Self-Funded Companies: “Sweet Spot” for Direct Pay Care

Under the self-funded model and the 1974 Erisa law, businesses and many unions bypass commercial plans and pay directly for medical claims of workers. Self-funding isolates companies from federal and state mandates and lowers health benefit costs for businesses and premiums for workers. State mandates, which number in the 100s for such things as chiropractic care, acupuncture, and contraceptives, sharply drive up costs.

R. Reece, “Self-Founded Companies,” Medinnovation Blog, September 13, 2013


Self-funded companies are mandate-killers. The mainstream media has been mute on this point.

But it is widely appreciated among small and medium sized companis that self-funding can cut 25% to 30% off your health coverage costs.

Lately self-funded companies have begun to contract directly with direct pay ambulatory care centers for a variety of minor operations - hernia repairs, laporoscopic gallbladder removals, cosmetic procedures, removal of skin lesions, urological intrusions, colonoscopies, noninvasive back operations injections, knee replacements, arthroscopies, cataracts, ENT and gynecologic surgeries, and a host of other procedures that can be performed safely and efficiently on an outpatient basis without overnight stays and without third party administrative fees and management. It is estimated 90% of surgery procedures can be performed in outpatient settings outside of hospital operating rooms formerly reserved for hospital inpatients.

To make a long story short but sweet, physician and outpatient site entrepreneurs have found a “sweet spot,” a chink in ObamaCare in the ObamaCare and third party armor of regulations, an opportunity to perform operations safely, efficiently, without the usual “fuss and bother” of third party payments outside of traditional hospital settings.

For those of you not in the know, a “sweet spot,” may be defined as:

• The point or area of a bat, club, or racket at which it makes the most effective contact with the ball. In this case, the “ball” being third party regulations, restrictions, and bureaucratic rules driving up costs, causing delays, inffeciencies, and inconveniences.

• An optimum point or combination of factors or events that impede performance, e.g , a market may have reached its “sweet spot,” when the prices are high enough to discourage buyers (high premiums and deductibles induced by ObamaCare health exchanges, but still low enough to promise a good return for direct pay surgeons, ambulatory surgery centers, and independent direct/pay physicians and surgeons.

This new, rapidly evolving approach to care, is most often promoted in the names of “competition”, “transparency,” and “cost savings.” It has caught the attention of a Silicon Valley entrepreneurs, as it apparent from this story ”Silicon Valley Startup Launches Self-Insurance Option for Smaller Firms”(Baltimore Sun and Reuters, August 12).

The lead two paragraphs in that story go as follows:

“SAN FRANCISCO (Reuters) - The founders of Collective Health, a Silicon Valley startup, say they can help employers save money by self-insuring rather than paying premiums to a health insurance company.”

“Collective Health has developed software to help companies pay workers' health costs directly. Collective Health describes its "sweet spot" as companies with a few hundred or a few thousand employees, typically in the tech sector.”

Collective Health will begin collecting members and offering its service in January 2015.