HCW Benefits Blog

Contributor:
Skip Woody, Partner
Hill, Chesson & Woody

Understanding the various components of a health insurance renewal can be a bit overwhelming. Understanding when your organization is paying too much (or too little) for its medical insurance, how paying too much or too little can affect your insurance carrier relationship and recognizing when the time is right to change insurance companies are just a few of the considerations at hand. Similarly, understanding why the traditional approach of bidding and changing insurance carriers time and again is not effective in the long term is a basic fundamental.

Here are 10 crucial things group health plan decision makers should know about the intricacies of healthcare plan renewals:

1. There is a correct premium for your insurance. It’s not good to pay too little or too much.
2. Changing insurance carriers is not the answer. At best, it could create short-term savings.
3. Data is king! Get your claims data before you do anything.
4. The premiums you pay are directly related to the claims you incurred.
5. Insurance carriers want to collect enough money to cover unknown future expenses. Since future expenses are unknown, pricing is never exact. Pricing is subjective and, therefore, very negotiable.
6. Understanding how your carrier calculated your rates is critical to knowing if they are treating you fairly.
7. Requests for proposals (RFPs) should only be used when you are ready to change insurance companies — for some reason other than price!
8. Using a quote from insurance company A to leverage down rates from insurance company B works poorly for health plans.
9. You can’t accurately evaluate your relationship with an insurance carrier by only looking at one year’s worth of experience. You must look at the relationship over the entire time period.
10. With only 5 major insurance carriers in our market, the traditional approaches to managing cost are no longer effective!

How is your company’s 2012 renewal shaping up? We welcome your questions and remarks in our comments section below!