When selling a house, most of us don’t invite buyers over with dirty laundry on the floor and a sink full of dirty dishes. We know that “showing” a house when it’s at its “worst,” can make it more difficult to sell and probably cost us money in the long run. However, when under pressure – relocating for a new job or too busy with the other million things we have going on – being satisfied with a little less probably feels okay.
The same holds true when organizations negotiate their medical benefit renewals. While insurance carriers are attracted to healthy, low-risk employers, employers tend to wait for a significant increase before they test the market. In other words, they wait until they are “at their worst.”
As a result:
- There’s a rush to find a better deal instead
of better benefits
- Traditional markets may not have interest
and decline to quote
- The employer may no longer qualify for
- Lessening benefits or shifting more cost to
the employees becomes the only option
In this reactive state, employers are pressured into making poor decisions for the business and its employees. Shifting the cost burden to employees can cause employees to consider job changes and make recruiting and retaining a good workforce more difficult. Reactive is not good for any business in any situation, and yet, many miss the opportunity to enhance their medical benefits programs when times are good.
Rewards for Good Performance
At Oswald, we certainly come across organizations satisfied with single digit increases. These businesses typically have a healthier than average workforce and good claims history and, as a result, they tend to get favorable rates. However, many are content with those kind of results and move on to more pressing matters rather than take advantage of the situation.
Generally-speaking, employers experiencing single-digit or flat increases probably have a decent loss ratio and are considered desirable by their insurance carriers. What’s attractive to the incumbent is also attractive to other carriers ready to compete for the business. Interested carriers can even “sweeten the deal” with lower rates, discounts for bundling coverages and other added-value that can benefit your company and your employees with minimal disruption.
Lower loss ratios can also translate into access to preferred risk pools. “Pooling” low-risk companies – companies actively engaged in health and disease management or those with a healthy employee population – inherently drives better outcomes.
These arrangements can drive down the total cost of healthcare by rewarding good performance through incentives, premium discounts, renewal credits and even complimentary fitness center memberships. It should be no surprise that these programs regularly outperform traditional health plans.
Make Changes When Large Claims Hit
Unfortunately, bad things happen to good people. Rather than react once a big claim hits, there are some things you can do to minimize the risk of higher healthcare costs.
First, keep your options open. With time on your side, maintain relationships with carriers so they are familiar with your group for when you need them the most. Sell them on your company’s overall risk reduction strategy, health management initiatives, company culture, etc. – anything that shows that you are an employer of choice and that you are a good risk for them now and in the future.
Remember, carriers are in the business of buying your risk. The more they know about your efforts to improve risk, the better the results will be.
Second, health risks drive costs, plain and simple. However, overuse and misuse of healthcare services and poor healthcare consumerism compound the escalating cost problem. Therefore, educate your employees on how to find the same service at a lower cost, provide them the proper tools and don’t be afraid to make employees accountable for the choices they make. In the end, eliminating unnecessary ER visits or utilizing telemedicine instead of urgent care centers will save money for them and for your organization.
Furthermore, encourage employees to establish relationships with primary care physicians. Without those relationships, people tend to run to the ER, self-treat or not treat at all. When they have primary care physicians, you’ll find that some employees discover health conditions they didn’t know they had. For example, high blood pressure can be devastating to one’s health if left undiscovered and unchecked. Earlier detection can lead to better management of the condition and result in happier, healthier, more productive lives and lower doctor bills.
Lastly, transferring less risk to an insurance company is another way organizations can reduce healthcare spend. Therefore, consider simple things like adding a health reimbursement account, offering direct primary care or even looking at less-risky self-funded models like a group captive. In essence, you can lower the cost of insurance by buying less of it.
Act When You Look Your Best
Remember, approach your next medical renewal like you are selling a house. If your “house” is not in the best-selling condition, then work with an advisor who can help you “clean it up.” We like to say that hope is not a strategy and if you find yourself hoping for a decent renewal, then there are probably things you could do to improve your position. Even if you are used to a 5%-10% increase year after year, how sustainable is a trend like that 5 or 10 years from now?
Having a good understanding of your risk profile, giving yourself enough time and partnering with a proven advisor can put you in the best position for financial success and help you build a healthy, productive and more “attractive” workforce.
If your rates are good, great! If not, there are still steps you can take. Either way, your business is our business. For more information on ways our Oswald team of benefit specialists can help, contact:
Note: This communication is for informational purposes only. Although every reasonable effort is made to present current and accurate information, Oswald makes no guarantees of any kind and cannot be held liable for any outdated or incorrect information. View our communications policy.