Self-Funded Health Plans: How Two Employers Cut Costs Up to 77%

Real claims data from two mid-market employers on fiduciary duty, PBM transparency, and what it actually takes to break the annual renewal cycle.

For many employers, escaping the annual health insurance renewal trap starts with a single decision: moving to a self-funded health plan you actually understand and control. Without that shift, premiums climb every year, deductibles creep higher, and the only real choice on the table is which flavor of bad news to accept.

You ask your broker for options and get back two or three quotes from the same handful of carriers, no more transparent than last year’s. Meanwhile the bill keeps growing: the average family premium hit $26,993 in 2025, according to KFF’s Employer Health Benefits Survey, up 6% in a single year. It is easy to conclude there is nothing to be done except brace for next year’s increase.

Two employers decided that conclusion was wrong. Hendry Marine Industries, a shipyard at the Port of Tampa, and Kalos Services, a construction and trades company spread across three states, both walked away from that cycle and built self-funded health plans they actually understand and control.

The results were not small: one plan now pays roughly 23 cents for every dollar billed, and the other has held employee premiums flat for four straight years. This is the story of how they did it, and a practical guide to doing it yourself.

Trapped in the Annual Renewal Cycle

If you sponsor a health plan for 200 or more employees, this probably sounds familiar. Your broker shows up a few months before renewal with two or three quotes from the same short list of national carriers. None of them show you what was actually billed for your employees’ care, only a top-line number and a handful of high-cost claims with the names redacted. You negotiate at the margins, maybe swap a carrier, and sign whatever increase is small enough to explain to your CFO.

The incentives behind that process are not accidental. In a traditional brokerage relationship, brokers are paid to broker a risk transfer, moving as much of your claims risk as possible onto an insurance carrier, because that is the most direct route to their own compensation. There is no comparable payday for helping you avoid or reduce that risk, which is exactly the incentive a genuine self-funded health plan removes.

Donovan Ryckis, co-founder and CEO of Ethos Benefits, has watched this play out across hundreds of renewals:

“Follow the money, and you’ll find the incentive that drives the behavior.”Donovan Ryckis, Co-Founder & CEO, Ethos Benefits

When an advisor’s paycheck depends on the size of the risk transferred, the size of the risk transferred is exactly what grows every year.

A New Philosophy: Governing Your Plan Like a Fiduciary

Here is the shift that changes everything: your company is already an ERISA fiduciary for its self-funded health plan, whether anyone in the building realizes it or not. The U.S. Department of Labor’s guidance on fiduciary responsibility is explicit that hiring and monitoring a pharmacy benefit manager, network, third party administrator, or stop loss carrier is a fiduciary decision, not just a routine purchasing one, and that fiduciaries are personally responsible for making sure the fees involved are reasonable.

That is the same standard most companies already apply to their employees’ 401(k) plan. Nobody would let a 401(k) provider operate with zero transparency about fees or performance. Yet that is exactly how most employers treat the second or third largest line item in their entire budget.

“We can’t say the purpose of your health insurance is to keep your costs low when it has failed to do so over 20 years.”Donovan Ryckis, Co-Founder & CEO, Ethos Benefits

The purpose of a system is what it actually does, not what it claims to do on a renewal cover letter. Treating your self-funded health plan like a fiduciary would means building a real decision-making process: a benefits committee, documented criteria for evaluating vendors, and a habit of asking for your own data instead of accepting a summary someone else prepared for you.

The Four Moving Parts of Every Health Plan

Once you start asking questions, most self-funded health plans turn out to have four separate, separately negotiable components that a traditional renewal bundles into a single conversation:

• The pharmacy benefit manager (PBM), which sets drug prices for every employee.
• The network, which sets reimbursement rates for every hospital visit, specialist, and primary care appointment.
• The third party administrator (TPA), which issues ID cards, pays providers, and handles claims administration.
• Stop loss insurance, which caps the plan sponsor’s own liability.

Most brokers evaluate one or two of these each year against a couple of national carriers and call it a renewal strategy. A plan sponsor who separates all four out, and benchmarks each one independently, opens up real competition instead of a rubber-stamped comparison.

The PBM piece in particular deserves scrutiny. The FTC’s own investigation into the three largest pharmacy benefit managers found they marked up specialty generic drugs dispensed through their own affiliated pharmacies by hundreds and even thousands of percent, generating more than $7.3 billion in excess revenue between 2017 and 2022. A plan sponsor who never separates the PBM out for its own review has no way of catching that kind of markup.

Case Study: Hendry Marine Industries

Hendry Marine Industries operates a shipyard at the Port of Tampa with about 300 employees, most of them men in their late 40s and 50s working on a single site. The company moved to a self-funded health plan built around reference-based pricing back in 2017, but as former HR Director Stephanie Porrino explained, that first move was only the beginning.

She recalled the moment the strategy actually clicked for her, years earlier at a different company, when leadership first proposed reference-based pricing and she pushed back hard.

“I said there is absolutely no way, you guys are nuts, and it sounds too good to be true. So I decided that I needed to learn. We took an EOB from one of my employees, ran it through what it would be through reference-based pricing, and the light bulb went on.”Stephanie Porrino, Founder & CEO, Empower Healthcare Insights (former HR Director, Hendry Marine Industries)

At Hendry, that education turned into a string of deliberate, data-driven changes made one at a time over nearly a decade: a pharmacy benefit manager switch that saved 30% of pharmacy spend immediately, a dependent eligibility audit that removed more than 30 people who did not qualify, an on-site primary care clinic and dermatology access added after claims data showed gaps in preventive care, and eventually a broker change that brought Ethos Benefits on as the plan’s fiduciary advisor.

The financial picture over five years is stark. Across roughly 39,700 claims, providers billed the plan $50.4 million. Because Hendry’s plan reprices claims against a Medicare reference point rather than accepting a hospital’s inflated charge and a token discount, the plan actually paid $11.4 million, an average reduction of 77% and an effective rate of just 123% of Medicare.

For comparison, RAND Corporation’s Hospital Price Transparency Study found that employers and private insurers nationally paid hospitals an average of 254% of Medicare rates in 2022, with Florida among a small group of states where prices ran above 300% of Medicare. Reference-based pricing to Medicare is not a fringe idea either: the National Academy for State Health Policy tracks 13 states that have introduced some version of it for their own state employee health plans.

Case Study: Kalos Services

Kalos Services is a family-owned construction and trades company with employees spread across Florida, Georgia, and Alabama, which meant any strategy had to work without relying on a single physical location. When HR Director Jaimie Jarvis first asked her broker about a self-funded health plan in 2021, the answer was blunt.

“He just said, you’re not ready for it, you can’t handle it, it’s a bad idea, there’s balance bills. It’s just not going to be an option. And so he refused to present me with that.”Jaimie Jarvis, HR Director, Kalos Services

Kalos found a different partner and, in 2022, built out a full self-funded health plan in a single renewal: network, TPA, pharmacy, and stop loss, all changed at once. Rather than easing employees into the change, Jaimie kept the plan designs identical to what employees already had, removed primary care copays entirely, and held premiums flat. The first plan year ended with a large surplus, and rather than banking it for a worse year ahead, Jaimie returned most of it directly to employees as a bonus.

From there, Kalos kept building: a third-party care coach so employees had someone besides HR to talk to, a direct primary care option with a $500 deductible that drove more than 50% enrollment, zero out-of-pocket imaging through directly contracted providers, and a mental health benefit with every barrier removed, inpatient, outpatient, and unlimited visits, at zero copay. The plan now spends about $6 per member per month on mental health, compared to an industry average of $14 to $17, alongside a 36% drop in ER utilization.

The Balance Bill Myth, Answered With Data

Reference-based pricing inside a self-funded health plan is often framed as risky because of balance billing, where a provider bills a patient directly for the difference between what they charged and what the plan paid. Both case studies suggest the framing has it backward, and federal rules have also narrowed where this can happen at all: since 2022, the No Surprises Act bans most balance billing for emergency care and for out-of-network providers who happen to treat a patient at an in-network facility.

Over five years, Hendry Marine saw 352 balance bills totaling roughly $2.1 million in initial charges. The settled amount across all of them: under $15,000. That is the system working as intended. If a plan never sees a balance bill, it likely means the provider was satisfied with an inflated invoice that got paid in full without anyone checking it.

Kalos, which layered in a wrap network around its primary and specialist care from the start, saw only two balance bills across four years, an initial ask of about $18,500 settled down to $3,666.

A Step-by-Step Guide to Building a Self-Funded Health Plan

Neither Hendry Marine nor Kalos found a shortcut. What they found was a repeatable process for building a self-funded health plan. Here is how to start applying it to your own plan this renewal cycle.

Take Control of Your Health Plan

Hendry Marine Industries and Kalos Services are proof that a self-funded health plan is not just for the largest employers in a market. They are not outliers. They are a model for what is possible when an employer decides to stop being a passive participant in a system built to work against them. Stephanie Porrino and Jaimie Jarvis did not wait for the perfect year to start. They asked for their data, found a fiduciary advisor willing to show it to them, and made one deliberate decision at a time.

Breaking the renewal cycle is not about finding a magic carrier or a secret discount. It is a shift in philosophy: from reactive purchasing to strategic management, from opacity to transparency, and from a broker’s incentives to your own. Your company can be the hero of this story too. A guide, in the form of a genuine fiduciary advisor, just has to be willing to show you the numbers.

Watch the Full Podcast Episode

This article is based on conversations from The Business of Benefits podcast with hosts Chelsea Ryckis and Donovan Ryckis of Ethos Benefits, featuring Stephanie Porrino and Jaimie Jarvis. Watch the full episode above for the complete story behind both self-funded health plan case studies.