Employee Benefits 101

Bob Gearhart Jr., DCW Group:
Avoid Pitfalls When Renewing Health Insurance

September 14, 2018

Today we’re pulling back the curtain on your benefits renewal process to show you four red flags that could indicate trouble.

Most employers renew their health insurance plan in the fourth quarter, but even if you don’t, the principles shared in this article still apply. The current model suggests that most of you are working with an adviser, broker or consultant to lead you through this exercise. The reality is that the process itself is fairly simple: 10- to 15 steps, with little or no proprietary differentiation between brokers.

For most employers, employee benefits is a top-three expense on the profit-and-loss statement, rising every year with little or no explanation, and is only addressed at the annual renewal.

If you’ve been following Employee Benefits 101 throughout the year, hopefully you understand that the insurance is not the problem and the insurance is not the solution. If you have not developed a strategic plan to predictably and repeatedly reduce the cost of health care within your benefits plan, you are probably waiting and hoping that your renewal comes in within your budget.

Before we dive into the details, it’s important to understand how the renewal process has evolved over the years at the expense of your company. Putting a deadline (renewal date) on any negotiation puts the leverage squarely in the court of the seller (insurance carrier/broker). Both parties know that you have a deadline by which you must decide. It’s not the fault of the industry that your contract renews on a given date. But if you don’t think that factors in to how they approach your renewal (especially your broker), you’re being naïve.

Here are four warning signs that your renewal is in trouble:

Getting a Late Start

Regardless of your group size, it is inexcusable to start the renewal process any later than 90 days before your renewal date. If you have to fill out medical applications, most carriers accept signatures within 90 days of the renewal date (others will accept them up to 120 days prior). Every day you wait to start the renewal process, the leverage tilts further and further to your incumbent broker and insurance carrier and away from your company.

Not Completing Applications

Insurance carriers will now issue medically underwritten quotes using only a census if you have more than 25 employees enrolling. These quotes are easy to obtain, especially if your broker is starting late. But they are not as competitive as those underwritten with online medical applications.

If you have between two and 120 employees covered by your plan, you should be filling out online medical applications every year to ensure that you are obtaining all of the options that the market has to offer. This means more work for your broker and your team, but not doing so tells the market you’re not seriously considering your options and it puts your company at a disadvantage to obtain the lowest cost, highest quality plan.

Not Seeing Your Renewal

If you don’t have your renewal at least 60 days before the effective date, it’s because your broker is withholding it from you.

As of the writing of this article, DCW Group has received all of our Medical Mutual Jan. 1 small-group renewals (120 days in advance). And as of the publishing of this article, we expect to receive the same small-group renewals from Anthem and United Healthcare (110 days in advance).

Withholding the renewal makes it harder to change brokers or change carriers, and shifts negotiating leverage away from your company. Call your carrier directly if you’re not getting your renewal in a timely manner from your broker.

Not Seeing Physical Proposals

Has your broker ever presented a spreadsheet where your current carrier was the most competitive and the other carriers “weren’t competitive/declined to quote/aren’t the right fit?” There is a good chance that a market evaluation was not even conducted for your company. Many brokers steer business to a single insurance carrier to earn bonuses and overrides. They can’t afford to move your company to another insurance carrier where they aren’t earning bonuses and overrides.

In an industry that is this heavily regulated, even when a carrier declines to quote a group, they either issue a formal letter or an email. Ask your broker for copies of all documentation (declination letters or noncompetitive quotes) from the other carriers that were evaluated.

Like any negotiation, the renewal process is about building and preserving leverage. The perception of increased complexity has served as cover for brokers to sabotage the process in their own self-interest.

To be an insurance broker, you only need to pass a one-week licensing course, background check and maintain 24 hours of continuing education every two years. The person who cuts your hair has to go through more certification requirements than someone managing a top-three business expense for your company.

I’m sure you have a great relationship with your current broker, but if you’ve experienced any of the four pitfalls mentioned above, you deserve an explanation. If you aren’t receiving an unbiased market evaluation – a basic function of any broker – there’s no chance you’ll be presented the strategies that will lead to long-term stability within your health plan.

Published by The Business Journal, Youngstown, Ohio.