7 Steps to an Effective Health Insurance Renewal
Originally Published in RMP Advisor, October 2009At this time of year, many businesses face the annual renewal of their health benefits. Is your company prepared? We hear from many business owners and executives that this annual process is generally ineffective and unsatisfactory. Why do they feel this way? It’s typically due to a combination of the following factors:
- Double-digit increases in annual health benefit costs over much of the last decade
- Limited understanding of what is driving up healthcare costs
- Lack of control—a belief that there is little that a business owner or manager can do to better manage costs.
We are here to challenge these beliefs and provide you with a 7-step plan to a more effective and successful health insurance renewal for your company.
- Recognize That “You Don’t Know What You Don’t Know.” There is a reason why the cost of healthcare is the dominant issue facing our country—it is a complex and historically intractable problem. Dig a little deeper, do your own research, and seek out reliable and unbiased advice. Understand that there are vested interests in the status quo and that it is up to you to determine, and then act in accordance with, your company’s best interests.
- Prioritize Your Company’s Needs. Perhaps your company’s top priorities are cost, cost, and cost. But maybe not. How important is it to avoid layoffs and/or attract and retain the best available employees? How important is it for you to give employees coverage choices? What is your company’s risk tolerance? These are all important questions.
- Understand Your Current Situation. Do you understand where your current health insurance dollars are going? Have you or your advisors analyzed available claims data? It is important to understand how your dollars are being spent (and how much), how much your employees are spending, and the cost-savings opportunities available (without cutting benefits). What factors/incentives are driving employee behavior and company costs?
- Assess Your Options. You can continue doing what you’ve been doing for many years, but how has that been working for you? You can increase co-pay here or a deductible there, and reduce premiums that way, but for how long? Is self-insurance an option? You should understand your options, including other carriers, alternative benefit plans or combinations of plans, contribution strategies that encourage desired behavior, and a multi-year strategy for controlling costs.
- Use Financial Modeling. Given the many variables under consideration, you need a financial model that will predict your costs in the coming year(s) based on the options highlighted above and the decisions that you will ultimately have to make. Think about this: What if I change ____________? (Fill in the blank—carriers, plans, funding strategies, contribution levels, and so forth.)
- Prepare Your Company’s Healthcare Budget. How many successful businesses do not have a financial plan and budget for their future? What was the level of benefits and costs for your company 3 years ago? Three years from now, can you afford the same benefit reductions and cost increases? If not, you need a budget and a plan.
- Make Your Decisions Wisely. If you are the person in your organization with primary profit & loss (P&L) responsibility, do not assume that other managers share your priorities. There are vested interests in the status quo, so it is advisable for you to be involved. The current health insurance system is inefficient and broken, and it is up to you to challenge the conventional wisdom.
If you haven’t already done so, read our “10 Steps to Fixing Your Company’s Healthcare.” It’s available by request—and as a gift to anyone who signs up for our monthly newsletter. You do have more control over your future healthcare costs than you may have been led to believe, and it is up to you to assert that control.