How to Handle “Minimal to No Increase” Insurance Renewals

Lewer Benefits Group | 9-20-2017

It’s second nature to automatically “check the box” since you didn’t get hammered by your major-medical renewal, but savvy HR managers see it as the best time to shop options on the open market.

It’s that time of year when Human Resource managers await the mail with anxiety. “Will my company’s major medical carrier (insert Aetna, Blue Cross, UnitedHealth, Humana here) increase their rates?” The mail finally arrives. Your letter opener slowly rips the envelope. You peek inside with one eye open, your face wrinkled like you just passed an open dumpster. “It’s a minimal increase!!!” You dab your forehead, sigh heavily and smile. Crisis averted. “Where’s my pen to check the box to renew?” 

Wait a minute? You may be costing your company money. That “minimal or no increase” may actually be a 15% reduction with better benefits on the open market. 

Before you simply accept the renewal and move down your to-do list, consider this:

  1. The worst time to shop and evaluate your health insurance options is when
    your group is taking large rate increases and the risk profile of your
    company is poor.
  2. The best time to shop and evaluate your health insurance options is
    when your group is taking small or no increases, because your company’s 
    risk profile is good to excellent.

Best Time to Shop for Business Health Insurance

That’s right. The worst time to shop is when you feel the pain of the rate increase.  It may seem counterintuitive, but if your rates didn’t increase, you are a more attractive company to insurance providers and they will compete harder for your business.  

It comes down to one word: MONEY. 

For most companies, next to your actual payroll, your health insurance plans are the second most expensive cost item on your ledger. Per a recent National Associates for Convenience and Fuel Retailing, your medical plan should NOT represent more than 9% of your total payroll costs. If you are spending more on your payroll than your target as a percentage of your total overhead, (with many retailers that should be about 40% of your total overhead) then look no further than your major-medical health insurance plan. It is the largest and most obvious target on your ledger sheet.

Reactive vs. Proactive Insurance Plan Shopping

Have you gone to a small business convention and, after speaking to other HR leaders, wondered, “Gee whiz, why is Jim at Company XYZ spending so much less on his health insurance than we are, even though we are very similar in size and employee type?” Answer:  Your company’s risk profile. 

If you think of your annual health plan more like a “credit score” in the marketplace, the risk profile of your company is what determines how much money your company must pay. This is analogous to one’s personal credit score determining how much interest is paid for the use of that credit. 

Regardless of the fact that major-medical plans make up a significant cost to a company, health insurance renewals are rarely factored into the overall company financial objectives. That “no increase” renewal might be a 15% cost decrease with better benefits on the open market. 

Unfortunately, companies tend to be “reactive” when they get a poor renewal. When shopping for a cheaper alternative, they usually end up shifting more costs to employees while still paying a huge increase. This, of course, is due to a poor “risk profile.” When companies find themselves in this situation, they spend an inordinate amount of time and company energy to find out how limited their options are.

Be Proactive:

  1. At least every other year, find out what is available on the open market
    (every year if you are experiencing a low renewal).
  2. Shop competitively, and bring in other broker/consultants to look at
    different ideas and approaches.
  3. Don’t settle for what’s familiar. There may be more options available than
    you realize. Stretch and see what new and innovative products are being
    introduced even with small insurers like Lewer Benefits Group. Too often
    companies look at just one other plan and call it “shopping.” Look at four
    or five insurers and get quotes for the best “apple-to-apple” comparison.
  4. If you have a good renewal, because you have a good company risk
    profile, look at implementing plans to help preserve the integrity of
    that risk profile.
    Don’t just throw your plan over the wall, and hope for
    good luck. Do things that will help you preserve the integrity of your plan.

Bottom line: When things are going WELL for your health insurance plan, that’s the moment you need to take time to become aware of ALL your insurance options. Next time when you peek inside the envelope from your insurance provider, be proactive with good news and shop your company’s low risk profile. It could save your company (and employees) a sustainable amount of money.

Need help deciding what insurance policy is best for you and your employees? Contact John Owens, Vice President of Lewer Benefits Group, for a personalized consultation! Reach him at  1+(800) 821-7715, ext. 109 or by email at jmowens@lewer.com.

 

Author: Lewer Benefits Group