Landing DPC Employer Contracts, Part 1: Understanding Self-Funded and Fully Insured Employers

There’s nothing that can take your direct primary care (DPC) practice to the next level like landing an employer contract, but they can seem overwhelming to negotiate. In this five-part blog series, join me as we cover the most fundamental aspects of finding, engaging, and closing deals with businesses of all sizes to get them promoting your DPC clinic as part of their employees’ healthcare.

As the basis for this exploration, I interviewed numerous expert DPC leaders who have had success with employers, combining their advice with input from experienced health benefits administrators and even some of our own Spruce market research.

In this first part, we’ll break down and explore the crucial difference between “self-funded” and “fully insured” employers and what it means for your DPC practice. The next parts will follow soon, but if you don’t want to wait, you can download our full ebook on the topic: “Secrets of Direct Primary Care: 5 Keys to Landing Employer Contracts.” Now, without further ado, the first key to landing DPC employer contracts…

Key #1: Understand the Difference Between Self-Funded and Fully Insured Employers

Whether a company’s health benefits program is “self-funded” or “fully insured” will often be the most important factor in your ability to attract the attention of its leadership, so it is critical that you understand the difference.

“Fully insured employers rarely or never see the savings [that direct care] provides. For fully insured organizations, all they’re doing is saving money for the insurance carrier.”Megan Freedman, FMMA

Most importantly, self-funded companies (also called “self-insured companies”) take on risk directly for the healthcare costs of their employees; as claims come in, they evaluate and pay them without the use of an insurance company. The administrative aspects of this type of plan are typically left to a third-party administrator (TPA), which can be either a fully independent organization or an “administrative services only” (ASO) branch within an insurance company. Crucially, self-funded employers experience their employees’ healthcare costs directly. When these costs are low, they save money, and when these costs are high, they can lose substantial amounts.

Fully insured employers, on the other hand, contract with health insurance companies to provide their employees with fixed-price plans that are both administered and funded entirely by the insurance company. This setup insulates a business from the healthcare costs of its employees, protecting it from the possible downside of expensive claims, but also preventing it from realizing any savings should its employees end up being healthier and less costly than expected. Transferring risk to an insurance company also comes at a premium, and fully insured plans cost more on average than self-funded ones.

Some small companies also offer no insurance plans at all to their employees. For our purposes, we can consider these businesses to be self-funded, since any health benefits they provide will be paid for directly out of company funds.

So why does any of this matter to you, the DPC doctor?

Key: Self-insured employers are at financial risk for their employees’ health issues. Fully insured employers are not.

“It’s all about the value you can provide,” says Megan Freedman, executive director of the Free Market Medical Association (FMMA) and Vice President of Corporate Communications at the Kempton Group, a longtime TPA for self-funded employee benefit plans. Ms. Freedman has worked for years in the benefits industry and is an expert on incorporating DPC options into health plans. “One of the biggest issues with helping employers see the value in direct care is that fully insured employers rarely or never see the savings it provides. For fully insured organizations, all they’re doing is saving money for the insurance carrier.”

In a nutshell, then, the way an employer pays for its employees’ health benefits (i.e., self-funded vs. fully insured) will drastically affect how its management perceives your practice’s value, and self-funded companies will see value more easily in the DPC model than fully insured organizations will. Don’t worry, though; there are many ways to show value…

Stay tuned for part two of our series, “Landing DPC Employer Contracts, Part 2: Getting Employers to See the Value of DPC!” Or, if you don’t wait to wait, get our full ebook on the topic right now: “Secrets of Direct Primary Care: 5 Keys to Landing Employer Contracts.”

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