Large Group Question

[Hefe]

One of my P&C clients asked me for my opinion on his company's group health plan with 80 employees in CA.

Due to claims, Health Net's renewal came with a 30%+ rate increase. His agent also quoted BC and BS which had similar rates.

The agent also stated that Aetna, Cigna, Pacificare, and Kaiser all declined to quote because they can not compete with the Health Net rate.

I'm looking for the answers to a couple questions.

1) Does that seem legit that the 4 carriers that didn't quote really can't compete?

2) What options does he have? Thinking creatively, are there other options beyond the standard HMO plan?

3) Am I correct in talking him out of dropping the plan in favor of paying for individual plans? I figure that more than a few employees would be declined and the premium of the rest won't really save him any money.

Thanks in advance.

 

[DS4]

3) Am I correct in talking him out of dropping the plan in favor of paying for individual plans? I figure that more than a few employees would be declined and the premium of the rest won't really save him any money.

80 person ee group in California?
Just figuring the 80 ee's and not deps, I would guess 15 to 25 would be declined, 20- 25 rated, and 50-60 issued preferred.
No telling what would happen to dependents.
Maternity hard to find on an individual plan.
Don't forget, California is an all or nothing state on Ind health. No waivers.
What zip code is your client in?

 

[somarco]

1) Does that seem legit that the 4 carriers that didn't quote really can't compete?

Yes.

2) What options does he have? Thinking creatively, are there other options beyond the standard HMO plan?

Yes. Partial self funded & PEO come to mind off the top of my head.

3) Am I correct in talking him out of dropping the plan in favor of paying for individual plans? I figure that more than a few employees would be declined and the premium of the rest won't really save him any money.

That would be extremely foolish.

 

[Hefe]

zip is 92701

 

[somarco]

Mine is 30328 . . .

 

[Hefe]

Mine is 30328 . . .

...Thanks for your replies. My zip code was in response to DS4's question.

 

[Hefe]

A couple quick follow up questions, how long do the negative claims years count against the insured? In other words, how many years of positive claims history would he need before he starts to see a significant reduction in premium?

Also, is there a limit to the increase that he will see year to year? I know small business is limited by the RAF, does large group have some limitation as well or would the carrier simply drop them if the claims got excessive?

 

[leevena]

I cannot speak for the carrier, but your group is only 80 lives, which means the credibility of the claims costs is minimal. For a group of this size they maybe using a "blended" rating methodology, meaning blending of the actual claims costs and the book/manual rate. My guess is with a group of 80, the claims weight is 25% or less. Long story short, there is little the group can do.

As for 2nd question, as of now there is no limit.

As possibility is alternative funding arrangements. There are many variations available, can't say for sure whether they fit, or would work. Good luck.

 

[ABC]

Its not uncommon for one carrier to have a dominate role in especially if they have an advantage with network discounts.

Its all about claims. If the case has a good loss ratio that is something you can work with.

I am working a very similar case right now.

Hefe,
Review the claims history. If it looks like a carrier can make money off of them that is a start. Call all the large group reps and make contact. Let them know what you have.

 

[somarco]

An 80 life case can be all over the boards. 70% loss ratio one year, 180% the next.

As Lee indicated, the case is at best 25% credible but even with that if the loss ratio has exceeded 100% for a few years running you are going to be hard pressed to find someone to take them. No one wants to put a bad risk in their pool even if they only attribute 25% of claims to the rate.

You shop this case by collecting 2 - 3 yrs claims experience, by month if you can get it, plus exposure for each of those months. Also need details of any claims xs of $25k.