New Games to Manage a Book in PPACA Environment

[Ann H]

Premium rebates will be required when an insurer's administrative costs exceed 20% (or 15% in the large-group market). So, if claims are low insurers must reduce income, or reduce admin costs, or rebate premiums. Obviously, they don't want to rebate premiums, particularly to clients that are not preferred risks. I've seen some new strategies emerging in my small group accounts lately. At first I thought it was an anomaly. Now I've seen it several times.

Insurers are giving low rate increases and even rate reductions to the groups that are favorable to the insurer. In AZ there is a little latitude in the rating structures allowing a group to be rated up 60% from manual rates or given a preferred rate that is as low as 60% below manual rates. They do this at initial underwriting when a group is first installed. Now, when the group renews, if the underwriter sees that the group is favorable and they want to keep the group, they are giving very low rate increases and in some of my cases rate reductions in order to keep that group from going to the competitors. In my last case, a carrier gave an 11.66% rate REDUCTION to one of my groups, and the group did not have a major demographic change. I've seen rate increases of 1-4% lately on some groups, while the same carrier gives another similarly situated group 15%+ rate increases.

Of course the IFP market can't do this, but I'm sure they'll find interesting ways of avoiding a premium rebate.

 

[somarco]

Of course the IFP market can't do this

Actually, I have had a few clients get rate reductions at renewal. Also had some groups that have had reductions.

What bugs me most are the much lower rates for new IFP business combined with lower commissions.

And then there are the group carriers paying PEPM vs percent of premium.

These are the times that try men's souls.

 

[Yagents]

If I were an insurer, and looking at post 2014, when all insurers are offering the same products, the only differentiation are the qualitative issues. How did this co. treat me in the past? They are trying to win the groups hearts now to keep the biz post 2014. IFP clients can fly a kite.

 

[stuy119]

Or, to play devil's advocate, maybe the carriers WERE gouging small groups over the past couple of years and had to pull back some to avoid refunds.

 

[somarco]

post 2014, when all insurers are offering the same products, the only differentiation are the qualitative issues.

I think it is more accurate to compare it to the Medigap business where the only differentiation is price.

 

[pahealthquotes]

many people will overpay for a company they know and recognize

 

[Ann H]

Or, to play devil's advocate, maybe the carriers WERE gouging small groups over the past couple of years and had to pull back some to avoid refunds.

And, yes, that would be a good explanation if it weren't for the fact that these new low rate increases or rate reductions are occurring at the same time as high rate increases to less attractive groups in the same market, with the same product, and same insurer.

 

[Post Quartermaster]

Actually, I have had a few clients get rate reductions at renewal. Also had some groups that have had reductions.

What bugs me most are the much lower rates for new IFP business combined with lower commissions.

And then there are the group carriers paying PEPM vs percent of premium.

These are the times that try men's souls.

For what it is worth, we've had PEPM from every major carrier in SC for close to a decade now. It's survivable. Unless it is a 2-3 life UnitedHealthCharity case.

 

[somarco]

Personally, I have no desire to write PEPM cases.

 

[Ann H]

Actually, it's not that bad, Somarco. When United Healthcare first introduced it here in AZ several years before PPACA, some of my case commissions went down, some went up, but the overall affect was an increased commission. It also stayed that way for years. At this point, it's leveled out, though. Carriers who pay PEPM tend to pay FAR less for 2-4 life groups... Also, they shoot themselves in many ways. I know agents who won't give them business when there is a high number of dependents enrolled because the payment is per Employee per month.