Thinking About Your Health Insurance Renewal?: It’s Never too Early.

Market Overview and Update

As we all know the health care industry appears to be in a state of constant change and trying to anticipate what the federal government will do next.  During this period of uncertain Employers are challenged with trying to absorb health insurance increase and trying to mitigate the impact to their bottom lines.

In addition, the Affordable Health Care Act (ACA) adds its own level of uncertainty to the market place as well as a whole new set of financial burdens.  There appears to be no quick end in sight to these financial burdens according to a Reuters’ story date June 15, 2017, in which they write about the GOP Senate considering keeping many if not all the current taxes imposed by the ACA.  So there is still a great deal of uncertainty surrounding the market and the Affordable Care Act.

However, within this uncertainty, employers still have some opportunities to minimize the impact to the bottom line.  The first is to educate yourself on one of the biggest impacts to your health plan costs and that is “Trend”.  The other area to make sure you understand is how your employees are using the plan or “Plan Utilization” or sometimes called “Experience”.  Finally you need to be open to new ways to provide health insurance to employees.

What is Trend?

Health Insurance Carriers use Trend as one of the factors used to determine the future cost increase over the next year of your policy or your renewal rate.  Carriers set their own Trend level based on various factors these factors include: the current health care inflation rate, analysts’ forecasts and their own experiences.

The Trend is typically determine by taking into account the “experience period” (the known claims experience) and the “projection period” or a 15 month period of time.  So for example if your Renewal is January 1, 2018 your trend period will be April 2016 to July 2017.  Once the carrier calculates this information they project what your experience and plan cost will be in the future.

In projecting these cost as part of the Trend there are four main components taken into consideration.  While these elements are common across the risk spectrum their impact varies depending on the level of risk being evaluated (e.g., first-dollar coverage, consumer-driven options or catastrophic risk).

The four main components are:

  • Inflation: The price per unit of service (medical supplies, equipment, staffing, etc.) will likely increase over time, and must be accounted for in projecting plan costs. 
  • Cost shifting: Medical care providers can shift costs from discounted payers (such as government programs and the uninsured) to those whose charges are based on what is considered reasonable and customary. 
  • Utilization of new technology: Use of medical care can be impacted by plan design, local and regional conditions, and new technologies, drugs and therapies. 
  • Deductible leveraging: If fixed plan benefits such as copays, deductibles and other plan limits remain the same over time, there is a greater claim cost to the plan because the cost of services increases.

The concept of Trend is complex because it takes into account many factors including historical experience and future estimates.  However, its influence on determining medical plan costs makes it an important concept to understand.

Plan Utilization or Experience

Plan utilization is simple how often your employees use the health insurance, such as number of office visits, number of prescription drugs taken or the number of days a person his hospitalized.  While HIPAA will prevent you from knowing how individual employees use the plan you should be able to obtain aggregate information for the plan.

Health Insurance Plan Options

Because of the Affordable Care Act employers do have some options available to them when providing health insurance.  One of those options actually helps to substantially control the employer costs and provides employees with a variety of individual options to best meet their needs as well as their family’s needs.

If you have any questions please let us know and our Health Insurance Agents in our Broker Services Area can help with examining your organization’s plan design(s) and provide some recommendations.

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