Healthcare costs have become one of the defining challenges facing employers, labor funds, and multiemployer health plans. Medical inflation continues to outpace general inflation. New therapies carry six- and seven-figure price tags. Chronic conditions are becoming more prevalent. Behavioral health needs continue to grow. Every year seems to bring another forecast explaining why healthcare will cost more than it did the year before.
For organizations that sponsor health plans, these aren’t just industry headlines. They are budget discussions, board meetings, renewal negotiations, and difficult decisions about the future of the benefits they provide. Every unnecessary healthcare dollar spent is a dollar that cannot be invested elsewhere; in wages, retirement, business growth, future benefits, or reserves needed to keep the plan strong for the people who will depend on it tomorrow.
Why Do Employers Self-Fund?
It’s easy to understand why so much of the conversation centers on cost.
Over the years, self-funding has increasingly been described as a financing strategy. Employers assume the financial risk of paying claims in exchange for greater flexibility and the opportunity to reduce healthcare costs.
While that is true, I believe focusing solely on cost reduction oversimplifies the reasons many organizations choose to self-fund in the first place.
After nearly twenty years in healthcare—first as a nurse caring for patients and later working alongside employers, labor funds, trustees, HR leaders, consultants, brokers, TPAs, and health plans—I have come to believe that self-funding is not fundamentally a financing strategy.
It is a stewardship strategy.
Organizations don’t choose to self-fund because they enjoy assuming financial risk. They choose it because they feel a responsibility for the healthcare they provide. They want the ability to shape a health plan that reflects their values, supports their unique workforce, and remains sustainable for years to come.
I’ve never met an employer who wanted to spend less because they cared less.
In fact, I’ve seen exactly the opposite.
I’ve sat in meetings where employers approved care that exceeded plan maximums so an employee with a rare disease could be treated at a nationally recognized research center because they believed that employee deserved access to the best expertise available.
I’ve watched plan sponsors extend residential behavioral health treatment after standard benefits had been exhausted because everyone around the table believed another few weeks of treatment might change the course of someone’s life.
I remember one young employee who suffered a traumatic brain injury. His rehabilitation lasted months longer than anyone initially expected and well beyond the original benefit. Every extension required another conversation. Every conversation acknowledged the cost. But no one was looking for the cheapest answer. They were asking a different question: Have we done everything reasonably possible to give this young man the opportunity to recover?
Those are just some of the conversations that have stayed with me. Each is a reminder that behind every self-funded health plan are people who genuinely care about the individuals their plan serves. They understand that every claim represents a person, every healthcare decision affects a family, and every dollar spent belongs not only to today’s members, but to everyone who will rely on the plan in the future. That is stewardship.
Three Fundamental Responsibilities
Over time, I’ve come to believe every self-funded plan has three fundamental responsibilities.
- The first is to protect the plan. Healthcare dollars are finite. Stewardship requires protecting the long-term financial sustainability of the plan so it remains strong not only for today’s members, but for those who will depend on it years from now.
- The second is to protect the benefit. Benefits are more than a schedule of covered services. They reflect an organization’s values. They communicate what the organization believes is important, where it chooses to invest, and how it intends to support the people it serves.
- The third is to protect the member. Every prior authorization, case management interaction, appeal, and clinical decision ultimately affects someone’s life. Stewardship means helping ensure members receive the right care, at the right time, in the right setting—not simply because it is cost-effective or easy, but because it leads to better outcomes.
None of these responsibilities can be fulfilled at the expense of the others. A plan that protects its budget while failing its members has not succeeded. A plan that provides every possible service without regard for sustainability has not succeeded either.
Stewardship is the continual work of balancing all three.
Healthcare has become far too complex for any employer, labor fund, or HR department to manage alone. Most self-funded plans rely on experienced partners to administer the plan and provide the clinical and operational expertise required to navigate today’s healthcare system. That expertise is both necessary and valuable.
But delegating administration is not the same as delegating accountability.
Plan sponsors can delegate the work of administering a health plan. They cannot delegate responsibility for how that plan functions or whether the outcomes ultimately reflect the organization’s goals and values. They must remain curious and engaged in understanding how the plan functions and for this. That requires transparency.
Why Accountability Matters
Consider just a few of the decisions that shape the experience of your members.
A member needs an infusion therapy expected to cost hundreds of thousands of dollars. Who determines whether that treatment occurs in a hospital, an outpatient infusion center, or at home? What if another drug were equally effective at a lower cost? Is someone actively evaluating quality, safety, convenience, and cost—or does it simply happen wherever it was originally scheduled?
A nationally recognized center of excellence develops better outcomes for a complex surgical procedure. Who is responsible for determining whether your members should be guided there?
New evidence emerges supporting a lower-cost treatment that produces equal or better outcomes than the approach your plan has followed for years. Who notices? Who evaluates whether your processes should change?
A member with multiple chronic conditions begins visiting the emergency department repeatedly. At what point does someone recognize a pattern? Who decides additional support is needed? How is that decision made?
Your organization has invested significantly in healthcare each year. Every one of those dollars was spent because someone made a decision. Decisions about where care was delivered. Which treatments were approved. When members received additional support. Which clinical programs were implemented. Which opportunities were pursued—and which were missed.
How many of those decisions would you recognize if they happened today?
These are not questions born from distrust. They are questions born from stewardship.
The increasing complexity of healthcare has made it remarkably easy to confuse delegation with accountability. Most plan sponsors have capable partners, as they should. The role of a fiduciary is not to perform every function of the health plan. It is to understand how those functions are being performed, to ensure they reflect the organization’s goals and values, and to hold its partners accountable for the outcomes they produce.
That requires more than trust. It requires visibility, transparency and accountability from partners. It requires asking questions, not because you expect something is wrong, but because stewardship requires knowing, not assuming.
The organizations that fulfill their responsibilities most effectively will be the ones who remain actively engaged, who choose partners willing to operate transparently, and who never lose sight of the fact that responsibility for the plan ultimately remains their own.
The Greatest Risk
The greatest risk to a self-funded health plan isn’t necessarily making the wrong decision. It’s never realizing there was another decision available.
So before asking whether your health plan is controlling costs, ask something more fundamental.
Do you know who is making the decisions that most shape your members’ care?
Do you know how those decisions are made? If you don’t, how can you be certain your plan is fulfilling the responsibility you accepted when you chose to self-fund?