Is it your 5 year plan to change every 12 months?
Status quo has been that an employer (50 – 250) decides which plan is best when the renewal is delivered. Brokers shop, employers reduce benefits and shift additional premium cost to employees. There is no long term strategy as everyone is at the mercy of the insurance carrier.
If the group had a low claims the renewal is moderate (rates still goes up not down). If the group had high claims the renewal is high and panic begins. Even when a good year follows a bad, the renewal for the next year is still added on top of the previous year’s high renewal, thus compounding the cost year over year.
To make the process even more frustrating insurance carriers deliver renewals with little or no supporting claim data – decision makers have no way to quantify how their specific population is doing. Employers and employees are frustrated. Sound familiar?
Isn’t time for a multi-year strategy with long term cost control?
Self-funding is not new. Employers have been able to self-fund for more than 30 years. It’s estimated that 57% of all health plans in the U.S. are self-funded, covering more than 100 million Americans. That’s up from 44% in 1999, an increase of nearly 30% in 10 years. Why?
Self-funding with stop loss insurance works
· Claims-related cost savings
· Customized plan design flexibility
· Improved cash flow
· Reduced premium/ACA taxes & fees
· Elimination of state mandated benefits
· Ability to contract with providers & provider networks
· Ability to save using Reference-Based pricing
· Access to better data
· Data analytics/predictive modeling
· Cost stability – no surprise renewals
· Remove carrier profit margins and risk charges
· Value-based wellness programs
· Population health tools to reduce cost trend curve
Consider a group benefit captive
(a captive is a closely held insurance company established to insure the risks of its parent company and affiliated groups)
An employee benefit group captive provides a mechanism that allows a small to medium size employer to transition from fully-insured to self-funded with lower risk and volatility.
· Risk shock absorber
· Underwriting profit
· Investment income
· Reinsurance leverage
· Engagement with other “like” minded decision makers
· Group buying power with vendors
· Actuarial support
Why work with Katz/Pierz?
There are many advantages to self-funding, but are you a candidate? First and foremost, you need to have some level or risk tolerance. Even with stop-loss protection the employer is still responsible for a layer of claims under the individual stop-loss deductible. Predicting an employer’s liability is much more credible if the group has a steady employee population and stable claims experience. Since self-funding gives an employer greater plan design flexibility and greater control over healthcare spending it requires that the employer-group is willing to get involved.