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Is Health Plan Self-Funding Right for Your Firm?

by Inoventive Solutions
September 29, 2026

As group health costs continue climbing, some employers are starting to take a second look at self-funded, or partially self-funded plans.

These plans give employers more skin in the game and the ability to better address cost drivers and tailor their offerings to fit the needs of their employees.

But while the plans can save both the employer and their workers money, they are not for every organization. Plus, there is a degree of risk as a few serious health issues among group participants can blow open claims costs.

Small employer considerations

While medium-sized and large organizations are more apt to self-fund due to their resources, 21% of employers with three to 199 plan participants were self-funded in 2025, according to a study by the Kaiser Family Foundation. That’s compared to employers with:

  • 200 to 999 plan participants: 63%
  • 1,000 to 4,999 plan participants: 86%
  • 5,000 and more plan participants: 87%

Recently, insurers have been trying to address small and mid-sized employers’ concerns about risk and costs by rolling out “level-funded” plans. These vehicles provide a lower level of self-funding with a stop-loss insurance program that has lower attachment points than typical plans.

For level-funded plans, the insurer estimates the employer’s expected monthly expenses, which include:

  • A portion of the estimated annual cost for benefits,
  • The stop-loss protection premium, and
  • An administrative fee.

The employer pays the above to the insurer every month. If, at the end of the year, claims were significantly higher or lower than expected, there will be financial reconciliation between the employer and the carrier.

These level-funded plans differ from fully self-funded plans, where the employer assumes direct financial responsibility for the costs of enrollees’ medical claims. The employer will usually contract with a third-party administrator or insurer to handle claims and provide administrative services for the plan.

Employers may purchase stop-loss coverage to protect against catastrophic claims.

Stop-loss basics

While these plans are called self-funded, there is still a portion of the costs that is insured to protect against catastrophic claims or unexpectedly high utilization.

There are different types of stop-loss insurance that pay the cost of claims at a certain attachment point, when plan, individual or claims spending exceeds a designated value:

Specific stop-loss coverage — This policy provides protection for the employer against a high claim on any one individual. This is protection against abnormal severity of a single claim, rather than abnormal frequency of claims in total.

Aggregate stop-loss coverage — This policy may limit the total amount the plan sponsor must pay for all claims over the plan year.

The benefits

Customization — Self-funded plans let employers customize their plan to meet the needs of their workforce.

Cost control — Self-funded plans only pay the actual costs, as opposed to fully insured plans, where the premium goes towards the expected health care costs the insurer has forecast, plus its overhead, reserves, profit margin, and more.

Access to claims data — The employer gets detailed access to claims costs, so they can see what claims are driving costs. By looking at claims and plan participant needs, the employer can better decide which benefits to provide, enhance or remove if they are not being used.

Disadvantages

Compliance — Since the employer will be paying for the claims, they will be responsible for fiduciary and compliance issues.

Cash flow — The plan will need to have sufficient money going into its accounts regularly to pay for claims as they arise.

Volatility — Medical outlays can be unpredictable. A spate of high-cost claims can wipe out any potential savings.

The takeaway

If you’re fed up with rising group health plan premiums, talk to us about self-funding. We can review your current insurance arrangement and your plan costs to help you decide if it’s right for you.

"group
Uncategorized

Employers Explore New Strategies as Health Plan Costs Rise

by Inoventive Solutions
September 22, 2026

A number of surveys are predicting another year of steep group health insurance cost increases in 2027, prompting many employers to rethink plan designs, pharmacy benefits and relationships with health care vendors.

The Business Group on Health’s “2027 Employer Healthcare Strategy Survey” projects a median 9.2% increase in employer health care costs in 2027, which employers hope to reduce to about 8% through plan changes. Other forecasts predict similar premium increase in the coming year.

Multiple forces pushing costs higher

There is no single culprit behind the increases. Instead, employers are being hit by large claims, expensive prescription drugs and rising costs of treating common serious health conditions.

Catastrophic claims: According to a survey by the International Foundation of Employee Benefit Plans (IFEBP), employers cited catastrophic claims more often than any other factor as the primary driver of higher costs. A small number of employees play an outsized role in increasing average claims costs due to lengthy hospital stays, complex cancer treatments, specialty medications or other intensive care that can generate claims of hundreds of thousands of dollars or more.

Cancer is a major contributor. In the Business Group on Health survey, 70% of employers ranked cancer as the top condition driving their health care costs, and 92% placed it among their three most expensive conditions. Musculoskeletal conditions ranked second, cited by 68%, followed by cardiovascular conditions at 37%.

Prescription drugs: Pharmacy benefits now account for about one-quarter of employer health care spending, and drug costs are projected to increase 12% in 2026, according to Business Group on Health.

The pressure is coming from several directions. Among IFEBP respondents who identified specialty and other high-cost drugs as their primary cost driver:

  • 67% cited GLP-1 drugs,
  • 54% cited autoimmune and inflammatory therapies,
  • 42% cited cancer drugs, and
  • 21% cited cell and gene therapies.

Employers are grappling with how to provide access to effective but expensive treatments without allowing a small number of prescriptions to significantly increase total plan spending.

Medical care and provider pricing: Employers are also paying more for hospital and physician services.

Business Group on Health points to declining population health, rising provider prices and increased use of expensive therapies as part of the broader cost problem. Employers have also underestimated their health care costs for three consecutive years, illustrating how difficult medical expenses have become to predict.

Employers sharpen their cost-control strategies

With costs continuing to climb, employers are increasingly looking beyond simply raising deductibles and shifting more expenses to workers.

Approaches employers are considering include:

  • Steering workers to high-value providers. Centers of excellence, high-performance networks and care navigation programs can direct employees to providers with better outcomes and more competitive pricing. Eighty-four percent of Business Group on Health respondents plan to offer at least one center of excellence in 2027.
  • Reassessing pharmacy benefits. Employers are exploring transparent or next-generation pharmacy benefit managers that provide greater visibility into drug pricing and rebates. They are also tightening utilization controls on costly drugs, including GLP-1s, and encouraging the use of lower-cost biosimilars when clinically appropriate.
  • Demanding more from vendors. Employers are scrutinizing wellness, digital health and other benefit programs for measurable results. In 2027, 58% of Business Group on Health respondents plan to replace underperforming vendors, while the same percentage plan to eliminate underutilized programs. Seventy-one percent are increasing the portion of vendor fees tied to outcomes.
  • Improving employee navigation. Providing employees with cost and quality information before they schedule care may help them find higher-quality, lower-cost providers. Employers may also consider reducing cost-sharing for high-value preventive and chronic-condition care.
  • Analyzing claims data. Claims audits, utilization reviews and predictive analytics can help employers identify billing problems, high-cost conditions and opportunities for earlier intervention.

The takeaway

With cost pressures coming from multiple directions, a targeted strategy focused on the plan’s largest cost drivers may help control spending while preserving the benefits employees value.

Work with us and your carriers to review claims and utilization data before renewal.

"notices"/
Uncategorized

Pay Attention to Health Plan Notification Deadlines Ahead of Open Enrollment

by Inoventive Solutions
September 15, 2026

As fall approaches, it ushers in year-end open enrollment for many group health plans along with compliance deadlines plan sponsors need to be aware of to avoid running afoul of the law.

The Affordable Care Act and other laws require employers to furnish certain forms and documents to employees annually. To help your organization remain compliant, we’ve compiled a list of health and wellness plan notices that employers must provide annually, as well as a few that we recommend including in your benefits communications.

Most of these documents must be distributed during open enrollment.

Summary of Benefits and Coverage

The SBC gives employees a standardized, easy-to-compare summary of health plans’ benefits, deductibles, copayments, coinsurance, exclusions and coverage limitations. It is required for most group health plans, including self-insured plans. 

When it must be distributed: With open enrollment materials when employees have an opportunity to elect or change coverage.

Medicare Part D Creditable Coverage Notice

Employers offering prescription drug coverage must notify Medicare-eligible employees whether their coverage is creditable under Medicare rules. Creditable coverage is expected to pay at least as much as standard Medicare Part D coverage.

While there is no penalty for employers for failing to send the notice, failure to provide it can lead to higher costs for staff who later enroll in Medicare Part D without having maintained creditable coverage. Because employers typically do not know which employees are eligible for Medicare, sending this notice to all employees is considered a best practice. You can find model notices here.

When it must be distributed: By Oct. 15 each year.

Grandfathered Plan Notice
This document outlines ACA protections for non-grandfathered plans, ensuring participants understand their coverage rights.

When it must be distributed: This notice must be distributed whenever a summary of benefits, description of coverage or enrollment material is provided to participants and beneficiaries.

Children’s Health Insurance Program Notice

This document alerts employees to the availability of premium assistance programs through their state of residence. This notice should be sent to all employees, regardless of location, to avoid the burden of tracking residency status. Failure to provide the CHIP notice can result in fines of up to $137 per employee per day.

When it must be distributed: Although it doesn’t have a fixed deadline, many employers include it in their annual open enrollment materials to ensure consistent delivery.

The Women’s Health and Cancer Rights Act Notice

This federally mandated disclosure informs group health plan participants and beneficiaries of their rights to post-mastectomy breast reconstruction benefits. It must be sent to all employee participants and covered beneficiaries under your health plan.

When it must be distributed: Annually, typically included with open enrollment materials.

Individual Coverage Health Reimbursement Arrangement Notice

Employers offering an ICHRA must give eligible employees a written notice explaining the arrangement and important consequences of accepting it. Among other things, the notice helps employees understand how the ICHRA interacts with individual health insurance coverage and eligibility for premium tax credits through the ACA Marketplace. 

When it must be distributed: Generally, at least 90 calendar days before the beginning of each plan year. Employees who become eligible later, such as certain new hires, generally must receive the notice no later than the date the ICHRA can first take effect for them.

"GLP-1"/
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Employers Try Different Tactics to Cope with GLP-1 Coverage

by Inoventive Solutions
September 9, 2026

Employers are facing an increasingly difficult benefits decision as demand for GLP-1 drugs grows: absorb the rapidly rising cost, restrict coverage or find another way to help employees access the weight-loss medications.

The financial pressure is significant. GLP-1 drugs prescribed for weight loss represented 11.4% of corporations’ annual claims in 2025, up from 6.9% in 2023, according to the International Foundation of Employee Benefit Plans. The foundation also found that only 36% of employers covered the drugs for weight loss

Demand, meanwhile, remains strong. A 2025 KFF poll found that one in eight U.S. adults was taking a GLP-1 medication for weight loss, diabetes or another condition.

That leaves employers trying to balance the immediate cost against the possibility that the medications may improve employee health and reduce other medical expenses over time. While some are opting not to cover the drugs for weight loss, others are exploring different ways to help workers access them.

Coverage with certain limitations

An employer can design coverage so that GLP-1 medications are covered only when prescribed to treat certain conditions, such as diabetes or chronic weight management, or when used for preventive care.

This approach can reduce the number of individuals requiring treatment under the plan and ultimately lower long-term treatment costs for these conditions.

An employer can also offer GLP-1 coverage while requiring medical management techniques, such as prior authorization, step therapy and site-of-care requirements.

Requiring one or a combination of medical management techniques before providing employees with GLP-1 coverage can encourage the use of alternative treatments and limit the number of employees who require GLP-1 medications.

Coverage under an HRA

An alternative to adding GLP-1 medications to a group health plan’s formulary is letting employees use a health reimbursement arrangement to cover GLP-1 drug costs. HRAs allow employees to receive tax-free reimbursement for all or a portion of their medical and prescription drug expenses.

Participants typically must enroll and participate in a weight management program to qualify for HRA reimbursement for a GLP-1 prescription.

The program evaluates each participant’s ongoing need for the medication and determines whether to approve the request. If approved, participants fill their prescriptions through a direct-to-consumer pharmacy. Employers can then use the HRA to reimburse all or a portion of the prescription cost.

Looking outside traditional insurance

Another emerging strategy is to bypass insurance.

Drug manufacturers and other vendors have developed direct-to-consumer programs that allow patients to obtain GLP-1 medications at lower cash prices. Employers that exclude weight-loss drugs from their regular pharmacy benefits may direct employees to one of these programs and, in some arrangements, reimburse part of the expense.

A similar direct-to-employer model may allow an employer to carve out GLP-1 weight-loss medications from its pharmacy benefit and obtain fixed, negotiated prices through a specialized vendor. These arrangements could reduce costs and make them more predictable, but employers should proceed carefully.

Purchases made outside the pharmacy benefit may not count toward an employee’s health plan deductible or out-of-pocket maximum. Moving prescriptions outside the traditional system may also make it more difficult to see a patient’s complete medication history, potentially creating care coordination and drug interaction concerns.

Employers also need to consider existing pharmacy benefit manager contracts, which may contain exclusivity provisions. Special care may be necessary for high-deductible health plans to avoid inadvertently affecting employees’ health savings account eligibility.

The takeaway

Much can hinge on how employers handle GLP-1 coverage and the options they provide their employees. The key is to provide access that supports employee health without allowing one fast-growing category of medications to overwhelm the benefits budget.

Before making changes, employers should work with us to review utilization, costs, plan design and alternative purchasing arrangements.

"group
Uncategorized

Group Health Plan Affordability Level Rises for 2027

by Inoventive Solutions
September 1, 2026

The IRS has increased the group health plan affordability threshold, which determines whether an employer’s lowest-premium health plan complies with Affordable Care Act rules, for plan years beginning in 2027.

The threshold has been set at 10.22% of an employee’s household income, up from 9.96% in 2026. The higher threshold will give employers more leeway in determining employees’ share of health insurance premiums. It also marks the first time the threshold has exceeded 10%.

Under the ACA, “applicable large employers” — those with 50 or more full-time or full-time-equivalent employees — must offer their workers at least one health plan that is considered affordable based on a percentage of the lowest-paid employee’s household income. If an employer’s plan fails this test, the employer may face penalties for noncompliance.

For 2027, coverage is considered affordable if the lowest-paid employee’s required contribution for self-only coverage under the employer’s lowest-cost plan providing minimum value does not exceed 10.22% of their household income.

The affordability test applies only to the employee’s cost for self-only coverage, not to the premium for family coverage. If an employer offers multiple health plans, the test is based on the lowest-cost option that provides minimum value.

For non-calendar-year plans, the affordability percentage in effect when the plan year begins applies throughout that year. That means a plan year beginning after Jan. 1, 2026, would continue using the 9.96% threshold until the next plan year starts in 2027.

Calculating

Since employers typically don’t know their workers’ household incomes, the IRS provides three safe harbors for determining affordability:

  • W-2 wages: The employee’s required contribution generally cannot exceed 10.22% of their Form W-2 wages from the employer.
  • Rate of pay: For hourly employees, affordability is based on the employee’s hourly wage multiplied by 130 hours per month. For salaried workers, the monthly salary is used.
  • Federal poverty level: Employers can base affordability on the federal poverty level for a single individual.

For calendar-year 2027 plans using the federal poverty level safe harbor in the mainland U.S., the employee’s maximum monthly contribution is about $135.93, based on the 2026 federal poverty level of $15,960. Employers may want to set the contribution slightly below the maximum to avoid exceeding the limit.

Penalties

Failure to provide affordable coverage may result in a penalty of $5,670 per affected full-time employee in 2027, up from $5,010 in 2026. The penalty may apply when an employee is offered unaffordable coverage and receives a premium tax credit for Marketplace coverage.

A separate Employer Shared Responsibility Payment may apply if an employer fails to offer minimum essential coverage to at least 95% of its full-time employees and their dependents and at least one full-time employee receives a premium tax credit for Marketplace coverage.

The separate penalty will rise to $3,780 per employee in 2027 from $3,340 in 2026. It is generally calculated using the employer’s total number of full-time employees minus 30.

Both penalties are indexed to inflation and calculated monthly.

The takeaway

The higher affordability threshold gives employers more flexibility in setting employee premium contributions for 2027, but now is the time to review those amounts in preparation for the upcoming plan year.

We can help assess your plans’ affordability and confirm that they meet the standard, so your firm stays compliant.

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