After last year's early renewal, now what to do?

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Not long after the summer memories of the beach and vacations fade, your insurance agent/broker will be calling to set up a meeting to review your company's 2015 health insurance options. If you are suffering from a health care reform hangover you are not alone. Companies must continue to deal with the ramifications of reform far into the future as various provisions take effect over the next several years.

One key question on many business owners and decision makers minds will be: “Do we take (or not take) the early health insurance renewal?”

Similar to last year, an early renewal will be offered to groups as a way to prolong the full weight of health care reform. Essentially, younger, healthier groups benefited from taking the “early bird” as they were still permitted to be rated under the old formula which gives them more credit for favorable demographics and health conditions.

The groups with older and at-risk populations benefited from not taking the early renewal and instead capitalized on the new rating methodology dictated by health care reform which softens the “rate up.”

The law of averages would suggest that 50 percent of companies would benefit from taking an early renewal and 50 percent would be negatively impacted (and were better off renewing under the new HCR rating methodology). However, reports from local insurance carriers who offered early renewals suggest that as high as 75 percent of groups took the early renewals that were offered to them. This implies:

• 25 percent of groups that took early renewals should not have, but would have instead benefited from waiting to renew. It would be wise to consult your insurance industry experts to determine if you fall into this bucket.

• There was a push from industry insiders (insurance carriers, brokers, agents, etc.) to renew all groups early. The “fear factor” is clearly indicated in the high early renewal numbers (75 percent). This allowed carriers and agents/brokers to allow groups to take the early renewal and keep them on their books for one more year until the full impact of HCR would take effect.

Companies that took early renewals will be given another opportunity to be rated under the old methodology until at least 2015 under yet another delay on HCR coming from Washington, D.C. So you may think it makes sense to just “hit the easy button” and sign the early renewal paperwork one more time.

This decision, without careful review, could cost your company tens of thousands of dollars. It is completely understandable to not want to deal with health insurance; however, you need to trust the professionals that work on your behalf.

By following the steps listed below during your renewal process this year, it will ensure you have secured the highest level of benefits for the lowest cost:

Call your agent/broker immediately and discuss a renewal action plan. The longer you wait, the fewer options you will have. Remember, insurance carriers will hold onto renewals as long as possible.

Above all, receiving your renewal should be the last piece of the puzzle, not your trigger to get started. If you wait to look for options, it will be too late!

Ensure that your agents/brokers and insurance carriers provide you all the information regarding the HCR guidelines to make the best decision for your company. It is important to understand that all the insurance carriers are willing to offer your renewal on the old methodology for another two years; however, they are not offering this old methodology if you want to change insurance carriers.

This may create scenarios where agents/brokers are going to tell you that you have no choice but to renew with your current carrier. Always have your agents/brokers check the full market before making your final decision.

If you are not talking about the following health care options during this renewal season, you need a new strategy or someone new to give it to you:

• SELF FUNDING

Very competitive stop-loss markets now are allowing groups as low as 20 employees to consider self funding. Remember, being proactive and ahead of the curve is a positive.

Being a guinea pig for a brand new product is not recommended.

If you consider self-funded options, make sure you are looking at established companies that have been handling self-funding in your size segment for a number of years.

• VALUE BASED BENEFIT

Integrating incentives into your employee benefit package will yield many positives. VBB can come in the form of “carrot” or “stick” approaches.

A “carrot” approach is lowering employee contribution toward health insurance for participation in wellness programs. A “stick” approach is charging smokers 20 percent more in employee contribution. Both approaches are gaining traction. Recommendation is first to try the carrot.

• CONSUMER DRIVEN CARE

Health savings accounts are exploding in popularity. Rapidly rising health care costs will never truly come under control until the utilizing member has “skin in the game.” Look into adding a high deductible HSA qualified option to test the waters with employees.

In addition, it is important to understand the educational strategy plan for implementation. Education is the key to a successful implemented HSA plans.

• PRIVATE EXCHANGES

These options are becoming more popular by the minute. (See guinea pig reference above in “self funding.”) Private exchanges do not offer lower rates for the same coverage. This is a common misconception.

What they can potentially do is limit company exposure by setting a “defined contribution” model that caps employer risk. Take a look at what is available but be skeptical.

Get at least one additional proposal from another consultant/insurance agent. Companies often think that because they have the same health insurance carrier that it doesn't matter what insurance agency they use.

Health care reform has dramatically changed the role of an insurance agent. There are substantial value-added benefits you can get from various firms, including health care reform compliance attorneys, wellness coordinators, Cobra administration, analytic/actuarial support, etc.

Spend the time to solicit multiple agency bids for your business; you will be surprised with the vast difference in services provided from firm to firm.

It may seem like your renewal is in the distant future, but your approach to your upcoming health insurance renewal can save you time and money. Be proactive; use your experts and start planning and creating today for your successful renewal action plan.

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