Health Insurance Renewal: Are You Chasing the Premium?

As an employer, what if you are making a common mistake when trying to lower healthcare costs?

On the surface, it looks like saving money.

I observe a common phenomenon I call ‘chasing the premium.’

Each year a company might face an increase in premiums.

To counteract this, executives seek a more affordable premium, often switching health insurance carriers, or increasing the deductible, copays, and maximum out-of-pocket – all in the name of lowering the premium.

While successful in the short term, this creates a vicious cycle.

The Hidden Cost of Chasing Premiums

One group I worked with kept chasing premium reductions until no more premium was left to chase – experiencing a staggering 49.9% increase!

Moreover, the company compromised the quality of benefits to a point where the financial burden on employees became overwhelming with less return value.

For instance, some of their employees were on a $2,500 deductible plan which might seem reasonable, but once paid, the employee is responsible for an additional 20% until reaching $7,500 in a calendar year.

Many employees cannot afford this on top of their healthcare premiums.

How can employers regain control when costs are already so high?

You may have to develop a strategic approach to work your way into a plan that creates more sustainability for the long term.

Ask this Question: What is Driving Up My Rates?

Don’t wait until renewal to understand your premium rates.

Get more information from your broker on the formula used to calculate your health insurance premium.

Part of the formula involves administrative costs and catastrophic insurance which are relatively fixed expenses.

However, the claims fund provides the best opportunity for you to control costs. Identifying the factors influencing the claims fund cost is crucial for effective cost management.

Evaluate the Cost to the Employee

Another consideration is to examine the cost for employees when they seek care.

One plan might offer a $15 or $25 primary care copay, yet specialist visits can cost $100 or $125. This might potentially deter employees from seeking timely care.

Employees must address health concerns early to prevent these conditions from escalating into major medical issues that cost more, and seriously affect your claims fund. Encourage employees to seek care early and often.

Do not price them out of seeking care and make it as affordable and assessable as possible.

Look for Medication Alternatives

There is a potential for 20% premium savings when we manage medication expenses.

This doesn’t mean forcing employees to change their medications but rather exploring cost-effective alternatives. For example, we do not want to pay $10,000 a month for Humira, $600 for Eliquis, or $7,500 a month for Embrel if there is a less expensive source for these medications.

There are ways to implement transparent prescription drug plans that can significantly reduce medication costs and positively affect the claims fund.

Cost Savings for Everyone

These cost-saving techniques are not exclusive to large corporations. Companies with as few as five employees can implement programs toward manageable and quality healthcare.

Don’t fall into the trap of ‘chasing the premium.’ Develop a strategic approach that is more sustainable for the long term.