The Health & Benefits Tea: Stay Ahead of The "Trend"

So, here’s the tea: It's time to save $$$. To those of you who fully-insure their medical insurance, this is for you. I'm about to spill the "tea" about how to negotiate fully insured renewals. You might be thinking, "Well, my broker already negotiates our renewal." But here's the truth: traditional broker renewal rate negotiations often start with inflated renewal projections. Carrier reporting and rate development usually lean toward higher fully-insured renewals. This often leads to great broker war stories that sound like "We got a +25% renewal last year but our broker got it down to 18%". That's great but ironically, it's not about where you finish, it's about where you start. Many brokers rely on relationships and checking carrier calculations for negotiations. However, my team takes a different approach. We focus on identifying the optimal starting point for negotiations. We look at underwriting techniques such as excessive reserving for ongoing claims, inflated trend and margin, uncompetitive administrative charges, hidden profits in prescription drugs, and shared savings programs that all contribute to inflating a renewal projection beyond reason. Over the next 5 days, we'll delve into the five key areas of hidden costs in your fully-insured renewal and how to negotiate accordingly.

Let's "sip" on the five areas:

1. Claims Trend
2. Admin Fees
3. Large Claims
4. Pooling Charges
5. Hidden Profits

Negotiating your renewal effectively is "hot tea" because employers and their brokers can't go to the market every year. The burning question for employers is: How can we negotiate "Claims Trend"

The medical claims trend is the projected increase in the cost to treat patients from one year to the next, assuming benefits remain the same. Insurance carriers use these projections to calculate health plan premiums for the coming year. For example, a plan that costs $10,000 per employee in year 1 will cost $11,000 in year 2, and $12,000 in year 3, assuming a 10% trend annually. Historically, insurance companies have over-projected the cost of medical and prescription drug services. This is done to minimize the chances of adverse claims risk. Over the past decade, carrier forecasted trend vs. actual reported trend has been inflated by an average of 30%. Imagine the incremental impact that would have to your organization’s bottom line over a 10-year span (Yikes!).

So as an employer, how can you negotiate claims trends? Keep calm and put the kettle on!

Underwriters at USI analyze the impact of lowering the trend assumption on the overall renewal. For instance, if the carrier is assuming a 10% trend, the USI team might negotiate for a lower percentage, such as 7% or 8%. By scrutinizing insurer trend factors and the duration of the trend, they can uncover a 2% - 3% difference, which can lead to more accurate projections and lower the risk associated with a plan.

For employers with fully insured medical plans, claims trend is just one of the five areas that USI's underwriters consider when negotiating with insurers. This negotiation process often results in an additional 3% to 6% reduction in renewal premiums. When combined with further negotiated rate decreases of 5% to 7%, USI's analysis could potentially lead to final renewals being reduced by 8% to 13% from the initially proposed amount.

Don't settle for high renewals. If you're interested in a free, custom analysis, please click here to set up some time or reach out using the information below and let me show you how we can support your organization!

Zachary Leibovitch ? Vice President ?| Employee Benefits

w: 212.842.3460 | c: 561.215.5320

[email protected] | www.usi.com |

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