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Frequently Asked Questions
January 18, 2008
Q. We have tried the traditional strategies to contain healthcare costs, such as reduced plan design, changing carriers and cost shifting to employees. Are there any other methods that we can utilize?
A. Yes, there are programs now available that are effectively utilized by large corporations. We have been successful in bringing a variety of these solutions to mid-size companies. They are particularly valuable to companies with 150 or more employees.
Q. We had a low, single-digit increase this year. Is there anything we can do to sustain this increase going forward?
A. When companies receive favorable increases, they don't always understand all of the factors that have caused this to happen. In fact, it is possible for single-digit increases to turn into double-digit increases the following year. Claims data is typically utilized to determine rates. However, this data pertains to historical information. There are more effective ways to predict future costs.
Q. Are there ways to help the company without hurting employees? Many of the solutions proposed to us to contain costs and help the company seem to negatively affect employees. Are there alternative methods we can explore that do both?
A. Yes, this is absolutely possible. We have worked with companies to deliver a reasonable increase year-in and year-out while ensuring employee satisfaction.
Q. We were able to obtain a 3% increase last year. Why do we have to do anything?
A. It is not advisable to do nothing and hope that next year's increase will be reasonable. Very few companies are fortunate enough to receive this type of increase year after year. We have employed proactive strategies for our clients, enabling them to sustain favorable increases into the future. Our clients expect modest increases based on utilizing our strategies to reduce costs while improving the health and satisfaction of their employees.
Q. Do I have to wait until renewal time to implement cost savings techniques?
A. No, you can initiate certain practices immediately that are not dependent upon plan renewal.
Q. What does it mean when a company is experience rated?
A. Carriers will provide claim experience when there is a minimum of 150 employees on a plan. The rate is calculated using a percentage of the group's most recent experience. The remaining factors determining rate are demographics of the group as well as the carrier's manual rate.
Q. What does the term "credible" mean with respect to claims experience?
A. "Credible" is a term used to establish how much credit should be given to a group's actual claims experience. The fewer number of employees in a group, the lower the credible factor that will be applied. The longer an employer is with a carrier, the more credible the claims experience becomes.
Q. What are the benefits and drawbacks of changing carriers frequently?
A. One benefit is that you might be able to secure a lower price for the first year with a new carrier. In any given year, one or more of the major carriers (Aetna, CIGNA, UnitedHealthcare or Blue Cross) is looking to grow membership, and discounted pricing is one strategy.
There are, however, several drawbacks to this idea:
- There are only 4 major carriers offering health insurance. Once you've exhausted these markets, your choices are limited to regional players or self-insuring with a TPA.
- Moving frequently is disruptive to your staff and takes time and resources to implement.
- You lose the ability to actually build a strong working relationship with a carrier who is knowledgeable about your company and its needs.
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