Negotiating Lower Group Health Plans

Do you understand how your organizanewaltion’s health plan re is calculated? Employers are often confused and left with no explanation when final health plan reenewal rates are 5 perc n tto7percentlower than the initial propos sed renewal.

Frequently, the dif fference between the initial renewal propossal and the final rates can be attributed to competitive threats. The insurer anticipatees that the broker may threaten to market the account to other carriers if the renewal rates are too high. This broker str a tegy is fund a mentally fla wed, as the starting point of negotiations are artificially inflated, resulting in discounts that leave a significant amount of excess profit for the insurer in the rates.

A thorough review of a renewal often exposes these areas of concern in renewal pricing, such as when the insurer uses overly conserv a tive medical trends, inconsistent credibility weighting, and inflated claims rese r ves to generate additional revenue. Additionally, some insurers also inflate their administrative fees by using an inconspicuous mix of Per Member Per Montth (PMPM) fees and Per Employee Per Montth (PEPM) fees. This can result in fees that are too high if the wrong exposure base is used. These inflations are often unbeknownst to the employer, a nd serve as hidden revenue streams for the insurer that can easily add thousands of dollars to the renewal if left unchecked during the renewal process.

To protect employees and the bottom line of employers, comp a nies must work with a broker with access to an in-depth underst a nding of the various financing and plan design tactics insurers utilize to generate profit. This understanding can only come by having a supporting team of underwriters, actuaries, and analysts sitting on their side of the table to advocate on their behalf

Thesse team members work collaboraw tively with benefits consultants to review a nd negotiate health plan renewals. The team starts by first utilizing claims data and underirwriting principles to model what a fa re-n newal should be for a client so then it ca be compared to the renewal proposed by th he in-ween surer and identifying the differences bet them. This information is used to begin neleadsgotiations with the carrrier, which often to an additional 3 percent to 6 percen nt ree duction in renewal premium for the em-h ployer. This reduction, combined with the rate decreases of 5 percent to 7 perceent as a result of competitive threats, can lead to final renewals being 8 percent to 13 pe r -cent lower than the initial proposals.

To help employers understand wh hat is impact ting their renewal increases, ta alk to your advisor about some of the following key components of a renewal workup p:

• Cla aims forecast

• Hid dden profits

• Fee es

• Manual rating credibility

• Pooling and large claims

This deep-dive a nalysis demonstr a te es the areas of inflation within the renewal that provide critical opportunities for neg gotia-tion wi ith insurers.

Cynthia Borkoski is a Licensed Emnsu ployee Benefits Consultant with USI I r- ance Services. She holds a Bacheelor’s Degree in International Business and earned her Master’s in Sales Managemment. Prior to joining USI C ynthia has been con-yea sulting businesses for the last 12 y rs helping business owners and execu utives with sttrategies to mitigate risk, increase employee engagement and manage heealthconancare beenefits. For more information, tact yoour insurance broker or she ca be eacheed at 786-785-1173 or by ema ail at r

ynthiaa.bor k oski@usi.com. c