When it comes to self-insurance, many senior decision makers in healthcare organizations only think of it as a means to fund employee benefit programs. This leaves many opportunities for self-insurance in other areas of risk management unappreciated and underutilized.
For example, paying annual premiums to a carrier to rent your professional and public liability insurance (commonly known as being fully-insured) continues to be standard operating procedure for most. Perhaps the main reason most people do not explore alternative funding strategies, as a replacement for liability insurance, is its ready availability and relative affordability. (Relative at least to the dramatic rate increases seen in health insurance.)
Pay rent or build equity?
Since it’s affordable and easy to acquire, why would anyone wish to seek an alternative? Well, in this case, a little independent-mindedness could go a long way.
Anyone who is committed to leaving no stone unturned in their search for new ways to control costs recognizes that premiums paid for liability insurance are a material expense. It’s money you’ve spent and there is no opportunity of ever getting your money back.
While there are several alternative ways to self-insure liability risk, if well managed, each method can result in significant long-term savings for your organization. Simply said, if you don’t incur claims, you get to keep the money you’ve set aside for potential losses.
Reducing your dependence on insurance gives you more control over the disposition and the use of money available to pay claims. Think of buying commercial insurance as renting it year-to-year. Think of self-insurance as an opportunity to build equity over the long term.
Whose skin is in the game?
When choosing between investing in an insurance company (by renting their insurance) and investing in your own organization, there are more benefits than money to consider. Self-insurance strategies can have a substantive, positive influence on the actions and roles of employees and other stakeholders.
It’s a matter of human nature; when it is your money, not the insurance company’s, when you have skin in the game, you tend to pay closer attention to what happens. For instance, how you treat patients and ensure service quality, and how you manage other factors influencing the amount of risk your organization is exposed to, come into sharper relief.
Replacing the “remedy” of insurance with a this-is-our-money preventative attitude, causes you to take asset protection to a new, higher level. This attitude creates a powerful context for additional conversations with care givers about taking more responsibility and eliminating even the smallest potential of someone thinking, “Oh it doesn’t matter… we’ve got insurance.” Having to answer “Are we ready to manage a claim?” automatically drives the maturity of your organization to a new level.
Wait, there’s more
The skin-in-the-game concept extends beyond your organization when you implement a self-insurance strategy. Instead of leaving the claims settlement process up to the insurance company and its lawyers, and instead of hoping they do their best to prevent an increase in your premiums, you have more control of the claims process and a role in deciding whether to fight or settle.
When your community knows your organization is self-insured, there is a tendency for complaints and incidents to simply go away. (This is particularly true for non-profit community hospitals.) When an attorney knows there is no big insurance company backing you, they are less likely to invest as much time and effort in a claim. Patients who are aware of your self-funded strategy may be more likely to think, “This is the community’s money… if I sue the hospital, it is coming out of my community not the big bad insurance company I could care less about.”
What am I up to?
You may be wondering why someone who is in the business of selling insurance would be so keen on self-insurance strategies. While it is true the commissions we receive from insurance carriers are greater than fees we collect from our self-insured clients, our only motivation is finding and implementing solutions that help our clients prosper over the long run.
Consider our tag line “Prevent. Protect. Prosper.” Our first priority is to prevent surprises in your boardroom, on your balance sheet and throughout your organization. Anything and everything we can bring to bear to reduce or eliminate the risk you are exposed to is fair game in our books. So be it if short-term income from our self-insured clients is lower, as long as we’ve helped implement the right preventative strategies, we’ve fulfilled our mission.
Protection is our second priority. Simply said, we must help our clients protect themselves from risks that cannot be prevented. In doing so, we look at renting insurance from carriers as just one option. All other options are on the table and it is our job to have an intimate understanding of how they work and when and where to apply them. This deep knowledge coupled with our unmatched focus on the healthcare industry is the formula behind how we make it simple for you to choose the best possible strategies for your healthcare organization.
You get to choose…
If you suspect renting insurance may not be the primary solution to your needs, gaining a clear understanding of all the relevant options is a simple next step.
Competing with fully insured programs are other innovative solutions such as risk retention, risk transfer, loss control, risk purchasing groups, owner-controlled insurance programs (wrap-ups), joint insurance funds and self-insured programs.
It is reasonable to expect your board would want to know what options are available to control cost, improve value and enhance benefits in everything your organization does. I recommend you fully explore your options so that you can lead an informed, due diligence approach to achieving long-term prosperity.