Here we are in the middle of the year, and believe it or not it’s time to start the planning process for your health benefits for employees for 2017. It’s way too early in the year to know what your renewal is going to be from your insurance company or your stop loss carrier, but it’s always good to identify and investigate opportunities within your plan for implementation.
In the next several articles, I’m going to help you identify possible alternatives for your plan that can create savings and/or minimize any increase in costs beyond the typical cost shifting that is probably recommended every year. I’m going to attempt to uncover innovative ideas and programs for your consideration that will not only reduce your plan costs now, but also for the long-haul.
One of the first things to review within your plan is the medical claims of loss ratio year to date. Your aggregate attachment point or your maximum claims liability is typically calculated based upon 125% of expected claims. Even if you’re fully insured and you’re large enough to be experience rated, you should get reporting in order to be able to estimate where you are with your claims liability.
In order to calculate your loss ratio, expected claims should run it 80% of your aggregate. So if you know what you’re aggregate attachment point is YTD, you can divide that by 125% or multiply by 80%, and the result will give you the amount expected claims that was originally estimated by your underwriter.
If you then know your monthly claims YTD and compare it to your aggregate YTD, your plan is running at expected levels if your loss ratio is 80%. If your plan is running hot your loss ratio is going to be much larger than 80% loss ratio, and if your plan is running better-than-expected your loss ratio will be less than 80%.
This is important only to get a gauge of what you might expect at renewal. If your plan is running at expected levels, you can probably expect a trend increase. Trend is running between 10 and 14% depending upon which company you may be talking to. As such, a 10 or 12% increase may be unacceptable. See Rule Of 72.
After understanding your year-to-date loss ratio, if you’re fortunate enough to be working with an Administrator that has a good claims reporting system, you should be able to see where the hotspots are within your plan. Is it in major diagnostic categories such as oncology, endocrine disorders, coronary and cardiac issues, COPD, etc.? This in turn will permit you to further examine whether or not these are claims that are “one and done,” are the members who ran up these claims no longer on the plan, or will they be ongoing into 2017?
This is the first step to help you understand what your costs are going to be for next year, and what strategies you may wish to consider and deploy for 2017.