With most businesses struggling with rising health insurance costs, Roundstone believes it has a model that can solve that problem.
And the Lakewood insurance company’s significant growth in recent years shows it has found its niche in offering a self-funded insurance product in a group captive model. Between 2015 and 2018, the number of employer groups it manages has grown by more than 150% to nearly 500 across the country. In that same period, it nearly doubled its revenue to almost $17 million in 2018.
Roundstone offers employers an alternative to the often double-digit cost increases that companies face under a fully insured model. A self-funded insurance model in which an employer provides health benefits with its own funds has largely only been accessible to large employers that can bear the risk that comes with paying employees’ claims.
But the company offers a captive insurance solution where small and middle-market employers can come together, pool that risk and self-fund their insurance.
“We go out to our customers, our employers, and say, ‘Hey, you really should self-fund and share some risk with other employers and apply these strategies to control your costs, and that’s the way you’re going to beat this,’ ” said Mike Schroeder, president of Roundstone.
The 65-employee company (up from 39 in 2015) has been adding roughly 10 employees a year. In 2016, Roundstone moved its headquarters for the second time since it began in 2003 to accommodate its rapid growth, renovating a historic church in Lakewood to house the company.
Schroeder anticipates the company growing its clients, revenue and employee base at a similar rate for at least the next three to four years.
At first, the growth spurt was prompted by the Affordable Care Act and employers looking to self-funded insurance as a way to avoid some of the rules and taxes associated with the landmark health care law.
Tom Campanella, director of the health care MBA program at Baldwin Wallace University, calls this trend an “unintended consequence” of the ACA. Avoiding these regulations by shifting to a self-funded model can be financially attractive, he said. And for smaller- and medium-sized companies, the idea of pooling employees with other employers to in effect spread out the risk, makes the option even more attractive.
While the ACA was the initial push, Schroeder said that now most of the growth is driven by the cost savings Roundstone is able to achieve for its employers.
Enrollment season, once an anxiety-ridden time for employees, has essentially become a non-event at University School, where health insurance costs have remained mostly flat for the past several years since it joined Roundstone’s captive model.
Before Roundstone, University School, with campuses in Hunting Valley and Shaker Heights, was facing 5% to 12% annual increases to health care costs under a fully insured model. David Wright, finance director at University School, said that, at the time, he couldn’t imagine a world in which their health costs remained flat for several years.
For the past 15 years or so, the school has been in a health care consortium of roughly 55 private schools in an effort to spread risk. The consortium began looking to self-funding several years ago because of ACA regulations. They’ve stuck with Roundstone for its captive self-funded insurance model and for the company’s examination of claims, said Wright, who is also head of the steering committee of the consortium.
Campanella said another big advantage of going with a self-funded model is the fact that employers can better understand their claim cost trends.
“Under self-insured, you’re actually paying the claims and you’re the one taking on risk, so you have that information,” he said. “So then with that information â€” information is power â€” you’re in a position to be able to get creative and design initiatives and programs to maybe direct care toward more value-based providers. â€¦ You definitely have a lot more flexibility in that regard to control your health care costs then.”
Roundstone has a team of employees it calls the cost saving investigators that focus on how to save employers money. Schroeder said when a new employer joins Roundstone, the lowest-hanging fruit when it comes to immediately saving them money is in pharmacy and pharmacy benefit managers. The other major area it looks at is big-claim ticket items, such as cancer to transplants. With those, Roundstone looks to Centers of Excellence and incentivizes employees to go with higher-quality, lower-cost options.
“We really think it’s important that these employers in the middle market wake up and get out of the grip of the fully insured carriers and start buying the care direct themselves and self-funding,” Schroeder said.
According to the Kaiser Family Foundation, in 2018 the percentage of covered workers enrolled in a self-funded plan in firms with 5,000 employees or more was 91%. For firms between 50 and 199 workers, that was 20%. And for firms with 200 to 999 workers, it was 50%.
Small to midsize companies may not realize they have this option, he said, or they may be intimidated by the idea of proactively managing and controlling their plan design. Roundstone helps to mitigate that intimidation factor as a kind of outsourced risk management option.
What Roundstone sometimes struggles with is employers who are stuck in a year-by-year approach to their health care costs. Roundstone, Schroeder said, is a long-term strategy. He tells folks that they’ll achieve enough savings in four years with the company to essentially pay for the fifth year with their model. But it’s a philosophical change for employers to go from feeling trapped without choices in a fully insured model every year to committing to a long-term investment with a self-funded model, he said.
“Once a year, they sit down, they get a spreadsheet of cost increases and they hope to God it goes away,” Schroeder said. “We tell them, ‘No, no, no, let’s not do this. Let’s get in this, let’s find out your claims, let’s manage your claims and then over the long-term, let’s take proactive action to manage those costs.”