Why Self-Funded Health Plans Are Still Broken and How Employers Can Take Control

[00:00:00] Where is the Self-Funded Movement today? Chaos or Control? Chaos. You realize pretty quick in this fully insured model that it is a trap. Let's say if the community gets it right, what happens in control in five years? How would that look like? Employers first have to come to a realization and understanding that it is controllable. Once you understand why everything is so broken, it tends to motivate folks to do something about it. Name is Jonathan Barron, CEO, Self-Funded Health.

[00:00:28] All right. So I guess take me back. What was the moment of frustration that made you decide and build Self-Funded Health? So I was born and grew up in Wisconsin. And so Wisconsin has kind of always been dear to my heart. And we have a problem in Wisconsin, which is the cost of health care. This is the second company for me. First company was on the health care IT side,

[00:00:56] trying to help primary care doctors get through their day. But as I started to think about what I wanted to do for my next venture, this cost problem kept nagging at me. And it's the problem that's gone unsolved. It's the problem that's eating at, in many ways, our cultural fabric, right? People can't afford this basic service that they feel like they need, right?

[00:01:19] And so I started on this path of direct primary care, where I saw this beautiful interaction between physicians and patients actually having the time to let doctors be doctors, right? Let them spend time with their patients. But, and it was clear to me, this is a big part of the health care cost problem. But also it was going to need the employers getting into the game. It was going to need the employers actually understanding, getting to do things differently.

[00:01:46] And so this kind of started me down this path of DPC is kind of the start. It's the core, right? But now we have to do the same thing that direct primary care did to primary care with the health plan. Because the health plan is actually in many ways the problem. Its incentives are completely misaligned. The incentives of the health plan are for costs to go up.

[00:02:11] And so this was the point at which it was clear to me that we need to reinvent this health plan. We need to rebuild it from the ground up, start from first principles, understand that direct primary care and things like it are at the core. But this became really kind of the thesis, the idea for what became Self-Funded Health. And exactly what's the offering when somebody becomes your customer? Is it the whole plan? What are different pieces involved, specifically what you offer currently?

[00:02:41] Yeah, I mean, I think of this as a continuum. So on one end of the continuum is the fully insured plan. The fully insured plan, many know and recognize it, right? The challenge with it is that you have zero control, right? So you are a 50 life employer, you are a 200 life employer, you have a premium, you pay that premium, and it does not matter what the utilization is, right? I joke with folks that say, like, imagine this hypothetical thought experiment, right?

[00:03:10] That no one used health care on your fully insured plan. It was a miracle, right? But guess how much you paid, right? You still paid that fully insured premium. So you realize pretty quick in this fully insured model that it is a trap that you have to get out of, right? So you exit it, and then typically next in the sequence is you self-insure through one of those same carriers. Well, now you're back, you're still in the same trap, you're just paying for it a different way, right? So then the next step in the process is that what many folks do is they unbundle the health plan.

[00:03:39] They take the health plan, they blow it up into all these different pieces. PBM, a TPA, a network, case management, all right? And then now you're moving in the right direction, but it's still quite complex. And so what we've done at Self and Health is to say the actual next step is we actually have to repackage that back up into a cohesive health plan that functions and delivers the same product over and over again, because that's what the market wants, but in a standardized way.

[00:04:06] So what we do is we replace the existing health plan, any one of those options, whether it's a fully insured plan, whether it's a currently self-funded plan, in whatever form, and replace it with an aligned health plan to the employer. And based on what you're seeing in the market at the moment, your customers or ideal customers are more people switching who are already on self-fund kind of models, or those are completely, oh, I just discovered this thing. And then we change it.

[00:04:35] And I'm sure there's a difference of sales cycle and timeline between that. Yeah. It's, I mean, I would say that most of our customers have one unique attribute, which is that they're just frustrated, right? It's just like they have seen enough of this to understand something is broken. Maybe they haven't put their finger on it, right? But they realize renewal after renewal, increase after increase, something is not working.

[00:05:01] They're getting advice from folks that doesn't like seem to move the needle. And so, yes, we have folks that move from fully insured to us. Then we also have groups that are self-funded today and move to us. It really speaks to a mindset shift, which is we talk about a big difference between most employers think about that they buy health care insurance, where we say you've got to stop thinking about that.

[00:05:28] You've got to learn to instead buy your health care. And that's where the cost savings comes, is when you learn to understand what should health care cost and what am I paying for the health care and then driving as much utilization as possible. So I always shorthand this to say, particularly in our market, an MRI, everyone knows what an MRI is. You sit in a tube, get a picture taken.

[00:05:55] That can cost $5,000 or it can cost $500. So when I talk about buying health care, are you going to get more $500 MRIs as a result of your strategy? I'll tell you what doesn't get you more $500 MRIs is changing networks, is dealing with HSAs, is narrowing networks, broadening networks, changing your TPA. All these different components. This is the shopping of insurance.

[00:06:22] The shopping of health care gets you more $500 MRIs. How do you do that? Well, you add incentives. You add nurse navigation. You educate your members. You change the culture top down at your organization to help folks to understand why would we want more $500 MRIs? What is that going to do to the money coming out of our paycheck? Right? All of these things fall on that other side of the spectrum, the purchasing of health care.

[00:06:47] And so I would like to answer your question, right, is when people understand that distinction, that's what leads them to us because that's what we're purpose built to do. Okay. And, you know, obviously we were just talking that, you know, there needs to be a big shift towards the mindset, especially on the employer side. And to have that mindset that not health insurance, getting health care, it's a big deal, right?

[00:07:14] So where do you see like the most on your end when you're talking to employers? Where do you see like the biggest hurdle you're seeing? Is it like they just have the wrong person assigned or is it just like it's very hard for them? It needs a lot of education before they understand this shift. And where do you see is like the biggest friction at the moment to even get that message across?

[00:07:40] Yeah, it's fundamentally an education gap that employers have. I think most of most employers believe that it's health care. What am I supposed to do with it? Right. It's like it's kind of like the thing that is the untouchable in the corner. Like it's like, yeah, my rates are going up 20, 30 percent, whatever they are every year. But what do you want me to do about it? Right.

[00:08:03] And so that that one piece of it's this victim mindset in many ways. Right. That insurance, the cost happens to me and I don't feel like I have any control right now. I think you have to look at and understand who is driving that narrative today. Right. So zoom way out. Right. Most employers, health care is their second or third biggest expense. Right.

[00:08:28] In most companies, your second or third biggest expense is not managed by someone who oversees a P&L. It's overseen by an HR benefits leader. Right. Now, then typically an HR benefits leader is then bringing in a third party broker or advisor because they don't feel like they have enough understanding of this health care ecosystem to do it themselves. Right.

[00:08:52] So and now and then we start to get into the meat of the issue, which is that the business model of the brokerage or the agency is in many ways completely designed to protect the status quo, which is driving the outcomes that that employer says they don't want. Right. Right. And so it's not in the incentive of that advisor or that broker to typically talk about all of these things that I'm referencing. And so that's how the employer learns.

[00:09:22] Right. Right. And so it is taking now the market reaching a boiling point for these employers to realize maybe that advice isn't always the right advice. Maybe I need to think about this a little bit differently. Right. That's leading to different conversations that haven't happened in the past. It's fundamentally an education and awareness gap that employers have today that most just don't understand. And it can get really complicated if you want to go, if you want to want it to.

[00:09:52] Yeah. What's the I guess let's shift the gear to the summit. Right. So what's the chaos you started the summit to fix? I take a lot of pride in the work that I do. Right. But it's also very easy. You know, I'm at a cocktail event or reception or whatever. Like, what do you do? Like, I'm fixing the broken health care system. And it's like immediately this triggers anyone. Right. It's like, yeah, yeah, yeah. I was just at the doctor and it took me like six months or 12 months to even see anyone.

[00:10:22] Or, yeah, I went in and they charged me this crazy bill. Right. It's to me. This is something the chaos is anyone now recognizes this. Anyone who is a patient recognizes that this is messed up and there is nothing that is pushing back in the opposite direction, making this any better. This is just this is on a progressive runaway train that is just it continues to move right now. And then you and you take that to the employer lens. Right. Right.

[00:10:51] So that chaos and that craziness just at a patient level manifests in like people not even using their insurance. Right. Because it's not like it's too much. It costs too much money. I don't know how to use it. All of these things. Right. And then as well as these employers are getting hit with these massive increases year after year that they don't know what to do with. Right. And so it's like just reflect the broken health system on any one of these stakeholders and you can see it. Right. That's the chaos to me. Right.

[00:11:20] It's it's all of these things. It's fundamentally broken and no one thinks that it's working. Right. So that's the chaos. And let's say if we get it right, the community gets it right. Yeah. What happens in, let's say, control in five years? How would that look like? Yeah. I mean, I think the first piece is I'll take that through the employer lens first, is that. They have to come.

[00:11:47] The employers first have to come to a realization and understanding that it is controllable. The you know, the first time that most employers think about that, they think about like, well, what am I going to do about the car accident? Right. Or the you know, the big emergency room stay. Right. But and that is certainly a part of health care. Right. But 80 to 90 percent of health care falls outside of those buckets. Those are just the first ones we think of.

[00:12:15] 80 to 90 percent of health care is schedulable. It's knowable ahead of time. It's not something that happens emergent. And when employers begin to see some of the massive cost differences between hospital and an independent surgery center or an independent imaging center or even other hospitals in a given market. Right. That these orders of magnitude can be 10 X differences in price. Right.

[00:12:43] You begin to see really quickly that like, wow, there's a lot of opportunity here. Right. Just on a strictly on a cost basis. Right. So to me, first off, it's changing the mindset. I reference that victim mindset. Right. It changes from a victim mindset to know this is just like any other cost. This is something if I'm a steel manufacturer, it's like the cost of my steel. Right. I manage the cost of my steel. I have to manage my health care costs in the same way.

[00:13:11] The only way to understand the health care system is you have to follow the incentives, follow the flow of money and you will see the incentives because they play out just as you would expect them to. And you have to understand that you get enough confidence that you will be able to control this because you now understand the pieces. Right. So to me, that's that's a big part in that step is just taking agency over their own destiny. Right.

[00:13:40] My goal is that employers don't think of the renewal as something that happens to them, but instead it's a reflection of their members purchasing decisions throughout the year. Right. They know and they will see what drove that renewal. And it didn't happen to them. It had happened as a result of the actions that their members have taken, the choices that they've taken. Control. Hopefully they realize first. Yes. That's an important thing. Yes.

[00:14:08] I guess what's the thing about self-funding? You believe that most of the industry still doesn't, you feel like, doesn't get it. I mean, we've talked about this cons or I talked about at the conference, this concept we called self-funding and name only. Um, and it was this concept that, um, it really goes back to that buying healthcare insurance versus the buying the healthcare.

[00:14:35] Most people think about self-insurance is the answer to the problem. Like self-insuring saves you money. That is false. We always use this example, this analogy, right? Where it's like you coming to me complaining about the cost of your groceries. I'm like, okay, so where do you go? Where do you shop for your groceries? You're like, I go to whole foods and I pay with my credit card. Okay. So self-funding is the equivalent of saying, I'm not paying with my credit card anymore.

[00:15:04] I'm going to pay with cash. Right? So now you come back to me and you say, John, I'm going to whole foods and, but now I'm paying with cash instead of a credit card. But my grocery bill is still just as high as it's been. I'm like, well, the only way that you're going to change the cost of your groceries is you've either got to go somewhere else other than whole foods or you've got to buy less groceries. And this is most people make that first shift in how they pay for the healthcare, but don't feel like they have to do anything to change the buying behavior.

[00:15:34] And something's going to be, something's going to be different. That's false, right? This is the hard work of self-funding. Self-funding, if you just self-fund, if you just change how you pay for your healthcare, but you don't change the consumer behavior as well, guess what? You're going to end up paying the same, if not more than when you were fully insured. The only way it makes sense to self-fund is when you are committed organizationally, culturally to a change in the consumption of your healthcare.

[00:16:03] Moving away from those big box, like those big logos, hospital system logos that we're used to seeing and getting your healthcare elsewhere. If you do that, then you can be successful self-funding. If you're not willing to do that, or that sounds like too much work or not worth the effort, then self-funding is the right answer for you. That was a great example.

[00:16:28] What do you think, or what do you want someone to feel when they walk out of the summit, let's say at the end of the summit today? The honest answer is I know they're going to walk out and they're going to feel overwhelmed. Um, because you come away from this, you see behind the curtain for the first time and you're like, oh my gosh, this is so complicated. Like there are so many different moving pieces.

[00:16:55] And I hope that for the right employer, it energizes them because we can talk about this all we want. But if we're not taking action, if we're not doing something with that, you know, we've kind of left something by the wayside. Now, I also think too, that not only energize, but I also questioning would be like a good, I think a good word to use to describe. They're hearing things at the summit that they've never heard before, ever, ever. Right.

[00:17:24] And so I hope they come away with like a little more of a sense of like, use the word agency before. Like I need to start asking some different questions than I've been asking before. Right. Now I've heard someone tell me something that like, I realized I wasn't getting the whole truth before. Right. And so I'm going to change my questions. I'm going to change a little bit of the way that I'm thinking about this.

[00:17:48] Um, but we do fundamentally believe that when an employer sees behind the curtain for the first time and begins to understand it, they never unsee it. They can't go back. Right. Right. So whether that results in change this year, next year, or the year after. Right. That's going to be on them. But once you understand why everything is so broken, it tends to motivate folks to do something about it. I'm going to do a rapid fire round with you.

[00:18:17] So first thought that comes to your mind, go with that. Where is the self-fund movement today? Chaos or control? Chaos. One word for where self-funding is headed.

[00:18:37] I mean, I want to say control, but it's headed towards ownership, internal ownership, like employers wrapping their arms around this and saying, the only answer is if I own this. Most overhyped thing in the space right now? Point solutions. Most underrated thing? Culture change. All right. Great. Any last thought you want to add from your end?

[00:19:08] No. Thank you for supporting the event. We've intentionally not made this a sales event. This is not about – I've had feedback from folks in past years. It's like we came away – we thought we were coming to this conference to learn about self and health, and we still don't even – you guys didn't even do a pitch, right?

[00:19:25] And it's like a – it's intentional because it's about progressing this movement forward, giving the employers in particular the tools that they need to then hopefully progress this conversation forward at a level that's even bigger than us as a company. So thank you for participating and supporting the spread of the message.