Small Business Adviser: Insurance Renewal Is a Time for Realistic Reassessment

The implications of runaway health-care costs, and a starting guide for how to beat them.

It is time to shine some light on the medical benefits renewal process. More specifically, the runaway train of health-care cost trends. While renewal trend varies by each health insurance carrier; generally speaking, the healthcare trend that is built into most renewals is around 13.5 percent. Knowing this, the following implications are true: 

1) If your health plan performs exactly as expected by the insurance company, it is likely your organization will receive a renewal that is around +13.5 percent.

2) If your health plan performs as expected year-after-year, your healthcare costs will more than double in six years (+114 percent in year seven).  

3) If your organization is consistently receiving renewals that are below 13.5%, this is likely to the benefit (profit) of the insurance company, and you may want to consider partially self-funding after a more in-depth discussion with your Benefits Consultant.

4) If your organization is consistently receiving renewals that are above 13.5%, this is likely to the detriment (loss) of the of the insurance company and you likely do not want to consider partially self-funding at this time.

This is admittedly an oversimplification. However, this can be used as directional guidance when evaluating your organization’s yearly healthcare renewal. We would strongly contend that a baseline trend renewal, that implies healthcare costs should double every seven years, is not acceptable or sustainable.

We would implore business leaders to challenge the status quo; to manage healthcare costs with the same level of care and vigor as they would any other essential part of their business. With this focus, we can shift course and buck the trend, to the benefit of both the boardroom and the breakroom.

Here is the outline of a framework for basic self-evaluation:

• What is the framework of my benefits program?

More specifically, who is the:

• • Plan Administrator/TPA
  • Network Provider
  • Pharmacy Benefits Manager
  • Insurance/Stop-Loss (if self-funded)

• Do each of these partners allow me to optimize my health-care program in ways that align with my organization’s goals and objectives? Key considerations might be:

Basics:

• • Support for HR staff and health-plan members
  • Access to physicians, hospitals, and pharmacies
  • Medical and pharmacy discounts/acquisition cost
  • Transparency
  • Clinical review of treatment plans

More Advanced Measures:

• • Network solutions to promote best-in-class health-care providers
  • Rx specialty pharmacy programs
  • Pharmacy rebate sharing arrangements
  • Ability to integrate with initiative and emerging solutions
  • Integration with advanced data mining and analytics platforms
  • Are the medical plans offered designed with a specific audience in mind?

Other key questions you should consider:

• How do these medical plans best serve my unique population?
• Are the medical plans designed to promote the desired utilization (i.e., generics drugs vs. brand drugs)?
• When building my benefits budget, and setting my employer contributions, do I have a clear methodology that is in alignment with my organization’s values and culture?
• How is my organization supporting employees to navigate the complex health-care system?

Understanding and knowing the above is the first step in building a strong and sustainable foundation to a long-term benefits and health-care strategy. From here, we must continue to challenge ourselves to sharpen the saw, innovate, and be the change that is need in the employee benefits and health-care industries.