Health insurance sits on the profit and loss as a cost line, and that is precisely the problem. Finance teams treat the annual renewal as a procurement exercise: compare quotes, shave the plan design, absorb what cannot be shaved, and move on. Treacy Duerfeldt, an insurance and risk specialist who has worked across property, casualty, and employee benefits, argues that framing misreads the transaction entirely. What an employer signs at renewal is not a block of prepaid medical care. It is a promise to the workforce about what happens when something goes badly wrong, and the value of that promise is decided less by the plan document than by whether anyone in the building understands it. Get that wrong, and the money spent buys resentment instead of loyalty.
The Product Is Security, Not Care
Duerfeldt is blunt about what the spend is really for. “They’re actually buying employee retention and the employee sense of security in their firm; the ability to attract new talent,” he says. “Without decent benefits, your competitors will take your employees or your employees will be disgruntled at the time of claim, or at the time of a premium increase the following year, and leave.” The asset being purchased is psychological, and it is only tested at the worst possible moment. “Most people think they’re buying health care, prepaid health care, and it’s like, well, the psychology of that is beyond the technicality of that. So you’re really buying a warm blanket for your team that will keep you warm at the coldest times.”
Whether an employer sees it that way tends to track with size and proximity. Smaller firms, where leadership interacts with staff daily, are closer to the human reality of a claim. In larger organisations the calculus hardens. “A larger firm with a CFO, a corner suite, is definitely going to be looking at how it fits their culture, because most of them are educated by HR to do so,” Duerfeldt notes. “But it’s a little more sterile, a little more clinical, a little less personal. So they may get distracted by the details as opposed to the intention of the plan.” That distinction matters commercially. A plan optimized on the details, while the intention goes unexamined, still carries the full cost and delivers a fraction of the retention value.
Two Points Of Failure, Neither Of Them The Plan
Duerfeldt frames the recurring breakdown as a language problem rather than a market one, and the distinction has teeth. There are two separate places where meaning gets lost: between the broker and the employer, and between the employer and the employee. “You have two opportunities for failure that have nothing to do with the insurance plan selected,” he says. An employee who treats enrollment as a box to tick is exposed. “If it’s just checking a box on an enrollment form and rolling the dice, while hoping to God that it works when they need it most, that’s going to cost the employer money with a lost employee or potentially a fiduciary liability.”
The gap is widest in the mid-market. Firms with ten to fifty employees are too small to staff a benefits function and often too small to command a broker who will do the communication work, yet they carry the same obligation to explain the coverage accurately. The same opacity shows up in financing structures. Stop-loss arrangements, aggregate limits and deductible stacking most often fail “when they didn’t understand the structures, when they nodded their head and said the broker knew better.” On self-insured plans in particular, an employer who has not grasped how stop-loss operates on both a per-employee and a per-plan basis “may be looking at a very large bill at the end of the plan year.” Duerfeldt’s standard is verification, not disclosure: the broker should confirm the employer understood, in writing and in plain English, and the downstream effect on any individual employee should be anticipated and communicated the same way. The stakes justify the rigor. On the health side, he points out, getting it wrong can mean personal bankruptcy for the employee.
Where The Alternatives Are Coming From
With employer health costs climbing and conventional cost sharing close to exhausted, Duerfeldt thinks chief financial officers (CFOs) should be asking two questions before absorbing another increase. First, are there non-insurance alternatives that could supplement or outright replace the current offering? He has examined health care finance and health sharing structures that can do both. Second, how else can the tax code be used to cut cost for the company and the employee. “Everybody knows about section 125. But there are other areas in the tax code that can apply that may save both the employee and the employer money.” Brokers are not tax specialists, which is why he argues the CFO should put the broker in a room with the certified public accountant or tax attorney. A broker who cannot engage with either question is a signal: “you got to either find a new broker or do your own investigation.”
The structural case for the alternatives is in how they get paid. Many compensate on a flat dollar amount per head rather than a percentage of premium, which removes the incentive to deliver premium increases. What this means is that they are not insurance: they often sit under federal rather than state regulation, which opens design space: flat nationwide pricing instead of ZIP Code rating, and lines of credit in place of reinsurance. Duerfeldt is candid that some models segment risk, keeping healthier employees in the pool while relying on the Affordable Care Act (ACA) to absorb others, and that ACA subsidy reductions this year make the employee census a question at renewal. Spouses who lose coverage may land on the employer plan, and employees who previously opted out may return, reshaping the risk profile. He sees the parallel with fintechs and neobanks as exact: competitors playing by different rules forced the incumbents to improve. “If you’re still offering traditional health insurance and your competition is offering something more creative with a better impact, you could be losing customers and employees.” His advice holds even against professional resistance. “Even if your broker dismisses them, even if your broker says no, you need your independent research.”
Follow Treacy Duerfeldt on LinkedIn for more insights on employee benefits strategy, risk financing, and alternatives to traditional health insurance.
