Here’s a phrase we hear a lot: “We tried self-funding and it just didn’t work for us.” Almost every time, that’s not quite true. It’s usually not the whole plan, it’s one or two of the self-funded plan vendors running it.
One or two pieces broke. The rest of it was probably fine.
We touched on part of this in our last article, where the issue was often a broker who sold the plan and then disappeared. This time, let’s get more specific about what’s actually breaking inside the plan itself.
Self-Funding Isn’t One Thing. It’s a Stack.
This is where a lot of the confusion starts. Employers get sold on “a self-funded plan” like it’s a single product, the same way you’d buy a fully insured policy. But it’s not one vendor doing one job. It’s a stack of separate pieces, each handled by a different company:
- TPA – claims processing and day-to-day admin
- PBM – pharmacy benefit manager
- Specialty pharmacy – for high-cost, complex medications
- Stop-loss carrier – caps your risk on large claims
- Network access – the provider discounts your plan runs on
- Utilization review / case management – oversight on how care gets used
Every one of those has its own contract, its own performance, and its own room to go sideways. And they rarely all go sideways at once.
What We Actually Find When a Plan “Isn’t Working”
When we get called in to look at a program that’s supposedly failing, we go through each of the self-funded plan vendors piece by piece. Almost every time, we find the same handful of culprits:
- A PBM with spread pricing nobody caught, quietly padding drug costs
- A TPA that’s slow to adjudicate claims or impossible to get a straight answer from
- A specialty pharmacy carve-out that sounded good on paper but was never actually set up right
- Stop-loss terms that don’t match the plan design, leaving gaps nobody noticed until a big claim hit
Notice what’s not on that list. It’s not “self-funding doesn’t work for companies our size.” It’s specific vendors doing specific jobs poorly, usually because nobody was watching closely enough to catch it.
The Fix Isn’t Going Back to Fully Insured
Here’s the mistake we see employers make once they’re frustrated: they assume the whole model failed, so the answer is to scrap it and go back to fully insured. That’s usually an overcorrection, and often an expensive one. The self-funded vs. fully insured decision isn’t really the issue here. It’s whether the vendors running your self-funded plan are doing their jobs.
If your PBM is the problem, you replace the PBM. If your TPA is slow and unresponsive, you replace the TPA. If your stop-loss terms are mismatched, you renegotiate or rebid them. You don’t tear down a stack that’s 80% working because one piece is dragging the rest down.
The businesses that made the jump to self-funding usually did it for good reasons: more control, better data, real savings potential. None of that goes away because one vendor underperformed. What usually happened is a broker sold the plan and then stopped paying attention, so nobody was positioned to catch the weak link before it started costing real money.
How to Tell Which Piece Is Broken
Before you write off self-funding altogether, it’s worth actually auditing a self-funded health plan piece by piece instead of guessing. A few questions worth asking:
- Has anyone audited your PBM contract for spread pricing or rebate issues in the last year?
- Are claims getting processed quickly, and can you actually get someone on the phone when there’s a problem?
- Was your specialty pharmacy carve-out implemented the way it was sold, or did it quietly never happen?
- Do your stop-loss terms still match your current plan design and claims history?
If you can’t answer most of those, that’s not a sign self-funding failed. It’s a sign nobody’s been checking under the hood.
Let’s Find the Piece That’s Actually Broken
If your self-funded plan feels like it isn’t delivering, let’s take it apart piece by piece before deciding to abandon it. At Ohio Health Benefits, we’re appointed with all the major carriers and contracted with the ancillary vendors that make up the rest of your stack, so we’re not steering you toward whichever piece we happen to sell. We look at the whole program, TPA, PBM, stop-loss, network, and the rest, and tell you plainly which parts are working and which ones aren’t.
We’re a locally-owned, independent self-funded health insurance broker in Ohio, with offices in Tallmadge, Canton, and Hiram, and employee benefits consultants who work with employers across the state.
Call us at 330-633-3837, or click here to send us your name and number and we’ll call you. Calls aren’t recorded, and your information stays confidential.
Frequently Asked Questions
Not usually. Most “failing” plans have one or two broken vendors in the stack, not a broken model. Replacing the weak link is almost always cheaper and less disruptive than moving back to fully insured.
A handful of usual suspects: a PBM with spread pricing that’s never been audited, a TPA that’s slow or unresponsive, a specialty pharmacy carve-out that was never implemented correctly, or stop-loss terms that don’t line up with the current plan design.
Start by asking when your PBM contract was last audited, how quickly claims get processed, whether your specialty carve-out actually works the way it was sold, and whether your stop-loss terms still match your plan. Vague or missing answers usually point to where the gap is.
No. Self-funding is built as separate pieces on purpose, which means you can replace the piece that’s underperforming without rebuilding the whole program.
