As January approaches, approximately 70% of employers who offer health benefits to their employees are getting ready to begin their renewal process. Most organizations feel like they have very little control or insight into why premiums continue to rise which makes budgeting for health benefits very difficult. Experts agree that heading into 2019, the medical cost trend should remain stable around 6%*, however many employers continue to see double-digit premium increases from their insurance carriers. With the right strategy in place, you can keep costs down for your organization and your employees without slashing your benefits program.
1) Know your options and negotiate
Many employers going through their renewal process are faced with the imminent question “to bid or not to bid”. Insurance carriers will often offer a reduction to their renewal if an employer is willing to forgo a market review. But how do you know if you are getting the best deal? If you have access to your claims data and work with a sophisticated insurance broker, there should never be a surprise at renewal time. However, many employers don’t have access to their data or work with a broker who relies on the insurance carrier to do the underwriting for them. Insurance carriers will typically provide very rational reasons for requesting premium hikes such as “you had a large claim” or “your population is getting older” however a good broker should be able to point out considerations the insurance company should take to lower your premiums. In addition, they should be well versed in market trends to ensure you are getting the best pricing, terms, and conditions based on your employee demographics. Plus, they should try to lock those terms in under a multi-year rate guarantee.
2) Consider a refunding contract
Over the past four years, we’ve seen a major shift in how employers can buy health insurance in our region. Historically, many employers bought health insurance from their insurance carrier by paying a fixed monthly premium based on enrollment with little or no access to their claims data. When the renewal was released, it was a mad scramble to look for more cost-effective solutions while negotiating with the incumbent carrier. Now, employers with 25 or more employees can purchase health insurance on a refunding contract that is still paid with a fixed monthly premium. However, these contracts provide insight into how your plan is running while providing the employer the opportunity to get money back at the end of the plan year. As you consider refunding contracts, make sure you are working with a broker who clearly understands the benefits and pitfalls of each carrier contract.
3) Look at high performing health networks
Health insurance carriers from across the nation are developing “high performing networks” also known as “narrow networks” to help steer their members to high-value healthcare providers. Typically, hospitals and providers who participate in these high performing networks have a financial incentive that is tied to the health outcome of their patients. In the Pacific Northwest, we’ve seen insurance carriers provide a 10% premium differential between their broad network and their high-performing network which has caused greater adoption throughout our region. However, there are a few things you need to consider prior to implementing a high performing network. Saving money is great, but you need to clearly understand what if any impact a narrow network would have on your employee population and implement strategies to lessen that impact.
Not all brokers are created equally. If your broker simply delivers your renewal 45 days in advance of its end date and isn’t actively providing innovative solutions to manage your health insurance cost, you should ask yourself are they just a nice person or are they a forward thinking thought leader who aggressively manages my health insurance program? If it’s the former, they could be costing your organization a lot of money.
If you need help with exploring all your options for dealing with renewal increases, please contact The Partners Group:
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*6 factors behind PwC’s 2019’s medical cost trend of 6%, HealthExec.com, June 2018.