Highlights  

• Inflation and rising salaries have led to cost/price increases that will likely drive up total health care spend.

• People are returning to their doctors for care that they may have delayed due to the pandemic — another cost driver.

• Small and mid-size employers have limited ability to shift more costs of health plans to employees.

• These conditions negatively impact the ability of small to midsize businesses to offer a sustainable healthcare benefits plan to acquire and retain employees.

• Employers must look to alternative funding models with greater cost control and savings to thrive in today’s volatile economy.
• Self-funded health insurance can dramatically lower costs for employers and lead to a more sustainable benefits plan that better meets the needs of both employers and employees.

Amidst rising salaries, decades-high inflation, and other economic headwinds, many small and midsize businesses are finding it difficult to offer high-quality healthcare benefits plans to their employees.

Many are being hit with double-digit renewals as insurance companies seek to ensure their own profitability and hedge against provider cost increases and anticipated high utilization post-pandemic. Worse, they can’t get a clear picture of their organization’s healthcare spend because data is typically not shared with them.

As healthcare costs continue to skyrocket, unsustainable employee benefits plans can mean significant financial and operational issues for these companies.

The trouble is, most business owners and CFOs don’t realize they have any other choices. “It’s just the way the system works.” “My broker says I am too small to self-insure.” We hear this all the time.

But there ARE terrific options out there for small and midsize businesses to self-insure their employer-sponsored health benefits. Self-funded group captive health insurance offers an affordable health insurance option that allows small to midsize companies to meet their employees’ needs and expectations and maintain a sustainable benefits plan. By self-insuring, employers can lower their costs and offer quality benefits to their employees sustainably into the future.

Economic Factors Affecting Small to Midsize Employers

The Great Resignation has continued into 2022, with more than 4 million Americans leaving their jobs over the last 15 months.

Combined with record-high retirement rates (about 50.3% of Americans 55 and older) in 2021, employers across the country are struggling to find and retain a qualified workforce. Self-funded health insurance allows employers to provide affordable, high-quality benefits to their employees, which can significantly improve retention rates.

Inflation

The U.S. Bureau of Labor Statistics reports that inflation reached 8.2% as of October 2022. Medical care costs have increased 6.5% since last year, food prices are 11.2% higher, and fuel costs have increased 58.1% over the same period.

Rising Salaries

To combat inflation and the resignation rate, many employers are raising salaries in an effort to retain workers and avoid the high cost of recruiting and training. According to an industry survey, salaries increased by an overall 4.8% in 2022, the highest increase in decades. 70% of those surveyed reported higher increases in 2022 over 2021.

This percentage far exceeds the standard 3% to 3.5% cost of living increase companies typically offer. While a CNBC All-America Economic Survey found that 80% of workers are happy with recent pay increases, 74% believe they won’t be enough to keep up with inflation.

The Effect of Rising Salaries and Inflation On High-Quality Healthcare Benefits Plans

Smaller companies are struggling to keep up with salary increases and the cost of inflation. Unfortunately, these rising costs also affect the healthcare benefits plan offerings of small to midsize businesses.

Budget Cuts

High salaries and inflation cause many small businesses to make unwanted budget cuts. These cuts often result in fewer competitive employee benefits, such as wellness programs and quality healthcare coverage.

Higher premiums from fully insured carriers make it difficult for smaller companies to afford well-rounded healthcare plans. Sometimes, this results in minimal healthcare coverage, high co-pays and deductibles, or even layoffs as the company struggles to budget for rising costs.

Self-funded health insurance can dramatically lower the costs of benefits while simultaneously improving the quality. Employers only pay for the benefits they actually use — essentially paying for the insurance they deserve.

Self-insurance saves money. That’s the Roundstone guarantee — you’ll save money in your first five years or we make up the difference. In fact, 2/3 of customers using Roundstone’s self-funded insurance save enough in their first four years to entirely pay for their fifth year of claims.

High Deductible and Cost-Sharing Plans

Many businesses turn to high-deductible and cost-sharing plans to balance the cost of increasing salaries and operational costs. High-deductible plans may make premiums affordable for employees when they are healthy, but these plans can create financial issues when employees need to use their benefits.

According to the Kaiser Family Foundation, high-deductible plans average $7,441 and $21,662 for single and family coverage, respectively. Employees who struggle to pay the deductibles and co-pays may skip medical care, worsening their condition and resulting in higher costs down the road.

When this happens, smaller companies pay the price with unhappy, unhealthy, and less-productive employees who are at risk of leaving their jobs for a company that offers a more attractive benefits package.

But by self-insuring, they can turn those tables around. By lowering the cost of their benefits, they can afford to offer high-quality care with a benefits package that improves employee retention.

Inability to Attract and Retain Workers

Of the companies that gave raises in 2022, 44% cited retention as a primary concern. Pew Research found that in 2021, 63% of workers quit due to low pay and 43% cited poor benefits.

High healthcare costs often mean fewer raises, potentially leading to employees looking for greener pastures. Companies then get stuck spending more on recruiting and training. It takes nearly 15% of HR budget expenses to recruit new talent, and according to Glassdoor, companies spend an average of 24 days and $4,000 on hiring a new employee. After hiring, it takes another 12 weeks for the new hire to perform their position effectively.

The inability to retain workers is a significant expense factor for most businesses. Maintaining a high-level benefits program can help minimize this cost.

Roundstone’s Group Captive Insurance: A Proven Solution for Affordable Healthcare

Smaller companies looking for a tailored healthcare benefits solution can opt for self-funded health insurance from Roundstone. Roundstone lets small to midsize businesses join a captive health insurance plan that provides savings of 20% to 30% per year while offering better coverage at a lower cost.

How do we do it? Unlike a fully insured model, you only pay for what you use and keep the rest. And unlike other self-insurance models, you benefit from a risk-sharing approach that lets you offer high-quality coverage because you join a pool with other like-sized companies. The pool gives you the power and scale of a much bigger company — and in the world of insurance, it’s all about the law of large numbers.

With Roundstone’s self-funded health insurance, you can create healthcare benefits packages that include elements that will attract and retain employees without breaking your budget. Our customers typically include the following coverage in their plan design to provide quality care and save money year over year:

• Telehealth coverage
• Low deductibles and copays
• Access to mental and behavioral health providers
• Well-being programs
• Wellness apps
• Care Management teams
• Discounted prescription medication coverage
• And more!

This year, Roundstone gave back over $10 million in unused premiums to its group captive members, highlighting our commitment to helping small and midsize businesses save money on healthcare and provide excellent coverage. We believe self-funded insurance works as an affordable benefits solution, and we have the data to prove it.

Offer a High-Quality, Affordable Healthcare Benefits Plan with Roundstone’s Self-Funded Insurance

To minimize the effects of rising salaries and inflation on your business, it’s time to get affordable, sustainable healthcare insurance for your employees with a self-funded insurance plan.

Contact us to learn more about how self-funded insurance can save you money compared to a fully insured plan, or check out our free eBook.