Monthly Archives: April 2023

First Year With A Self-Funded Healthcare Plan: What To Expect, How To Prepare

Recognizing that you are into a Strategic vs Transactional solution means positive change is around the corner.

While self-funding a medical plan is (almost) always a wise financial decision, it does present challenges and new opportunities to direct the course your plan will take.

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How Insurance Companies Hide Profits

Fully insured health insurance companies and HMOs are exceptional at playing Hide and Seek, with profit margins hidden in the premiums. Besides the guaranteed profit margins of the Affordable Care Act (15-20% of premiums) , its new extra charges and taxes, you have to look really hard to find out where the contingency margins are hiding in the premium calculations – especially when you consider that there is very limited transparency in the actual healthcare renewal calculations. 

Ask yourself – did your employees’ good health and low healthcare utilization send a surplus to your corporate bottom line or to the insurance companies’?

So, where are the good profit margin hiding places in the fully insured premiums? 

Let’s take a peek at the ones hiding inside the employer-paid healthcare premiums – For starters, try looking at these little gems:

  • pooling charges, 
  • These are premiums for Stop Loss Insurance that your insurance company buys from its own reserves
  • Industry Loads on the risk factors
  • These are up charges for your type of industry, created by actuaries that work for  the insurance company
  • medical claims trend factors,
  • These are made up numbers that justify the need ofr more revenue, just like any other business plan 
  • demographic load factors, 
  • These are up charges for your employee mix, created by actuaries that work for  the insurance company
  • pharmacy claims trend factors
  • Drugs Companies adjust their pricing twice per year.  They add and they subtract from these depending on how their drug list is performing to their business plan
  • or the capitation trend factors. 
  • This are charges for fixed cost items like mental health, organ transplants and other bundled medical care that rarely are used but always seem to have an increase

Wait! There is more…

Of course, there are more profit margin hiding places in the retention factors, IBNR reserve,(IBNR, we call it “Incurred But Not Really”) some still use terms like 

  • Rate stabilization reserve,
  • More of your money they keep to offset claims 
  • pending claim reserve 
  • More of your money to hedge against something that might happen
  • and the earned interest rate assumptions built into reserves.
  • That earned interest is never not enough to move the needle for your benefit

Don’t limit yourself playing Hide and Seek with your local fully insured health insurance company or HMO, because the game is rigged against you as long as there’s no financial transparency, profits can be hidden, your company’s good claims subsidize bad risks and you have no way of being rewarded for good claims.

Hiding an elephant in the room has never been easier. But I can make sure it’s not hidden in your healthcare plan.

Don’t postpone your free one-on-one session. Summer is the right season to start.

Click here to arrange a one-on-one meeting with John Clay >>


Mid-Year Employee Motivation

As we reach the halfway point in the year, you may be seeing signs of your team starting to flag. 

Whether it is caused by internal or external factors is irrelevant. The real question is how do you lift your workers out of the mid-year blues? 

There are a few methods available that can break the monotony and inject fresh impetus into your company’s efforts…

With Great Resignation and talent shortage on the market that happened less than a year ago, it’s especially important to make sure your company doesn’t have extra expenses on new talent acquisition, etc. 

SHRM, The Society for Human Resource Management reported that on average it costs a company 6 to 9 months of an employee’s salary to replace him or her. For an employee making $80,000 per year, that comes out to $30,000-$45,000 in recruiting and training costs. 

There are a couple of other numbers that you should consider. 

According to Zippia – The Career Expert agency that performs research – U.S. workers have an average tenure of about 4.1 years with a single employer.

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Activating Healthcare Equity

It is spring and the Oak tree Helicopters are back and into my pool here in Kentucky, and buddy it is a pain to clean those out of the skimmer. As I was busy doing it, a great analogy came to mind…

Not only do most employers swim in polluted healthcare pools, but they choose to! So when did it all go wrong? How did Fully Insured carriers hypnotize the entire market into believing that choosing the “least bad increase” is a win? And most importantly – how did they turn it into the only available option?

In these series of articles and videos I tend to debunk the myth of healthcare, and give employers and their teams a chance to get measurable, predictable, and repeatable results from their healthcare plan.

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