Self-Insurance Is Not Just For Big-Caps

A few years ago, Zane Tankel, CEO OF Apple-Metro, the New York City area franchisee for Applebee’s, took for granted that self-insuring would be cost prohibitive. Then insurance companies began hiking premiums, and Tankel decided it was time for Plan B.

Before signing up, Tankel wanted concrete evidence that the new plan would be affordable. For two years, his executive team “phantom-tracked” the health insurance claims of his roughly 200 full-time managers and calculated what it would have cost the company to self-insure. “As we tracked it, we saw it made a lot of sense,” Tankel says.

In 2015, the company began self-insuring, with Aetna managing the plan. Apple-Metro has continued to track what it would have paid in premiums so Tankel can see the savings. “It’s not cheap, but, for example, just this past month we paid something like $180,000. If we had been fully funded, it would have been $225,000,” he says. “When you buy insurance, you buy for the worst-case scenario. When you self-insure, you buy for the reality.”

Apple-Metro still has to cope with rising healthcare expenses, but Tankel says he is not even considering raising employee’s share of the tab. “For us, insurance is a perk. It helps us attract and, most importantly, keep the best-in-class talent.” He adds that his restaurants have low management turnover compared with industry averages.

In October, Apple-Metro sent out a letter to all health plan members letting them know that, while overall healthcare expenses rose for the company, employees’ share of the cost would remain the same. “If the savings are substantial enough, we can absorb the increase,” says Tankel. “Because if we’re saving $2 million on premiums and costs go up by $100,000, then we’re still saving $1.9 million. That’s not bad.”

Read more: Smart CEOs Aren’t Waiting For Washington To Fix The HealthCare Crisis