Most of us cringe at the sight of a stack of forms to complete.
We assume they are filled with legalese that are a waste of time.
But if you knew that completing a questionnaire would save you money and give you a better product as a consumer – then you would get the job done.
It’s the same way with health insurance.
As an employer providing health insurance for your employees, you know that insurance carriers need information regarding your workforce to provide an accurate quote.
But what information do you need to provide?
One insurance broker might ask your employees to complete a health questionnaire.
While another broker may ask only for a census.
What’s the difference? Does it matter?
The answer — it’s all about gathering the right data.
When it comes to health insurance, gathering the right data can make a big difference in the type of policy – and the overall cost.
Why Employee Health Information is Needed
Following the passage of ACA/Obamacare, new approaches to the way small and medium sized companies purchased healthcare evolved.
“Shopping the market” every year to find the health insurance carrier offering the lowest rate is no longer the norm. All brokers get the same numbers.
Calculating health insurance premiums and renewals is a simple formula. Premiums are determined by the anticipated claims of your group. With level funded plans, the carrier’s goal is to project the amount of money needed to pay claims. Therefore, it is important to provide solid information about your employees to the insurance carrier.
Level funded policies provide monthly claims data at the group level. You know throughout the year what you are paying in claims vs. what is in your claims fund. The claims data will assist you at the time of renewal because you know what to expect in advance and can plan accordingly.
Census vs. Health Questionnaire
There are two primary ways to submit employee information to insurance companies – a census or health questionnaire.
A census will include basic information such as:
- Number of fulltime employees
- Employee name
- Number of dependents
- Zip code
Based on the census information, the insurance carrier then looks at the prescription drugs through a global database that records pharmacy and prescription purchases.
When using a census, the rates are determined by the insurance company using a formula connected to the prescription drugs used by that group. Remember, they are anticipating expected claims to build the cost of the premium.
Does this approach give a complete picture? Not always.
For instance, the pharmaceutical software does not register injectable drug treatments, which are often expensive specialty drugs. This poses a risk for a higher renewal the following year if once this treatment begins to show up in the claims of the group.
Also, the system has limitations in diagnosing if a medical condition is still ongoing or if it has been resolved.
A health questionnaire, on the other hand, offers a more complete picture of the health status of employees. Medical underwriters will evaluate the information and price accordingly.
A questionnaire will ask an employee to provide:
- Medical history for the last 10 years
- Any recent doctor visits
- Any recent ER / hospital stays / surgeries
You can see that this gives a broader perspective while also providing important details that could be costly if certain conditions were overlooked.
For example, we were asked to help a company with 66 employees where the premium jumped from $303,000 this year to a renewal of $489,000, with the same number of employees.
The increase was due to medical conditions from the previous year, but they did not know about the conditions because their insurance broker did not request health questionnaires.
There are cases when a medical condition may prevent the ability to change carriers. This company is now experiencing trouble finding an affordable option. Insurance companies such as Anthem/Blue Cross, Trustmark, CIGNA, and Allstate all declined to give them a quote. United Healthcare offered a quote for a fully insured product which is more than the renewal. Aetna is the ONLY carrier that will consider the group, but their cost is still $130,000 higher than their current year rate.
In 2021 the group was with Anthem/Blue Cross and received a large increase. In retrospect, the group would have been better to absorb the Anthem/Blue Cross increase and used this past year to educate employees and provide support to employees with large ongoing medical conditions.
The Benefits of a Health Questionnaire
Some insurance brokers only require a census.
It is a lot of work for both the broker and the employer to ask employees to complete a health questionnaire.
What is the benefit of this arduous task?
It’s all about creating long-term premium sustainability.
The more information that employers can gather on the front-end – the more likely premiums will remain consistent with fewer surprises at renewal.
In fact, there is also a benefit to insurance companies. One insurance carrier will reduce a premium quote by as much as 15% if they receive health information vs. using the prescription drug formula. Why? Because they have more detailed information to calculate the risk.
Medical underwriting can provide information at the group level that a good broker can use to help educate employees in obtaining the best care at the best price, such as:
- An expensive medication that could be obtained less expensive on the international market.
- A critical medical condition that needs the help of a case manager.
- An upcoming surgery that could be outpatient instead of the more expensive hospital stay.
- Employees may need guidance to use Urgent Care instead of the more expensive ER for non-emergency issues.
All of these are proactive actions that can help improve your employees’ quality of life and save money for the employee and the company.
What about Privacy Concerns?
This process is almost always done electronically in today’s world.
The information is collected via a secure and confidential electronic platform, and personal medical information is never shared or disclosed to the employer. For security, the information is encrypted and used strictly for underwriting purposes for the insurance company.
Based on HIPPA, the insurance company cannot give health information away, sell it, or share it. Personal health information is never disclosed to anyone other than the insurance carrier that will be providing a proposal for the group coverage.
Why it Matters
In my firm, we recommend that our clients use the health questionnaire.
Recently we made an exception with a company that did not want to complete health questionnaires. Instead, we submitted the census and used the prescription drug history.
Two months into the policy, the claims history has indicated a member with a by-weekly infusion. Infusions do not show up on the prescription drug underwriting. The cost of this infusion is $1.2 million annually.
If we had known this information ahead of time, we would have looked for alternatives. Perhaps the infusions can be covered under a government program; Or maybe the manufacturer has an alternative.
The next renewal for this group will be unaffordable. The company has more than 50 employees, and the law requires them to offer their employees affordable healthcare.
When it comes to health insurance, having the right information on the front end can make a big difference in sustainability.