I realize things are different here in California, but I have not seen rate increase that high. My year has been pretty easy so far has most of my groups are getting 3% increases. Some are even getting up to 6% decreases in their premiums.
Halby Insurance Agency
Nevada City CA
Sure wish that were the case in Florida. We’re seeing trend averaging about 12-13% for most carriers, but one major carrier has simplified underwriting at initial application and so typically grants a 9% discount the first year. Most of those cases are coming back with the 12-13% trend, and around the full maximum additional rate up in a single year under Florida small group reforms of 10% – so we’re seeing a lot of 22-25% increases this year.
Follow on post
One other thing of interest in the small group market in Florida with regard to renewals…
One of the major national carriers with whom we have a nice book of business now has higher renewal rates on their HDHPs than on their traditional plans. For our groups with dual option, with one HDHP and one traditional PPO plan, we just had two renewals where both groups’ HDHPs had about a 2% higher renewal increase than their more expensive traditional offering. (In the past, this carrier has always had mirror increases for both plans under dual option).
I’m not sure what to make of this. First, a disclosure: we only sell the 100% coinsurance HDHPs (preventative in-network has no charge, all other in-network covered benefits including covered Rx goes toward the deductible, and then all in-network covered benefits including covered Rx has no coinsurance after the deductible has been met). Even though the deductibles are higher than on the traditional plans, the risk to the carrier for consumers with larger medical expenses is higher once the deductible has been met (since the deductible and the maximum annual out-of-pocket limit for in-network covered expenses are one and the same).
So maybe the higher increases for the HDHPs are simply reflecting the higher risk for the carrier. What is interesting, though, is that this same carrier promoted HDHPs as a way to control costs, as they were projected to have LOWER annual increases, since consumers had more "skin" in the game and would make wiser choices (i.e. the HDHPs would curb over-utilization).
Yet another wrinkle in the whole consumer directed heath care experiment.
I don’t know what plans my good friend Anthony Halby is selling but here is the Small Group scoop for one of our largest carriers effective 5-1-08. This is my ramble: ppo’s 12.5, hmos 9.4, QHDHP 25%, Lumenos 35%. What kills me is that the largest increase is on the plans that were going to "change everything". The plans that ENCOURAGED wellness benefit utilization. It appears the insured masses are getting killed because they incurred so many wellness claims. In other sections of the business community it is called "bait and switch".
I look forward to their explanations.
Paula Wilson RHU,REBC
Paula Wilson, Inc.
If the truth be told, the reason rates of HDHPs with 100% coinsurance are going up in Florida and other states where they are popular is that they offer BETTER PROTECTION than the most expensive low deductible "traditional" co-pay plan could in a million years. Think about it.
Which plan would you rather have if you were really sick and were on 10 of the most expensive prescription drugs each with a $50 co-pay— a $10 office visit co-pay plan with a $250 deductible and $10/$30/$50 on Rx for $1500 per month for your family OR an HDHP with a $5000 family deductible; 100% coinsurance for $800 per month? If you do the math, with the traditional plan, if no-body else in the family gets sick or uses the plan at all, the cost for the premiums for the year are $18,000 for starters and then the co-pays for the sick family member’s prescriptions total another $500 per month or $6000 additional out of pocket costs for a total of $24,000 cost — IF nobody else gets sick!
Under the HDHP, the before tax savings gross cost for the EXACT SAME CARE for the family is only $14,600 (or $9600 for premiums and the $5000 deductible). Add in tax savings and you might be looking at just $13,100 net costs. Additionally, if anybody else gets sick in the family, they are fully protected from additional out of pocket costs — whereas with the so-called "best" $10 co-pay plan, there is no telling how many tens of thousands of dollars in out of pocket costs a family could be responsible for depending on how sick and how many Rx they get put on. Co-pay plans are clearly inferior when it comes to protection and WAAAY overpriced.
Emily Harding RHU
Health Plan Specialists
My theory that you are seeing more premium increases in the consumer driven area is that the profit margins are lower in the HDHP. We have approximately 500 HRAs and we rarely see over 40% of the deductible used by the employees thus the employer is conserving 60% or more. Thus the profit is greater in the fully insured products.
Ric Joyner CEBS, GBA, CFCI
This sounds like some of that Donna Shala math they were teaching at the U. of Wisconsin before she was discovered by Hillary.
If there are fewer claims filed, and there are less admin expanses to handle these fewer claims. explain to me how the insurance carrier is not making a greater percentage profit on this business.
I know that the HSA business loss ratios are so low for my clients that I am afraid to show them for fear of upsetting them.
Uniplan Financial Services, Inc.
Sorry David, thought I shared this within last email, but I can see where it may not be clear. Thus for you I will talk VERRRRRYYYYY SLOOOOOOOWWWWWW. (By the way folks David and I go way back and he loves abuse)
Ok we have about 500 HRAs of all kinds. Most are wrap plans where the employer purchases a high deductible plan and then "buys back" the deductible.
In my discussions with underwriters and actuaries of 3 different WI insurance companies they told me after I questioned them seeing the numbers from our experience of only about 30-40% of the employer deductible is ever used and thus my question to the company people was "is the small claims where your profit is?" And all agreed except one abstained to comment.
To conclude that is why if you are delivering increases with very low losses the stock market is affecting the rates AND that this is an unprofitable (or not as profitable) a product as the fully insured where the company keeps the claims not paid BUT still charges for it. With an HDHP they have even less "play room".
Ric Joyner CEBS, GBA, CFCI
To concur with Ric, I’ve had a local insurance company that I do business with tell me basically the same thing. HDHP’s are not as profitable because they expect a certain amount of premium for their actuary tables for certain size groups, regardless of loss ratios and underwriting.
This came up in an underwriting situation where they were putting some pretty heavy loads on a small group because of allergy & asthma of one child within the group. It also comes up with i
nsurers not being able to give big enough discounts for going to a HDHP from a traditional plan for their current business.
Like someone else on this thread wrote, it also is a richer benefit plan if you are choosing a lower deductible, 100% HDHP.
Based on most companies actions and the small difference in savings from going to a traditional plan to a HDHP, it’s obvious they’d rather not write consumer driven business. However, after a group has been with the same insurer for around 4 years, the rate increases over those four years usually make it feasible to switch to an HDHP. What worries me is where are we going to go after another 4 years (or less)?
Heartland Benefits Group, LLC