telehealth and specialized primary care programs. This helps ensure employees have comprehensive care access to improve their health with preventative services, screenings, and continued care for chronic conditions.

Transparency

Knowledge is power, and for SMBs, understanding where their healthcare dollars are going is essential. While a traditional insurance plan leaves you in the dark regarding claims data, self-funding lets you access data analytics tools that provide a clear picture of your claims and plan utilization.

This transparency allows you to identify trends, understand cost drivers, and make educated decisions on where interventions or adjustments are necessary through cost containment solutions. Instead of waiting until renewal, you can change your self-funded plan as soon as you see the need.

Return of Unused Premiums

For SMBs, every dollar counts. In traditional insurance setups, unused premiums often disappear into big insurers’ pocketbooks, offering no returns to those who put in the funds. A self-funded stop-loss captive operates differently, providing SMBs with a return on unused claims at the end of the year.

For example, with Roundstone, you not only get 100% of your unused claims account funding, but also the captive’s surplus premium funds back at the end of the coverage period. We’ve returned over $72 million in premiums to customers since we started in 2003.

Why Choose Roundstone?

ROUNDSTONE is an innovative employee health benefits company. We help small and midsize organizations offer competitive benefits at a lower cost by self-funding health insurance through our group medical captive. The Roundstone Captive enables companies to self-insure safely by pooling hundreds of employers together to share risk and save money.

With easy onboarding and personalized support every step of the way, the stop-loss Captive offers control, flexibility, and transparency and returns all savings back to employers where they belong. We believe in always aligning with the employers’ best interests and remain committed to our mission — quality, affordable healthcare and a better life for all.

Speak to Our Team at Roundstone Today

If you’re ready to learn more about the self-funding insurance plan that works so well we use it ourselves, contact Roundstone today. Let us show you how to reduce the cost of your healthcare plan for a healthier, happier workforce.