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.
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.
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.
Over ninety percent of the country uses some form of health insurance. As a business owner, you could be mistaken into thinking that it is always a high-value proposition. More and more people are complaining every year about health insurance. Why is that, and what can you do about it?
Let’s talk about what needs to happen to improve healthcare and its associated costs.
The responsibility of the business owner to its team is a massive undertaking. They have family members, hardships, and expectations, like their staff. As a business owner, you understand both weights. The former is that your organization can actually afford health insurance. The latter, how crucial it is to have accessible, solid coverage for your team.
Employers everywhere are paying more out of pocket for healthcare because of their lack of a proper healthcare partner. Healthcare partners lead by example and strive to empower all businesses. They are at the helm of providing person-centered care and clinical support through health insurance.
If you’re wondering how to choose a healthcare partner and how to save money on healthcare partners, we’ve got you covered.
Truth is, not all stories have happy endings. Sadly, bad outcomes are completely avoidable but happen anyway. In our spirit of candor (we wouldn’t want it any other way) we decided to share a bit of the less fun side of group medical plans.
The city of Corbin, Kentucky has been a “WOW” client of ours for some time now, and with great success – we’ve slashed out-of-pocket costs and shown Big Checks that demonstrate how we saved them around $200k per year on their total healthcare spend. Recently, the city commission selected Anthem BlueCross Blue Shield to take over as the medical insurance provider for city employees for the fiscal year 2022. As you know, not all medical plans have a member’s best interest in mind. To that note, it was recently published that the city will receive its first health insurance rate increase in 5 years;
“The city will pay a monthly rate of $32,029, or $384,348 annually. Family plans will see a slight increase in costs for those employees who wish to add someone to their insurance plans. Sams said this would be the first health insurance rate increase in five years.”
The people of Corbin are some of the best, hardworking people around. They deserve the best healthcare options at a price that’s affordable. The main takeaway: Not all medical insurance plans are created equal. In fact, many medical insurance plans have one goal in mind; to increase profits for their shareholders at the expense of their “plan members”. The secondary takeaway; factors outside an adviser’s span of control may lose a long-term client. Just observing life here and I remain grateful for the time I was able to help the taxpayers of Corbin and their employees.
Pro Tip: Education is a continual process, custom plans require more ongoing education than “off-the-rack” solutions. Reporting alone is not enough, always be educating your clients.
Back in March of 2020, Congress passed the Paycheck Protection Program Act (PPP). Initial reports indicated that about 700,000 businesses were approved by July 6, 2020. It’s now time to start thinking about how to apply for forgiveness. As long as you meet certain spending requirements it shouldn’t be too much of an issue. Let’s look at the facts surrounding where your employee’s benefits fit into that equation.
The Goal of the Paycheck Protection Program (PPP)
The initial PPP set aside a maximum of $349 billion for forgivable loans. The goal was to help small businesses pay employees in the wake of the COVID-19 pandemic.
Details on PPP Eligiblity
Business owners with up to 500 employees are eligible to apply for this loan. They may use the initial PPP or First Draw PPP loans for the following:
Payroll costs
Employee benefits including health and retirement compensation
Mortgage interest
Rent
Worker protection costs associated with COVID-19
Utilities
Certain supplier costs
Certain expenses for operations
Damage due to looting or vandalism during 2020 that was not insured
The PPP capped the payroll expenses at $100,000 on an annualized basis per employee. Maximum loan amounts can’t exceed the average payroll cost for two months plus 25 percent and the total loan cap is $10 million.
PPP Forgiveness Rules
The First Draw PPP has several rules governing who meets eligibility requirements for forgiveness. Here is a quick rundown of a few of those requirements:
Self-employed, sole proprietors, independent contractors
Small business meeting the SBA size standards
NAICS businesses with a code beginning with 72 and more than one location and less than 500 workers per site
501(c)(3) non-profits, 502(c)(19) veteran companies, or tribal business concerns
They must have no more than 500 employees unless they must meet SBA industry size rules.
You may meet Second Draw PPP loan eligibility if you received a First Draw PPP. The first loan must be fully spent on authorized expenses.
Specific employee benefits play a part in the calculation of PPP loan forgiveness. The PPP Loan Forgiveness application has three lines addressing worker compensation.
Line 6
Employers enter the total amount paid for employee health insurance. This includes the contribution to employer-sponsored group health and self-insured plans. Don’t include pre-tax or after-tax payments made by employees.
Line 7
This line documents the total employer contribution for employee retirement plans. Pre-tax or after-tax payments by employees are excluded.
Retirement benefits include match, cash balance plan, and profit-sharing contributions. Remember that the PPP Forgiveness’ requires employers to use 75 percent of the loan for payroll. Compensation for retirement isn’t included in this 75 percent.
Line 8
Enter the total paid for employer state and local taxes. This includes charges for employee compensation such as state unemployment insurance tax. You don’t need to include taxes withheld from the worker’s earnings.
