Roughly one year ago today, we began working with an employer that got dealt a blow from their health insurance company. A whopping 50% increase to renew their health plan. Of course they were offered the option to cut their benefits down to reduce the trauma but that would mean shifting the burden onto their employees. Their insurance company would not offer any details nor disclose any of the claims but they did offer us this: reduction in headcount paired with three large claimants resulting in a 162% loss ratio.
Blue Skies Ahead
We learned a powerful lesson going through our normal, rigorous process of evaluating risk and assembling a health plan from the ground-up. That is: health insurance companies don’t manage risk, they deal with it. Let’s dig deeper. The large insurance company simply pays out claims as they are incurred, mostly on auto-pilot. They don’t parse through the data, they don’t seek out cost effective options among the sea of cost and quality differences in local markets.
An example: a knee replacement would have cost the insurance carrier $40k yet we routinely find top surgeons willing to accept $22k. Another example: Common blood panels can range from a few bucks to a few hundred bucks. That’s a huge delta. Imagine extrapolating these variances across the entire spectrum of care being used in a population? The risk profile all of a sudden starts to look better.
From Deficit to Surplus, Overnight
We are now approaching our 1st year renewal for this company and our loss ratio is 35%. For every dollar budgeted towards healthcare costs, this company is spending just 35 cents.
Their renewal increase of 50% was completely wiped out and employees now have access to free care options for making wise decisions.
“For every dollar budgeted towards healthcare costs, this company is spending just 35 cents.”
Whereas the large insurance company proposed cutting benefits to reduce their increase (see: pay more for less) we improved the benefits and drastically reduced their costs in the process.
The end?
Too often we hear that it’s risky to self-insure or risky to leave the large insurance companies. It seems that it is far riskier to remain trapped inside these traditional models where the only option is to pay more for less every year.
We’re going to be sharing this case study in more depth at our upcoming healthcare summit on September 10. You can register by clicking below
