Inside the Self-Funded Benefit Strategies Allowing Small and Mid-Sized Companies to Take Back Control

For many small- and mid-sized employers, the annual benefits renewal is a frustrating ritual of losing control. Costs go up, renewal rates arrive with little explanation, and leaders are left with limited data to make strategic decisions. Benefits can be a black box, lacking transparency into double-digit hikes and changes in coverage. Employees, often left out of the equation entirely, are pushing for more choice and control over their healthcare plans.

To shed some light on the benefits system, we spoke with Justin Burgess, an employee benefits leader with over a decade of experience designing more transparent benefit strategies. As Vice President and Employee Benefits Practice Leader at Insurance Underwriters of America, and as the Host of The Justin Burgess Podcast, Burgess has built his career on demystifying the murky world of healthcare for his clients.

"Transparency is what everybody’s steering for right now. Employers are frustrated because they can see the price of anything they want to buy in their personal lives, but in healthcare they have no idea where the money is going," says Burgess. He believes the dominance of these familiar, fully-insured plans isn’t an accident.

• The safety trap: According to Burgess, it’s a system built on fear and inertia, often driven by risk aversion and compounded by financial incentives that can reward brokers for keeping clients locked in place. "No one got fired for hiring IBM back in the day," Burgess explains. "Unfortunately, it feels like a safe bet to go with a carrier everybody knows. People are just afraid to make the jump."

• The escape hatch: Escaping this cycle means changing the game entirely, according to Burgess. He champions strategies like self-funding, level-funded plans, and Direct Primary Care (DPC) as tools to regain control, alongside solutions like reference-based pricing and ICHRA. "I'm a believer that everybody should be self-funded. When you're running a business, you control every aspect of your business besides this one expense, which you have to leave up to someone else to manage."

• Not on the same page: Of course, communicating these new, often unfamiliar plan designs to a diverse, multi-generational workforce presents its own challenge. A benefit that appeals to one employee may be perceived entirely differently by another. The key, Burgess says, is to find a powerful, simple, and universally understood value proposition that cuts through the noise. "As a Millennial, I love my high-deductible plan. But my counterparts often don't, because they see the higher copays and think the insurance isn't good," he says. "But everybody is okay with a free doctor. That's what I've learned."

The problem is often structural. When the responsibility for a six-figure benefits expense is placed on HR, it can create a fundamental mismatch. Burgess notes that HR leaders are experts in people and culture, but they are not typically trained as financial risk managers. Asking them to vet and implement unfamiliar models like reference-based pricing or ICHRAs can put them in an untenable position, exposing the company to risk.

While a historically opaque broker compensation model has added to the problem, new rules under the Consolidated Appropriations Act are prompting new scrutiny by requiring brokers to disclose all direct and indirect compensation. Burgess notes that when employers see their group is worth six figures to a broker, they are often shocked.

• A reformer's road: He empowers employers by providing benchmarks: standard carrier commissions often range from $25 to $30 per employee per month (PEPM), a figure he considers low for proactive management. While a $40 to $60 PEPM range can support more labor-intensive plans, he warns that figures of $80 or $100 PEPM should be seen as egregious. "I grew up as a fully insured broker, so that's what I was taught," he shares. "But five years ago, my brain switched, and I realized there has to be a better way. Once I started doing research, I knew this was the next generation of employee benefits."

Ultimately, Burgess believes the fear of the unknown, more than cost or logistics, is what keeps many employers tethered to traditional plans. However, some companies have made the leap, showing that it is possible to change the status quo. "The large ones are already doing it, and that should give everyone confidence. It is being done," he assures. While he advocates for a measured "crawl, walk, run" approach, his ultimate conviction is that gaining control requires taking the first step. "The only way you're going to gain control is to do this."