The most common form of employer-sponsored health coverage is getting a modern twist.
In 2024, nearly two-thirds of people in the US with employer-sponsored health insurance were in self-funded plans where businesses pay their employees’ medical bills directly rather than using a health insurance carrier.
But in recent years, employers have increasingly hiked up deductibles and employees’ cost-sharing liability for self-funded plans to avoid steep premium increases, Ariel Levin, the American Hospital Association’s (AHA) director of coverage policy, told Healthcare Brew. This transfers costs to patients who can’t always pay, adding to a mountain of medical debt US hospitals already face. (Over half of US hospital bills go unpaid, Becker’s Hospital Review reported in February 2024.)
Enter companies like Centivo, a health plan for self-funded employers that covers about 77,000 members from 160 businesses, Centivo CEO and co-founder Ashok Subramanian told Healthcare Brew.
Centivo started in 2017 and is backed by investors like Bain Capital Ventures and JPMorgan Chase’s Morgan Health. Most Centivo enrollees don’t have deductibles at all, Subramanian said, while individuals on employer-sponsored plans shoulder an average deductible per person of $1,930 nationwide, according to KFF.
The average Centivo enrollee pays $409 out of pocket per year, according to the company’s website, compared to a national annual average of more than $1,142, per the 2024 Milliman Medical Index.
“We are seeing more and more companies enter the market that are really trying to get at that high patient cost-sharing issue,” Levin said.
Countering misconceptions
At this point, readers of Healthcare Brew’s Compromised Coverage series might have alarm bells going off in their heads. Because often, if a health plan sounds too good to be true, it is.
But unlike plans that sidestep federal coverage rules (like short-term, limited-duration plans), self-funded plans are still subject to some of those requirements and must cover services like inpatient care, Molly Smith, AHA group VP of public policy, told Healthcare Brew.
“The way the rules are set up is that it really is supposed to be comprehensive coverage,” she said.
Subramanian said the company meets or exceeds traditional coverage standards.
“We’re not saving money by reducing access to care,” Subramanian said. “If you’re having a baby, if you need mental health coverage, if you need primary care, if you need a heart transplant, all of that is covered.”
How Centivo saves money
Centivo saves money in part by prioritizing primary care, going so far as to launch a virtual clinic with free appointments for members earlier this year, Subramanian said.
The company charges employers a flat fee per employee per month, incentivizing the health plan to keep costs low, he added. It also charges a bonus if Centivo saves the employer money compared to the employer’s old health plan arrangement.
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Centivo also contracts directly with healthcare providers, intentionally choosing affordable health systems.
On top of that, Centivo performs the duties of a third-party administrator that self-funded employers often hire to handle insurance company-esque tasks like processing claims and collecting premiums.
Hospitals buy in
Centivo’s model is winning over major health systems, too. In October 2024, Centivo announced it had partnered with Mercy, which became its only in-network provider in the St. Louis area.
David Thompson—Mercy’s SVP, chief growth officer, and president of population health—told us Centivo started selling in the market in February, and based on the health plan’s growth in other markets, said Mercy hopes Centivo will help bring in about 20,000 more patients and 30–35 total employers by the end of 2026.
He said Centivo’s model is “a perfect example of a solution” to rising healthcare costs.
Centivo also offers a plan for self-funded employers in the Orlando market.
The twist: In both St. Louis and Orlando, the plan is a narrow network, meaning only one health system is in-network (Mercy and Orlando Health, respectively).
This is in contrast with a broad network, where providers at most—if not all—major health systems in the area are in-network.
The tradeoff: In narrow networks like these, partnering systems may be motivated to give health plans lower prices because they expect to get nearly 100% of the plan’s patients, according to a 2023 review in the journal Medical Care Research and Review.
Mike Stubee, VP of payer strategy at Orlando Health, told us the Florida system gives discounted rates to Centivo and other exclusive partners for that reason.
A bigger trend
The question now is how long programs like Centivo will take to catch on.
Both Mercy and Orlando Health have other programs to cut down health costs through direct contracting, which is when self-funded employers negotiate and partner directly with providers without insurance companies in the middle.
“If the issue is the employer can no longer afford to provide coverage, that’s an existential threat for us…so we would rather give an employer a discount on the front end,” Stubee said.
But uptake hasn’t been as fast as expected in Orlando, Stubee said. He believes a mix of pandemic-related disruption and employee hesitancy around narrow network plans may be to blame. (It’s worth noting the pandemic may have accelerated uptake of direct contracting in other markets.)
“To not see more employers going down this pathway, it does make you wonder: What else is it going to take for people to get there?” he said.