The Challenge: Amidst a tough renewal market, a publicly-listed Newfront client faced a staggering 35% increase in medical plan costs. Knowing this increase would cause significant financial strain to the e-commerce company, the Newfront team encouraged the client to explore alternative funding strategies to reduce future healthcare costs by having better data transparency, ability to customize plan attributes and control over claim costs, in particular pharmacy and stop loss costs. 

The Solution: In 2022, the e-commerce company had a fully insured health insurance plan, but leaders recognized the impact of the potential 35% increase on their budget and employee satisfaction. They gave the Newfront team, led by Total Rewards Senior Vice Presidents Carolyn Locke and Paul Martinez, permission to explore other funding options and approaches to mitigate the financial burden.  

Locke and Martinez leveraged Newfront’s healthcare informatics tool, which provided detailed medical and pharmacy claims data, along with insights into the prevalent health conditions within the client’s employee population. “This wealth of information allowed us to conduct a thorough analysis, identifying patterns, cost drivers, and potential areas for optimization,” Locke said. The duo then assessed probabilities and potential cost savings when self-funding instead of fully funding their health insurance program, and ultimately recommended a transition to self-funding based on utilization patterns, risk profiles, and anticipated future expenses. 

The Results: By transitioning to a self-funded model, the client, with approximately 500 employees, realized substantial savings of nearly $1M annually both without changing the current benefit plan structure and also adding a new infertility benefit to the plan. The client gained greater control over their healthcare expenditures, mitigating the impact of premium hikes and aligning their benefits strategy more closely with the needs of their workforce. 

This significant cost reduction stemmed from various factors, including the elimination of profit margins typically associated with fully insured plans, more precise risk management, and enhanced control over healthcare expenditures. “This situation underscores the importance of proactive risk management and strategic decision-making in navigating the complexities of the healthcare insurance landscape,” Martinez said.  

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