Why Employers Are Desperate
[00:00:00] Stacey Richter: Hello, all you Relentless Tribe members. Thanks for hanging with me today to talk about a bunch of things. One of them being what exactly are level-funded plans, and what are the upsides, and then what are the risks?
Because here's the thing. I was talking to an employer the other day, an employer with a fully funded insured plan, and he told me his renewal this year, 69%. 69%!
Now, their broker managed to negotiate that increase down to 50%. I'm not entirely sure if I'd classify that as a victory. So when Frank Pennachio says in the conversation with him that I'm gonna have today that there's a lot of desperation out there for a lifesaver for these plan sponsors, for employers out there, for just a way forward that may just even preserve the employer's ability to continue to provide coverage, to not actively be working insanely hard to try to replace the humans with, like, AI that doesn't need insurance, or to, like, offshore labor to a country, literally any other country, because any other country is going to have more affordable healthcare.
Like, at a certain point, one more double-digit increase, one more 50% increase becomes a really big corporate decision.
Self Funding Isn't One Thing
[00:01:35] Stacey Richter: So right, we talk a lot about self-funding on Relentless Health Value because it can be a very empowering way to go if a plan sponsor chooses to embrace the entirety of the potential upsides while mitigating the inherent risks of becoming a fiduciary and, as Elizabeth Mitchell has said, running a small insurance business off the side of their desks.
That's what you're doing when you become self-insured. Someone in the company is running a small insurance business off the side of their desk.
What would be a problem for anyone to hear, though, is a message that self-funding or becoming a self-insured employer is, like, some kind of homogenous broad stroke.
Like, all of these employer-sponsored insurance companies that have gotten stood up are the same or maybe even similar, kind of forgetting that there are many, many different flavors or models of self-insurance.
So coming up here, Frank Pennachio, my guest today, quotes economist Thomas Sowell, who famously said that In healthcare, "There are no solutions, there are only trade-offs." And you can see why, because all of this adds up to a key point, how plan sponsors can make intentional and intelligent decisions, trade-offs, pick which trade-off they want rather than desperate ones.
Meet Frank Pennachio
[00:03:07] Stacey Richter: So right, my guest today is Frank Pennachio, who is the author of the book, The Silent Danger. Frank brings nearly 40 years of experience in the health insurance industry. He started his career on the P&C, the property casualty side, before evolving into employee benefits, owning an agency, consulting, and training with agencies and plan sponsors nationwide.
Frank also has a couple of courses available on his website, so certainly do check them out.
In the conversation coming up here, Frank walks us through the hidden contract risks that level-funded plan sponsors fall into regularly, and then we get into the critical takeaways to help plan sponsors, their advisors, navigate these waters with eyes wide open.
If you are an employer considering, for example, level funding or trying to figure out other ways to be self-funded, or an advisor or a policymaker or anybody thinking hard about healthcare affordability and where the dollars spent by taxpayers, members, and health plans are going, this episode is your essential field guide.
I'm Stacey Richter. This is Relentless Health Value. I want to first of all thank Frank for generously offering to sponsor the costs of producing this episode, which was really kind of him. That was a really nice gesture.
Also, thanks to our founding sponsor, Aventria Health Group. And with that, here is my conversation with Frank Pennachio.
Frank Pennachio, welcome to Relentless Health Value.
[00:04:40] Frank Pennachio: Thanks for having me, Stacey. It's a pleasure to be with you today.
What Level Funding Means
[00:04:43] Stacey Richter: So before we discuss the actions to be taken such that a plan can confidently move forward with a level funding, self-funded option, or maybe decide not to. A legit question here, Frank, is what is level funding?
So maybe we should start there.
[00:05:02] Frank Pennachio: Let's start there. So the name level funding indicates that the plan sponsor's gonna pay in a level amount every month. It may not be the ultimate amount they pay, but they're gonna pay in a level amount every month. And if their claims experience is positive, is good, they have an opportunity to get a return of that money at the end of the policy period.
It's a hybrid between the way the cash flows. It feels like a fully insured plan to the plan sponsor 'cause I'm paying my, my amount every month. But ultimately, it is self-funding, and it carries the risks and the benefits of self-funding.
[00:05:46] Stacey Richter: Just to reiterate, it feels comfortable for some plan sponsors who may be used to a fully insured model because they're told, "This is your nut that you're gonna pay every single month," and then you get the invoice, and you pay that amount, right?
So it's, you can count on this number. Then there's the opportunity for the surplus that which is often mentioned. But to your point, it is actually a form of self-funding. So from that vector, it's not a hybrid. It is squarely self-funding.
[00:06:19] Frank Pennachio: Absolutely.
Why Level Funding Is Booming
[00:06:20] Stacey Richter: Why now for level funding? There's been a, kind of an explosion here. Why?
[00:06:28] Frank Pennachio: Well, there's this relentless cost increase. 2027 is gonna be probably the worst we've seen in, from what I understand, over a decade. There's desperation. There's desperation among plan sponsor employers. There's desperation among agents. People are looking for, there must be a way to stem the tide on these increasing costs.
So there's, even if employers of all sizes are looking at level funding, which let's say right up front, level funding is self-funding. It may, we'll talk a little bit about this as we go through, it may appear to act very much like a fully insured plan, but it is not. It is a self-funded plan, and the pressure is on to, in some way, endeavor to mitigate these ever-increasing costs for employers and employees.
[00:07:16] Stacey Richter: Desperation from the standpoint of everybody. You mentioned employee benefit consultants. You mentioned brokers who are looking for a real solution for their clients who are facing these cost increases, which can be astronomical, double digits, year after year after year. It's like the opposite of compounding interest in your savings account.
Like, it's a thing, and level funding, as you said, it is a form of self-funding, which has its upsides and its things that you have to make sure that you are mitigating for all the reasons that self-funding is both excellent and also a responsibility.
If you're an employer and you're considering level funding, what are these things that need to be buttoned up?
[00:08:12] Frank Pennachio: So the first step is... My objective is fairly simple. I just wanna help agents and advisors, help plan sponsors to make intentional and intelligent decisions as to whether these plans are right for them. There are trade-offs. As, as Thomas Sowell, economist, says, "There are no solutions. There are just trade-offs."
There's trade-offs. There's upside, there's downside, there's potential to reduce the cost. There's also a potential that you could have greater cost and greater liability.
So the key is to help people understand that those trade-offs. What are they, what are they potentially going to gain, and what are they potentially have to lose by entering into one of these types of plans?
[00:08:57] Stacey Richter: And I hear you, because knowledge is power, right? Like, if we are aware of these potentials on both sides, then we can take advantage of the potential upsides while also mitigating for the downsides, and that's the way that you wanna move forward, with intention. I like how you put that.
Risk 1 ERISA Contract Traps
[00:09:30] Stacey Richter: I don't necessarily mean to focus on risks, but let's focus on risks so that we can lay them out and then figure out how we're going to address them such that upsides are upsides and there's as few downsides here that we can accidentally fall into as possible.
What would be your first risk to, to get addressed here?
[00:09:41] Frank Pennachio: I would say the first risk is, is the moment you, a plan sponsor signs a contract. Let's say it's the third-party administration claims administration agreement or an ASO agreement, administrative services only agreement
Typically, they are signing contracts that have embedded in them ERISA violations, and typically they do not have an ERISA attorney on their side to negotiate and to mitigate those clauses so that they're not signing on to an ERISA violation the moment they sign the contract.
And that's first and foremost it's let's... Because ERISA violations, Stacey, carry a potential of personal asset exposure, and we want to mitigate those as much as possible. I'm not gonna assert that you're going to ferret out everything out of the contracts that you want and that you're gonna get exactly what you want, but we do want to negotiate and not sign contracts as is, so the plan sponsors have an opportunity to push back against what have already been deemed by some federal courts to be ERISA violations that we're seeing the clauses still remain in the contracts.
[00:10:49] Stacey Richter: Level funding is a form of self-funding.
[00:10:52] Frank Pennachio: Yes.
[00:10:52] Stacey Richter: And we have had multiple guests on this show talking about the fact that once you start self-funding, then you become the fiduciary of the plan, and this is no different. It's a form of self-funding.
So best practices would apply for any, just the same as anybody else seeking to do self-funding or doing self-funding.
One of them is make sure you have your own, for example, ERISA attorney. Because as multiple guests have said multiple times on this show, there are these buried Easter eggs, I'm, the, don't know what you call them, in the contracts where there was just...
I think it was the Tiara Yachts lawsuit where there was a fiduciary issue with the contract, and the vendor was like, "Well, you're the one that signed it. You shouldn't have signed it if you knew that you were gonna be in breach of your fiduciary duties."
Right? So, like, at the end of the day, it's kind of buyer beware.
[00:11:50] Frank Pennachio: And I've been involved in some of those conversations where the comment back is, "Well, your, your fees do not meet the prudent test under ERISA." Not my problem. I'm not the fiduciary, and I didn't sign the contract.
So that's, that is, uh, technically correct, but quite disconcerting to engage in a conversation like that.
[00:12:11] Stacey Richter: Be very careful when you sign these contracts. If I was gonna talk about a second risk here, so we just talked about kind of this, there is a fiduciary shift and we should be aware of it. What's your, what's your second main risk factor?
Risk 2 Stop Loss Misalignment
[00:12:27] Frank Pennachio: I would say there's frequently a misalignment between the plan, which again, are the promises that the plan sponsors make into the employees. You're gonna get these benefits irrespective of whether or not I get reimbursed from the stop loss or not.
And frequently, the plan promises are not in alignment with the stop loss. And I'll give you just a quick example. We could go through dozens of them, but a quick example is the eligibility provision.
The eligibility, you're eligible to be on this plan and get these promises made to you if you work 30 hours a week, if you're on FMLA or COBRA.
Typically, that aligns with the stop loss, but sometimes plan sponsors will go further if you're on approved leave or they extend the eligibility in the plan, but it doesn't line up with the stop loss.
And we can go down a whole series, Stacey, of where promises are made under the plan that are not gonna be reimbursed under the stop loss.
And when that happens, guess who's on the hook? The plan sponsor employer's on the hook. Oh, you don't have the cash flow in your company to pay that? Well, now we're going to personal assets.
And, and that's where we have to be very careful. I've even discovered some managing general agencies, they're selling stop loss having never seen the plan. There's no connection whatsoever to the plan.
This is not health insurance. This is self-insurance. The plan sponsor's gonna pay, and most of the time, the stop loss reimburses as expected. But there are certainly areas where there's misalignment that can be fixed
[00:14:00] Stacey Richter: Yeah, and long-time listeners or even short time ones are probably also going to remember, there was a show last year with Andreas Mang and Jon Camire [parts 1 and 2] where we talked about just the issue of stop loss misalignment with the plan, which again, is more than just, happens with more than just level funding, but because level funding is a form of self-funding, and this is kind of a self-funding issue. Same absolute rules apply.
[[So right, as I just said, listen to the two-part show. This is episodes 478 and 479. Also listen to a recent post by Kimberly Carleson with great comments by Justin Leader and Lori Guliano on this exact topic.
I will also link to another post on stop loss cost trends, by David Goldfarb. Again, links in the show notes.]]
Risk 3 Surplus Fine Print
[00:15:01] Stacey Richter: What do you have for me for, for Risk 3?
[00:15:05] Frank Pennachio: Level funding, one of the big promises is you have an opportunity to get money back out of a surplus fund, what's called a surplus fund.
You have a chance. And the way it typically works is you pay your monthly allotment in, claims are paid up to your deductible, the stop loss pays the claims in excess of deductible when everything goes well. And the idea is, based on what you've paid in, if after those things occur, the intention is you get surplus returned.
Now, you have to look closely at the surplus formula, because I've seen plans and Stacey, I don't want to assert that what I'm about to say applies to every single level funding plan out there. No. But I've seen plans that operate this way. Yes, I paid my money in. Yes, I paid claims up to the deductible.
Yes, the carrier's picked up over the deductible. But then a carrier may apply what's called an incurred but not reported factor and take that factor, many times it's not even actuarial-based, actuarially-based, take it out of the surplus. Then they may also take a "service fee", I've seen as high as 30%. Well, they've already charged for all the services, but then they're gonna take a service fee.
So we got claims coming out, we got incurred but not reported factors coming out, we got service fees coming out, and oh, by the way, if there's anything left, you need to be with us five years down the road. Because when we return any surplus that may be left, it's returned as an invoice credit, not as a check. Which that, in and of itself, you're committing that I need to be with you, with this carrier, five to six years down the road, or even if I've qualified for a surplus, I'm not gonna get one.
[00:16:57] Stacey Richter: So Risk 3 here, I'm gonna do the thing I did with Risk 1 and Risk 2. It's specific to level funding, but it's also kind of a universal fact of life over here in the healthcare industry in the United States. So what you basically said for Risk 3 is, watch it with the surplus.
Right. Because what might be written on, similar to, like, PBM contracts. The first two pages tell you what you wanna hear, basically, and then the remaining 150 tell you why that's not gonna happen. So it kind of almost sounds like the same thing. What everybody kind of would love to get at the end of the time is the surplus back, the overpayment back.
But what you're saying is, watch it. Read the back half of the contract because there could be language in there that says, as you said, that it's not just like, "Oh, here's the surplus. Here you go." It's like, um, you know, manufacturer rebates and PBM contracts. There's just this pot of money.
[00:17:57] Frank Pennachio: Right.
[00:17:57] Stacey Richter: And did we classify it as a rebate? Did we classify it as a surplus? Oh, no, it's actually a service fee. Oh, no, it's actually an incurred but not reported, right? Like, they'll come up with a different name. Now it's not a surplus, and now you don't get it. And it, additionally, with a lot of these contracts, and I see point solution contracts that are the same way, where it's not actually dollars back.
It's a credit some years hence. So again, this particular instance is relevant to level funding plans, but it's a common term that you'll see in some of these contracts, sadly.
[00:18:32] Frank Pennachio: What we're trying to do with the intentional and intelligent decision-making process is weigh this risk and reward.
There's a risk and reward ratio, and if you're... We know that level funded plan sponsors are assuming greater risks for the potential of a reward. That's the way it works. That's the way it's embedded into the whole product. It's the plan sponsor's decision. We're just looking to help them be more aware and have all the transparency laid out.
Here are your risks. Here's your potential reward. We know you're under a lot of pressure with the increases. Let's take a look at it and make sensible decisions, especially, especially when ERISA allows personal assets to be exposed.
[00:19:16] Stacey Richter: To that end, it's not only a message like read the fine print at the end of the contract.
It also might be a message like, hmm, maybe do the math, like without that surplus included or, you know, like there's a lot of I think, very valuable takeaways that are kind of coming up here as we're going through these risks to just ensure that this plan is gonna work the way the plan sponsor wants.
And again, upsides are taken advantage of and downsides are at least known knowns going in.
[00:19:44] Frank Pennachio: Right.
[00:19:45] Stacey Richter: How about a number 4? Do we have a number 4 here?
Risk 4 Claims Data Access
[00:19:47] Frank Pennachio: We do. The fourth risk [Risk 4] is frequently touted in self-funded plans, level-funded and self-funded plans, is greater claims data transparency, and that's a promise that is made upfront and pretty much with every offer. And that's only true if the plan sponsor doesn't sign away their opportunity to secure that claim data in the manner in which they choose.
And frequently what happens is, once they sign the contract, that claim data access and transparency gets so restricted that the plan sponsor really doesn't get what they were promised. And claim data transparency now is, it should be a given. I mean with the new laws coming out and the new litigation emerging, there should be no question as to who owns the data.
The plan sponsor owns the data. The plan sponsor must have access to the data in order to have any opportunity to reduce claim costs.
[00:20:50] Stacey Richter: Yeah, again, long time and probably short time listeners are like, "Hmm, this, this song sounds very familiar," right? It's just such a common through almost every self-insured, self-funded plan working with especially ASOs or certain...
There's, there's certainly some TPAs that are well known for not providing data, which to your exact point, the Consolidated Appropriations Act, both the 2021, I think, and as clarified in 2026, like it is the plan sponsor's data. The plan sponsor should get it.
[00:21:29] Frank Pennachio: And they've signed it away. They've signed the rights away when they sign the contract.
[00:21:33] Stacey Richter: Yeah. Sadly, that is quite common. Not amongst our listeners who are at least aware of it at this juncture, but it's harder than it looks on TV to get those crossed off.
Risk 5 Fees and Prudence
[00:21:45] Stacey Richter: So Risk 5, where are we?
[00:21:48] Frank Pennachio: Well, we go back to, you just mentioned the Consolidated Appropriations Act of, we had '21, 2021 and 2026. So if listeners are going, "Well, wait a minute, you know, I've been in this plan," well, new things are emerging.
I mean, give yourself some grace here. We have a new law just a few months ago that went into effect. But the biggest issues here go to what you just mentioned, Stacey, and that's more around the transparency of not just the broker's fees. That came in 2021, now expanded to all service providers because the plan sponsor, the fiduciaries, must pay what are known as prudent fees.
They don't have to be the lowest fees. They have to be prudent. They have to be defended as being able to be prudent. And when you dig into these contracts, once again, ask yourself, "Can I defend in the bright light of day a $50,000 bill to reprice one hospital bill?" I've seen a TPA contract where as they say in the South, “bless your heart,” the most you're gonna charge me is $50,000 to reprice one hospital bill.
That is indefensible. And if, when and if the time were to come, either an audit or it arises through litigation, the plan sponsors can be told to put that money back. It's not your money, it's the participant's money, and put that money back. Oh, you don't have it? Again, we're gonna start attaching personal assets.
So disclosure of all fees, and then benchmarking. Again, you don't have to be the lowest, but you have to be in the ball game. You have to be able to defend what are considered prudent. What would a prudent person do? How would a prudent person pay fees for all these various critical, necessary, important services?
And we want our vendors and we want our professional service providers to be profitable so they can invest in the best technology and hire the best people, but you can't, you can't pay fees that are excessive.
[00:23:46] Stacey Richter: The definition of fiduciary is fees have to be reasonable, prudent, and free of conflict, I think are, are the three kind of top line. And again, similar to every other self-funded plan, level funding being a flavor of a self-funded plan, all these same rules apply.
[00:24:06] Frank Pennachio: Absolutely.
[00:24:07] Stacey Richter: Doug Aldeen actually was on the pod [Episode 512] a couple of months ago talking about exactly what you're just saying, like, the $50,000 repricing fee.
We had Cynthia Fisher [Episode 457] on talking about the, it was, like, a $600,000 out-of-network example, right?
Like, these are all kind of examples of, of the same thing, so it's not like we're talking about changing the couch cushions here. Like, this, this can be significant dollars.
[00:24:30] Stacey Richter: All right, five risks that are avoidable, actually. You, you take the time and the effort, and you go through this carefully, and these are avoidable.
Action Plan and Best Practices
[00:24:41] Stacey Richter: What's your advice? Like, if I am really thinking to myself, I really actually do want to avoid these risks, how would you kind of distill this down into maybe like action items or strategies here.
[00:24:58]Frank Pennachio: Sure. Well, the first thing I would do is I would engage with an ERISA attorney. You're assuming, the plan sponsors are assuming significant risks. I can promise you that anybody on the, any vendor or carrier on the other side of the table, they have attorneys crafting these contracts. And look, it's their duty and responsibility to shift as much risk over to the plan sponsor as possible.
That's just the way the game works in our system. So we need to level the playing field and say, okay, we need to push back and negotiate. Never sign a contract as is. That would be, I think, probably a... I think that's a strong statement, but I would, I would assert that it's good advice. Not as is.
Because as is pushed much more liability over, and risked to the plan sponsors.
Understand what this is about. We have multitude, as I mentioned, of contracts. You have the plan itself, which is a contract. You're making all these promises. You've got the claims administration. You've got quite, you know, you've got the stop loss. You've got quite possibly either a network contract or a reference-based pricing contract.
Go read the contracts. And it's complex. The opportunities, yes, are there, but plan sponsors have to make a far greater commitment of time, energy, money, and investment in order to make this work for them.
[00:26:16] Stacey Richter: The first takeaway that I heard you say is, number 1, right now, go get an ERISA attorney if you're considering moving, especially if you're moving from fully insured to a level funded or a type of self-funding of any nature, really. Like start out, that's your first item on the list. Get an attorney to help you here. That's number 1.
The second kinda takeaway that's sort of implicit and, and I think what you just said there is, really educating everyone involved in the plan on what self-funding means and just sort of all, what are all of the different contracts that are gonna be coming in, really reading them, understanding how they all add up, fit together.
An ERISA attorney would certainly help here, but just making sure that those who are on the plan sponsor side, who are tiptoeing or charging in this direction, have a bead on what this whole thing actually means, especially, as you said, the owners of the company or the fiduciaries, whoever's signing that document does have some personal liability here.
These kinds of things are just really important to go in with eyes wide open, it sounds like.
[00:27:30] Frank Pennachio: There's no doubt. And, and what we're finding, too, the Kaiser Family Foundation, and their new survey will be out likely in October, usually comes out every October, but the last survey they put out, they estimate that 44% of employers with 9 to 49 employees, 9 to 49 employees, are self-funded, which that group's gonna be mostly level funded.
Now, you're probably gonna get pushback from a nine-employee firm, "I'm gonna hire an ERISA attorney?" Well, just, you know, we strongly encourage that you do, because you have the same risks. And for all practical purposes, the plan sponsor is now the insurance company. They buy stop loss much like an insurance company buys reinsurance.
There's my promises to my employees. I have to deliver on them. I am the insurance company. Yes, I have stop-loss, and yes, I have, service providers to assist me with this, but I am, I am it, and I would not want to assume that liability and that responsibility without professional support from an ERISA attorney. As mentioned, the other side has attorneys, and why would you wanna go to that negotiation without one?
[00:28:45] Stacey Richter: Yeah, for sure.
Level funding certainly has some advantages, right, over other forms of self-funding if an employer is smaller, but it is still a form of self-funding.
I heard a quote the other day, "The marketing is theater. The truth are the contracts and the data."
[00:29:02] Frank Pennachio: Well said. Well said.
[00:29:04] Stacey Richter: So, you know, another thing that I'm kind of thinking of here as you're talking is, and maybe I'm gonna chalk this up as our third takeaway, as you said, not all of these level funding purveyors, vendors are the same.
So it definitely would appear that one should shop around and be looking at the actual contracts while doing so, not just, like, comparing PowerPoint presentations, it sounds like.
[00:29:37] Frank Pennachio: Absolutely. I don't think a proposal... And yes, shopping around, there's, there's a number of managing general agencies that are in the game now.
It's not just, not the carriers. The carriers were the ones that really pretty much launched this many years ago.
But there's other programs available, and they're programs that basically can be bundled together with a stop-loss here and claims administrator over there and a PBM over there.
And there's some advantages to that. There's some significant advantages to that. But somebody's gotta coordinate it all, and somebody's gotta make sure that when, when it's bundled, that bundle is in alignment and each piece is carefully examined.
There's a, a sundry of opportunities out there, and it's not my intention at all to do anything more than help people make better decisions and get that risk-reward ratio clear to everybody who may be taking, choosing to take greater risk.
[00:30:33] Stacey Richter: Right. Okay, so takeaway advice three is think about all the things that you've heard today, and do your RFPs really look at any given vendor very carefully with respect to everything that we've talked about, along with probably that ERISA attorney.
[00:30:51] Frank Pennachio: Right.
Choosing the Right Advisor
[00:30:52] Stacey Richter: You know, I think another, again, takeaway that I'm kind of hearing here is pick a broker or EBC who also has aligned interests with you, the plan sponsor.
And again, this is not the first time, nor will it be the last time that this has come up. But there's similarly to just we, we were talking about with the vendors, the level funding vendors themselves, there are some fantastic brokers and EBCs out there who have made a commitment to working on behalf of the plan.
Their pricing is that way, all the documents.
[00:31:35] Frank Pennachio: So Stacey, we're seeing a divide. We're seeing, there are certainly the agents, brokers, and consultants out there that are telling you the things that we're talking about today. They're raising the awareness. They're illuminating the risks.
The rewards, you know, certainly can be there. And there are those that are not. There are those that are still just saying, "Come with me and I can help you reduce your costs. I can help you fight back against these escalating costs."
If the risks are not being discussed, I would be very cautious. I'd be very careful. And sometimes people push back at me and say, "Well, that's scare tactics."
It's not scare tactics, it's the reality of what we're dealing with here. We have a crisis. There's no doubt there's a crisis. So how do we address this crisis? Well, we, we don't pull the covers up over our head. We let the light in and help people make intelligent, informed decisions.
[00:32:29] Stacey Richter: I mean it, there's a difference between a broker EBC who, again, is trying really, really hard to satisfy a client's objective, maybe desperate need to figure out how to control costs. There's two ways to proceed from that, you know. One is to lead a client down a path which ultimately they're not quite informed about, and then kind of wind up with a worse problem than the one they started with because the broker EBC has the trust and wasn't maybe informed enough themselves.
Like, I don't necessarily wanna even portray any maliciousness here. It could just be they're not really well informed about the, you know, all the things that we just talked about.
But relative to a plan sponsor, I think it's pretty clear here that a really informed EBC will be going through with the plan sponsor all the stuff that we talked about today.
[[00:33:30] Stacey Richter: All right, here's the advice summarized. One, never sign a contract as is. Get aforementioned ERISA attorney involved. Second piece of advice, plan sponsor team is, in fact, running a small insurance company off the side of their desk. That is what self-insured means. So make sure that everyone on the plan sponsor side really truly gets that this is what's happening and is educated to be an informed fiduciary decision-maker commensurate with this level of responsibility for the plan.
Piece of advice three, recognize that not all level funded plans are equal, and spend the time to do a legit RFP. Do listen to the episode with Claire Brockbank on RFPs.
Piece of advice four, pick a broker, advisor, EBC. Pick someone who has the experience, number one, and also the financial alignment to help you. Listen to episode 512 with Doug Aldeen, who is an actual ERISA attorney for more on this one.
Or listen to the episode with Justin Leader called The Mystery of the Weekly Claims Wire.]]
Final Takeaways and Resources
[00:34:48] Stacey Richter: Frank Pennachio, is there anything I neglected to ask you that you wanna say in summary or a takeaway bit of advice or, or just something that you definitely want all listeners thinking about level funding to make sure they take on board?
[00:35:03] Frank Pennachio: Stacey, I think employee benefits agents and brokers and consultants get up every day with the intention of doing great work and helping their clients.
I think the intent is to help in this, in these very challenging times, and it's overwhelming. It's coming so fast. The changes are coming so fast that it can be overwhelming for everybody.
So I would just suggest, let's take a deep breath. The likelihood is the increased cost in healthcare are gonna sting, they're gonna hurt.
They won't likely bankrupt most companies, but the risks you unknowingly assume could. So let's be moderate about our approach to this. There's no silver bullet out there. There's opportunities to reduce cost, and yes, we should be exploring those. Just how much risk do you want to assume in order for the potential to reduce your costs?
[00:36:03] Stacey Richter: Sage advice for probably way more than just level funding.
[00:36:08] Frank Pennachio: Right.
[00:36:08] Stacey Richter: But it is very wise what you just said.
Frank Pennachio, if someone is interested in learning more about what we have spoken about today, where can they find your book? Where can they find your classes?
[00:36:23] Frank Pennachio: Yes, thesilentdanger.com, also the name of the book, and, uh, the website is there. And you can find me on LinkedIn, as well, with a little bit of commentary here and there. I'm thrilled when people reach out and say, Tell me more.
[00:36:40] Stacey Richter: Frank Pennachio, thank you so much for being on Relentless Health Value today.
[00:36:43] Frank Pennachio: Thank you for having me, Stacey. It was a real pleasure. Appreciate it.