We all know that the real driver of your health plan costs is medical claims, right?
Claims are the Culprit
Granted, if you’re a small firm, say fewer than 15 people on the plan, you’re generally not big enough to fix it so that your claims and your premium are proportional. You’re going to be in a big pool, and your premiums will be based on the claims of that huge pool.
But larger than 15 or so, and your costs are – or ought to be -driven by your claims.
So Is Your Carrier
But your carrier is in your corner, right? They’re negotiating with the hospitals and doctors and labs and such to get prices as low as possible, right?
Sorry, Charlie, t’ain’t so.
Candidly, all the carriers want to do is to get the biggest possible “discount” from “list price” so that they can try to convince you that they and they alone are the carrier you ought to use for your plan.
First, you’ll never, ever see the priced from which that discount is calculated published anywhere. That’s “proprietary,” according to your carrier when you ask them. In fact, you could probably go in on your own, claim NOT to even have insurance, and get a better price than you’ll be charged via your health plan.
Second, carriers secretly want prices to go up. Under ACA (Obamacare) their allowed operating margin is dictated by claims. The higher claims are, the higher their allowed operating margin – and you’d have to be living in a bubble if you think that administrative costs are going up as fast as health costs.
So if your “trend factor” is, say 9% — 2-3 times the inflation rate — then the operating margin of the carrier goes up by 9%.
Wouldn’t you love it if your customers were willing to pay you 9% more next year to do the same job you’re doing for them this year? Heaven on Earth … but because you’re not a health insurer, you don’t get that break.
But My Broker Is on My Side, Right??
Looking back at the first paragraph, I will agree that your broker is on your side if he or she has done the following:
- If your broker has actively pushed exploring risk-sharing or partial self-funding or some other scheme where you take some responsibility for and receive rewards for improved claims outcomes, and
If the broker hasn’t done than, and hasn’t done that to the point of you getting tired of hearing about it, then no, your broker isn’t on your side.
We at BBI have pushed groups as small as 10 lives to explore partial self-funding – often without luck (it doesn’t take much of a “medical condition” at that size to scare off a risk-sharing carrier.) And we try to walk the walk wherever we can.
If we can’t self-fund, then for groups where rates have flexibility, we shop it widely and do our damndest to get as low a rate as possible.
We also continue to explore farther and farther afield to find risk-sharing carriers who are more “forgiving” than our current sources … we want everyone possible to “have a stake” in the actual claims of their employees – it’s the only way to beat the game of the providers, the major culprits in your never-ending cost increases.
Proof of the Pudding
We believe most brokers are unconcerned or lazy or uneducated about alternative funding processes and programs. It’s just too damned easy to sit back and overcharge you, the client.
Here’s an example. Every company with 100 employees or more on any coverage have to file a 5500 report every year. In that report they must detail a lot of info, but the following is part of what they report for health insurance:
- Number of eligible employees
- Premium cost for the year
- Compensation paid to the broker – fees and commissions
- If they’re fully insured or partially self-funded
So it’s easy to see how much brokers are paid. It’s not exact because they show eligible employees, not actual number on the health plan, so in figuring out what I’m going to show you, we had to estimate the number of employees on the plan from the premium, which typically runs from $9,500-$11,000 per insured employee per year.
Those reports are publicly available through the Department of Labor. In January of 2017 Massachusetts companies filed a 5500 health form as fully insured. Not sure I believe that (some seem very large to be fully insured), but I’m using that number.
There were an additional 73 entities that filed as self-funded.
I looked at the firms who listed eligible employee of between 100 and 350 employees. There were 323 of them. Here’s what I did:
- I estimated the number of employees on the plan.
- Using that number I calculated the “fair amount” of commission.
- I referred to the per-head rate provided by one of the “Big Three” carriers in Mass.
- Then I looked at the ACTUAL income paid the broker
- In MA a broker is allowed to charge more than the standard commission – the excess is charged to the employer.
So how did the brokers of Massachusetts do, compared to the “fair amount” represented by the standard commission scale? A little better? (After all, the broker is on your side, right?) A little worse? (Hey, the broker needs to make a living, too, right?)
Wrong. The sum total that brokers chose to pay themselves was … (drum roll, please) 178% of scale!!! That’s right – for those 323 companies, the “fair” compensation totaled $13,476,583. But brokers chose to pay themselves $24,044,300 – a whopping $10,567,717 MORE than what the carrier thought – and we think – they were entitled to.
Don’t get me wrong – brokers ought to have the ability to make more than the “minimum wage” of standard commissions – but only if they tie any increase into your company saving money on claims.
If you’d like to talk to a broker that puts their money where their mouths are, call or email me:
Jim Edholm – 978-886-9058/ email@example.com
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