We recently came across an employer who had a group health insurance renewal on July 1st. The group had a level funded type of a program with an insurance company (I won’t tell you the name of the carrier but it was a BUCA company). The group had been on this arrangement with this insurance company for several years and had reasonable claims experience over that time. Then, just before June the insurance company notified the employer that they were not going to renew the health plan!
Obviously, this set the employer on their heels not knowing what to do. Clearly, they could go out to market for an alternative plan but if that failed, they didn’t even have a plan that they could fall back onto with the incumbent insurance company even if it were at a dramatically increased price. The insurance company didn’t even provide an explanation as to why they were not renewing – it just came out of the blue. If an insurance company is taking a big financial hit because of adverse claims experience then the result is usually a significant rate increase. I can’t say that I’ve never seen this before, but not in recent years and especially with a level funded plan.
What we ultimately found out was that there were a several members in this group that were on specialty drugs – very expensive specialty drugs – drugs that were between $50,000 and $170,000 per person per year. When you add up the costs of all these drugs plus the members respective medical expenses it caused the insurance company to not renew. We talk to employers every day and we are seeing a dramatic spike in specialty drug utilization. In a lot cases, while we don’t see a non-renewal, we do see a dramatic increase in premiums or the claims liability.
In this particular case we were able to bring a partially self-funded program to the table for the employer to consider, at a considerably lower cost than even the pre renewal numbers. We were able to do this because we could carve out the specialty drugs and place them exclusively with a specialty drug company that could provide these drugs to the members at little or no cost, as well as to the plan. Therefore, we essentially eliminated significant claim dollars from the plan altogether which is why we could offer a less expensive plan with better benefits.
I’ve said it before in other articles that there are three driving forces that are trending right now and causing significant rate increases at renewal. One is specialty drugs – very expensive and more members being prescribed these drugs by their doctors. The other two forces that are driving cost increases are caused from the pandemic – the resumption of postponed services during COVID-19 and at the same time, increased prices from medical providers – whether that be a physician or a facility. When you have increased utilization and cost increases at the same time, that’s a bad recipe for an attractive health insurance renewal. Add to that, with the resumption of postponed services, the fact that without those services during the pandemic for those who had chronic conditions, it has put them at higher risk because their condition has deteriorated.
My advice and recommendation to employers is to get out in front of their renewal very early in the process – don’t necessarily wait until the same time you’ve evaluated this in the past. I would recommend that you seek as many alternative proposals as you possibly can so that you have options to consider, and plenty of time to exercise those if you need to. If specialty drugs are one of the reasons that your costs are going up, reach out to me and I can help you eliminate that cost and risk – and provide those drugs to members with little or no out of pocket costs.
