In recent years, with the population aging and the cost of drugs escalating, it has become increasingly difficult to accurately forecast group insurance plan expenses. We often see premiums significantly rise, for example, due to a diagnosis requiring expensive drugs. The lack of individual accountability for the impact of service overuse on all plan members remains a major concern for many companies. This leads to significant premium increases as insurers try to minimize losses and forecast profits.
To control spending, companies adopt reactive strategies, such as cutting employee benefits to reduce claims, while other options are available to them. Finally, shopping around for a new insurer is an arduous process in addition to having its limitations, and is a strategy that often fails over the longer term.
While traditional insured models are still an appropriate option for many companies, self-insured plans constitute a solution that is adapted to new realities, especially for large companies that can spread the risk over a greater number of employees.
With self-funded insurance, the company has more control over experience-driven benefits, which often account for nearly 80% of group plan expenses. Widespread in Europe and the United States, self-funded insurance allows for full control of the management of these costs while offering the same coverage as traditional group insurance.
Many companies still fear this approach in Canada and systematically choose the more traditional models. Why? Because they haven’t been exposed to actual risk, which is mistakenly perceived as being too high. For companies that take the leap and adapt with the support of experts in the field, the financial benefits ultimately outweigh the risk.
We believe that greater flexibility and autonomy coupled with active group plan management produce the best returns. Although it may not be a model for all companies, self-funded insurance is a transparent and, quite often, a more economical solution
