Close this search box.
Close this search box.

Small to Midsized Employers are Now Contracting Directly with Healthcare Providers

Cutting out the “middle man” results in substantial savings and puts employers in control

gettyimages-491857326-compressorWith the cost of health insurance growing to unsustainable levels, employers are desperate for a way to stop the skyrocketing expense. Healthcare costs are predicted to reach $30,000 by 2020 for a family of four, according to a 2016 Benefits Benchmarking Survey. And according to a study of independent insurance agencies, the median in-network deductible with an employer-sponsored health plan increased 50% in 2016.

There is a growing recognition by employers that the old approach of raising deductibles and increasing the premium contribution from employees will no longer work. As a result, employers are coming full circle from the 1980s when the idea of inserting an intermediary between the employer and the healthcare provider arose in the form of a Preferred Provider Organization (“PPO”) or managed-care company.

An increasing number of employers, particularly mid-market firms, are going back to removing the middle-man altogether, and working directly with healthcare providers.

“The proportion of midsized companies with 100 to 499 employees that were self-funded increased 19%, to 30.1%, between 2013 and 2015.” Employee Benefit Research Institute

In a recent study conducted by Oliver Wyman, nearly half of all employers said they would be interested in contracting directly with provider organizations. The direct contracting approach offers savings of as much as 40% over traditional fixed cost PPO health plans.

While the approach of direct contracting—for the most part—has been limited to large employers such as Boeing, Intel and Walmart, this too is beginning to change as self-funding grows in the middle market. According to the Employee Benefit Research Institute, the proportion of midsized companies with 100 to 499 employees that were self-funded increased 19%, to 30.1%, between 2013 and 2015.

Spurring this growth is a new insurance product known as a stop loss group captive. Insurance Claims Automation Solutions like this enable employers with as few as 25 employees to self-fund their employee health benefits while mitigating the volatility that historically prevented smaller employers from utilizing the cost-cutting strategies 98% of larger employers utilized for years.

To explain, the most damage in today’s health insurance market is being conducted by managed-care intermediaries that hold employee health data hostage. A medical captive eliminates this bad behavior and opens the door for employers and their providers to take control.

Cost containment is impossible without health data, and with claim data transparency, employers are able to take action and mitigate rising costs. In addition, strategies to reduce the cost of pharmacy, chronic care and preventable illness are best delivered by the clinicians of the provider under a direct relationship with the employer.

As such, the direct contracting approach is a community effort. All participants—from the CEO of the provider system to the employee to the CEO of the employer—work together toward a common goal of improving health and eliminating waste.


  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events


    Strategic Planning Workshop

    1:00 - 5:00 pm

    Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process

    Executives expressed frustration with their current strategic planning process. Issues include:

    1. Lack of systematic approach (70%)
    2. Laundry lists without prioritization (68%)
    3. Decisions based on personalities rather than facts and information (65%)


    Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns.  They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning.  Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process.  This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented.  If you are ready for a Strategic Planning tune-up, select this workshop in your registration form.  The additional fee of $695 will be added to your total.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.