A brokers Insight to Healthcare cost increases in 2008

This year has had its challenges in many areas; banking, the ongoing war, the election and the volatile markets to name a few. As an employee benefit broker I am seeing this storm of events begin to have serious implications in the group insurance market, particularly group Health Insurance. In an industry that has spent the past 6-8 years battling never ending increases I have worked diligently to duck and move to avoid having my clients face increases that were either not budgeted or not affordable. After 14 years in this industry I’m not seeing it get any easier but there are still tools available to control costs which are what I will be addressing today.

Beginning 2008 we began to see the impact of the housing market and credit crisis impact insurance renewals. Slowly we’ve seen increases being proposed that were above the current industry trend factor of 12%. Across our block of business, the last half of 2007 saw average rate increases of 11% before any plan modifications were done. For the first half of 2008 we’ve seen this figure climb to 15%. As 2008 continues we see these rates increasing monthly. Thankfully small groups with less than 50 employees on payroll are protected under SEHIRA which only allows for 25% loading for medical conditions. For groups not protected under SEHIRA we have seen increases as high as 68%.

Moving carriers has always been an option but it’s more difficult than ever due to higher initial quotes and with the economy in such turmoil most companies want as little disruption as possible. A more common practice is to change the benefit plan. This can be viewed as a takeaway by staff but if performed properly the impact can be reduced quite a bit. For example, we perform a web based utilization assessment for our clients that relies on participant feedback to understand how each component of the plan is used or not used. I highly recommend this approach as opposed to cutting benefits and waiting for the complaint line to form. It’s easy to setup and can give you valuable insight to your plan that claims reports just can’t offer. A recent assessment on a group of 180 employees showed that most of the members utilized the plan heavily but 18% had not used it at all in the past 12 months. It left us with the perfect opportunity to implement a Health Savings Account plan and saved that group of participants and the employer almost 20% of their health costs. And those participants now had an opportunity to get retain some of their contribution.

The goal at the end of the day is to develop long term cost containment strategies while meeting the benefit needs of your staff. We have found this to be an effective method to accomplish both. If you would like any advice or assistance with anything benefit related please feel free to contact me directly.

John Walker
President
Level Ten Consulting, Inc.
johnwalker@levelteninc.com312-212-8006