Are you doing the same old things in an attempt to lower your increases?
As long as I can remember in this business (and I’ve been around a long time), the limited options to explore for an employer when they receive an increase at renewal seems to take the same old paths. We’ve all been conditioned for the past few decades to research and explore traditional alternatives to the increases that are received each and every year from insurance companies. We’d like to think that the strategies we’ve implemented are believed to be better alternatives but in reality, they’re the same approaches revisited each year.
When an employer receives a less than desirable rate increase, the first thing they ask the broker to do is to try to negotiate the increase downward. A very logical request, but if the renewal is actually calculated with the narrowest of margins initially, it should be precise to begin with. Certainly the broker would like to look like a hero by knocking it down a bit, but the question would be why did the insurance company present the higher renewal only to reduce it? To make themselves look more accommodating and easy to work with?
The next alternative would be to look at different plan designs for employees. This would mean increased deductibles, co-pays, out-of-pocket exposures, etc. to cost shift to employees what would otherwise be the rate increased to the employer. This doesn’t reduce what would be the original renewal increase, except to shift the increase from the employer to their employees. It’s really not changing the top line. Obviously, this meets with employee dissatisfaction and loss of goodwill. Cost shifting can also take the form of increased employee contributions from their paychecks. Once again, the cost shifting phenomenon simply removes it from the employer’s pocket and shifts more to the employees.
When all else fails, another alternative on the hamster wheel is for the broker to go shop for alternatives from another insurance company. While this is a reasonable thing to do from time to time, if an employer and their employees are satisfied with the level of service they’re receiving from the incumbent insurance company, then the only reason to shop would be to find a lower price. Depending on the funding mechanism of your plan, i.e. fully insured or partially self-funded, the market does need to be checked, but one would have to ask if someone comes in with a significantly lower premium or price, are they buying the business? Insurance companies are notorious for buying the business in the first year only to dramatically increase the rate in subsequent years.
Another exercise that is deployed is whether better discounts can be achieved from a different insurance company or network? I’ve heard all too often that a particular insurance company has the best discounts in town, and therefore can have lower premiums. Too many games can be played when repricing claims. At the end of the day, most medical providers are offering roughly the same discounts to all the insurance companies and PPO networks. I understand volume can generate deeper discounts but a few percentage points isn’t going to make a substantial difference in your overall claim costs.
The same game can be played with the prescription drug costs. This game is usually associated with changing formularies from name-brand drugs to generics, administrative and dispensing fees, and or projected rebates. Rebates can be a game-changer, but must be reviewed as guarantees versus simple projections.
So the hamster wheel keeps on going round and round as we been conditioned to do: cost shift to employees, change insurance companies, networks, or PBM’s. Employers continue to look at the same thing each and every year to solve the increase, or they bite the bullet and accept the increase.
Do you want to get off the hamster wheel? Then you need to find and implement strategies that will permanently lower your healthcare costs and provide higher levels of employee satisfaction. Do you want to reduce employee costs and your bottom line? Then you need to explore new and different strategies that get to the crux of your cost and bring real results – not temporary ones.
If you want to learn more, let’s talk.
Sometimes you don’t know what you don’t know.
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