Health Insurance renewals…A Losing Battle?
Submitted by Peter Andrew, Council Services Plus
This year's annual rate increase may be less than past year’s. However, the results may not be different. Many nonprofits will continue to struggle with the “lose, lose” scenario that will have them either cutting benefits or asking employees to contribute more in premium deductions.
The New York State health insurance system is a heavily regulated one. Add to this the federal Affordable Care Act (ACA) and you get a recipe for complete confusion. The New York State Community Rating Law, enacted in 1992, mandates that no carrier can discriminate against any employer of under 50 eligible employees with respect insurance rates based on age, gender or heath of their employees. They must pool all employers within a given “community” (most often a county or group of counties) and develop their rate based upon the utilization of that community. This leaves most organizations with little ability to “negotiate” their rate for the coming year. Your rate is based upon the approved community rate, for the co-pays and out of pocket costs you have chosen. It is against the law for a carrier to charge you more/different.
The ACA mandated that the definition of community rating (nationally) must be no less than 100. New York worked hard to change their definitions to meet this mandate. In late 2015, under pressure from the individual state’s insurance departments, the federal government backed off on this mandate and gave the states back the ability to define community rates back to 50. New York State had gone too far down the road to 100, and decided to stay the course with ‘small group’ redefined to under 100 eligible employees.
Despite the apparent hopelessness of the health insurance market, there are a few things that you and your organization can do to help mitigate the harmful effects of health premium increases. Here are a few suggestions;
- Start early- Begin calling your companies or your broker three months before renewal. Most carriers will have an idea on what rate they are looking to charge by then. By knowing what you are up against early, you can begin to explore options or shop for another carrier. If you make any changes there will be plenty of time to call staff together and explain the changes coming.
- Compare the premium savings when raising copays- Be careful not to just arbitrarily raise copays in an effort to reduce premiums. Consider how much premium savings you will incur versus potential out of pocket expenses for your employees. For example, you may find that choosing a plan that raises your office copay by $15 only results in a $4/month saving. It may not be worth the bad employee relations associated with asking them to pay more at the doctor’s office to save $4. Try looking at the cause and effect of raising different copays, like prescriptions, hospitalization or out of network deductibles, and compare the premium savings.
- Shop and get other carrier rates- Even though the Community Rating Law sets the rate, different companies can have different experience within the community rate. Switching carriers can be a way to get the best rate for your employees. A word of caution here, switching carriers too often could cause your employees to not settle in with a plan. Employees get used to the way claims are paid, what to expect, and not having to show an insurance card every time they seek service. Changing carries disrupts that and the employee morale issues may not be worth the savings.
- Consider introducing a plan with a deductible and coinsurance. The days of low, co-pay driven, HMO’s are gone. Deductibles, coinsurance, out of packet maximums and Explanation of Benefits (EOB) are terms that all of us will need to know and be familiar with if we are going to understand how our plans work. Striving to keep staff shielded from the consumerism lessons of healthcare are not going to help them in the long run. Offering a plan that still maintains co-pay for the regular services such as doctor visits and pharmacy, but that utilizes deductible and coinsurance for other services, may be a good way to control costs and introduce employees to healthcare costs, terms and concepts that may help them become healthcare consumers and not just healthcare users.
- Use a Broker- A good Broker can do a lot of legwork for you without adding any cost. A good broker will know the market and be able to give you the inside scoop on what’s going on in the industry and within your carrier. They can gather rates from other companies and explain the subtle differences between plans. I want to stress that a good Broker can do all this. A bad broker can make this process even more miserable. If you have confidence that your broker knows your organization and knows the industry, you should use them to do some of this work for you. If you do not have that confidence in your current broker, or if you do not think you can find one who does, you may want to do most of the work yourself.
At the end of the day, you still may have to weather an increase in cost. Health insurance increases are a national dilemma. However, if you have done your work, you can be confident that your plan is the best plan for your organization and/or that you have the most cost-effective plan available for you and your employees.
© 2016, Council Services Plus
Peter Andrew is President and CEO of Council Services Plus (CS Plus) www.concilservicesplus.com, an insurance brokerage headquartered in New York State, dedicated to providing insurance and risk management services to nonprofit and nonprofit-related organizations. CS Plus is recognized by the New York Council of Nonprofits, the Louisiana Association of Nonprofit Organizations and is a supporting member of the National Council of Nonprofits and the Nonprofit Risk Management Center. For more information, contact Peter Andrew at email@example.com or (877) 501-4277, ext.125.