Much of employer-based insurance is fully insured – meaning the company doesn’t cover costs of coverage directly – rather they pay a certain amount each month (the premium) to a health insurance carrier. Put the percentage of employers we work with who go this route at about 60%. So, if an issue affects the fully insured market, it’s a big population. We’ve touched on the changes COVID has wrought on the healthcare system in this space before. Today, we should discuss a specific aspect of these changes at a specific time – health insurance renewal time.
Policy renewals are happening right now, so this is a timely discussion. And it could be, in some regards, a tough discussion. Many plans are seeing rate increases that reflect the financial risk involved with a global pandemic. We’ll touch on some of the painful elements of this discussion, but I want to make sure we cover as many facts as possible and share some varied perspectives of the issue.
The bottom line is what’s going on in the healthcare system and how that is reflected in insurance risk. The effects of COVID show up in this analysis, often not as a single input, but as a multifactor input that appears throughout the process. In a sense, its effect compounds. Whereas normally we might expect a rate hold or an increase of 5% at renewal time, employers this year are seeing 10%, 15% or more in their fully insured renewals. Let’s examine some of influencing factors from various perspectives including employers, employees, advisors and carriers. We’ll go in reverse order.
The Insurance Carrier
For an upcoming January 1, 2021 renewal, an insurer reviews a 12-month experience period, often claims from July 2019 through June 2020. What do they see when analyzing the broader patient population? Something different. Within that timeframe, there’s a window, from around the time the pandemic really hit in March, through May or June, where a unique phenomenon occurs because of COVID. Due of COVID, elective procedures were being deferred and outright canceled. These procedures literally grinded to a halt. In some cases, this was hospitals seeking to maintain capacity to deal with COVID. In other cases, it was patients following the guidance of public health officials or seeking on their own to lessen their risk of COVID.
What did that do? Well, in the world of an analyst, it created a bit of havoc as they try to forecast for 2021. As these elective procedures were placed on the shelf, consequences follow, including: one, artificially low claims in 2020 and, two, a situation where these conditions could worsen. And worsening conditions can lead to morbidity or a more expensive treatment/procedure in the future. Layer this uncertainty on the lack of knowledge as to when we might have a vaccine, what it will cost and how it will be distributed. It’s not an easy task to sort all that out.
Going back to that March-June 2020 period, consider a client that experienced more paid claims during that stretch. They’re effectively “off the off-trend” and could end up ‘paying twice’ by being in the same pool as the larger population which to a much greater degree saw deferred treatment during that same period. Not all employee populations are the same.
It’s this last scenario that’s just one example of why we keep our finger on the pulse of every client’s situation and why we have multiple partnership meetings as renewal time approaches. A First Person analyst and advisor meet with the carrier’s head of underwriting. We dig deep. We ask questions – looking for fairness to the employer and the carrier. What is the loss ratio this year and in the past? Have large claims resolved? What is the market and benchmark data telling us about how the renewal offers stack-up? It’s up to us to the know the data as well as the unique-to-the-client qualitative or anecdotal information that produces their healthcare benefits profile.
It might be cliche to say it is an art and science, but it truly is just that. And it is our opportunity to shine and deepen relationships. I often share this thought with colleagues and others based on experience, because I believe it’s an important reminder for us as benefits advisors – we sit on the side of the client. But we owe a debt of integrity to our carrier partners. It’s never been more important now to have empathy and respect for each other.
When we sit down with employers, we listen. We share information. We educate. But I know for a fact, that health benefits to many of them can seem like a black box. And it is no leap of imagination to understand that the pandemic has made the whole thing even more confusing. Just to provide one example: Back in August, some of our clients received a premium refund. This is just a few months prior to the renewal period where they are getting news that they’ll likely have an increase in their outlay. Two months ago, they were getting money because of ACA guidelines on meeting minimum loss ratios. And now they are getting a notice they’re not paying enough. It’s easy to see the frustration.
The differences in how 2021 renewals are being calculated causes a shift in employer mindset. We see more desire to explore switching carriers or potentially going self-funded. More than ever before employers are open to high performance narrow network solutions like Anthem HealthSync, UnitedHealthcare Navigate Premier, and IU Health Plans Select network. This drives employees to higher quality, lower cost solutions in the market.
The employee may sit in one of three positions as this all shakes out. One, the employer may decide to eat the extra cost. The employee is fine. Two, the employee may be asked to pay some or all of the increase. Or three, the employer may examine the benefits package and find ways to adjust. For instance, they can work with their advisor to offer a broader menu of options for premiums, deductibles and co-pays. There might still be some pain – but also some choice that allows individuals to have some say in the matter.
One more note on employees. All have been impacted by the anxiety and isolationism that the pandemic has caused. We see employees asking more questions about access to mental health resources and how benefits support them in this area. Employers must respond to this demand and look not only to their health plan, but also EAPs like CuraLinc and other telehealth resources that can make or break the emotional well-being of all associates.
Do you want to dig deeper into the future of healthcare in America? Read our seven predictions for what’s to come in the healthcare world. You’re also welcome to send me an email or note on LinkedIn. Or, drop us a line on LinkedIn or via tweet. We’d love to help!