Plan Sponsor Reacts To Sales Pitch
A 500 life case is in the process of renewing their group health insurance plan. Their claims are running hot.
Prescription drug spend equals 40% of total plan costs. There are more than several large on-going claims that are not going away. Premium rates are already high. Cost shifting over the years have made the plan unaffordable to use because on one has an extra $6,500 to spend towards health care deductibles and co-insurance. The employer is struggling to make ends meet and is considering layoffs. A move to China is no longer out of the question.
So the renewal process begins. Claim data is collected. Large case management notes are requested. Carriers are contacted for quotes. Weeks later a few proposals are received. All have conditions and contingencies requiring more data gathering. A final offer is made by one carrier and it’s not looking good. Lasers abound. Cost basis effectively bind the employer towards contributing more in order to keep the plan “affordable” as per ACA mandates. Employees are laid off. A new hiring freeze is put in place. Staff is instructed to take Chinese language classes.
Then a broker no one has ever heard of makes a cold call on the employer offering a solution.
“How about a plan that gets you out of the health insurance business and still keeps you compliant with the ACA while freezing your costs at the same time?” asks the salesman. “And you will really like the underwriting process, which is none! Plus your employees can build their own set of benefits to meet their specific needs too” continued the insurance agent.
The Solution to Rising Insurance Costs
by Pete English | posted on 12-07-2021
Employer-sponsored, traditional health plans prove to costly and complicated for businesses focused on growing and improving their company. Expensive group coverage continues to lose ground and may not sound like a good fit anymore, especially when more affordable and flexible health insurance options become more appealing by the day. As group health insurance costs continue to rise, here are three ways to protect your bottom line.
- Move Beyond the Traditional Employer-Sponsored Plan
In years past, the employer-sponsored group plans made sense. A business could partner with a health insurance provider to offer coverage for employees, who would ultimately share costs of participation. Fast-forward to today’s economic and pandemic-affected climate, and those group plans prove to be too expensive for employers and employees alike.
Remove Drains on Your Business
Group health plan prices continue to rise, and more and more employers are finding them unaffordable. If your business was also affected by government-imposed shutdowns, or you experienced losses in revenue, those employer-sponsored plans are just too burdensome to afford. With the cost of employer sponsored health insurance rising on average 5 % per year, businesses are flocking for alternatives ways to cut costs.
Remove Drains on Your Employees
If you had to shutter your business, your employees likely also felt the financial crunches at home. Enrolling in more expensive traditional group health plans may prove to be too expensive for your employees to contribute to. Many employees are desperate to take home as much of their paychecks as possible these days. Enrolling in an expensive group plan that no one can afford at the employee level will only be a waste of benefits resources.
The one-size-fits-all group plans are costly to today’s tighter budgets for employers and employees alike. And companies don’t want to invest in coverage that their teams can’t afford to use any more than employees want to enroll in it.
- Look Towards ICHRA to Combat Rising Costs
The traditional group plans are phasing out of the limelight in part due to the surge in support for the Individual Coverage Health Reimbursement Arrangement (ICHRA). An ICHRA allows employees to enroll in on the ACA Marketplace while employers reimburse them for premium payments and qualifying medical expenses. In addition to providing flexibility to your employees’ health coverage, the ICHRA model can meet the needs of any budget.
Flexibility for Employers
Establishing an ICHRA can often be the best way to save on health insurance costs while providing comprehensive coverage. The ICHRA isn’t like the employer-sponsored plans of yesterday. Companies have the control and flexibility to establish the ICHRA platform within customized affordability parameters. The company owns the ICHRA and can establish the rules for reimbursements. These determined reimbursements are then managed by the employer to accommodate whatever health plans the participating employees choose to adopt, allowing for control and flexibility.
An ICHRA can protect your bottom line with the following features:
- Employers can set reimbursement over 11 classes
- Unused funds can rollover to the following plan year or return to the company
- An ICHRA can be used alongside more traditional coverage to cut cost without fully committing
Giving Employees the Power the Choose
No one likes to pay a premium they can’t afford for coverage they can’t use to the fullest. ICHRAs allow employees to experience real reimbursement benefits. In some cases, even the monthly premium for an ACA Marketplace plan can be reimbursed. Copays, prescription costs, and deductibles can all be part of the ICHRA reimbursement model. Your staff will appreciate the opportunity to pay for the coverage they actual use and not expensive one-size-fits-all group coverage.
- Stay Updated on Shifting Affordability Requirements
Before approving your ICHRA plan and communicating the changes to employees, make sure that the coverage you are offering is Affordable. Affordability is particularly important to Applicable Large Employers (ALE). Using the benchmark of the lowest-cost silver plan in the area, the annual out-of-pocket cost after the ICHRA contribution should be less than 9.61% of the employee’s annual household income as of 2022.
The maximum employee contribution is down from 2021’s 9.83%; employers will need to contribute more towards employees’ health coverage to compensate. Some employers will need to either find a new affordable health coverage up rise salaries to accommodate the decrease in the employee contribution limits. This is a timely and expensive process that an ICHRA can easily mitigate. Adjusting reimbursement limits for specific classes is a simple process for employers, so companies can easily adapt to changing requirements.
Despite the ever-changing rules and federal guidelines for compliance, companies can still carve out budgets and flexible reimbursement arrangements under an ICHRA. It’s the way today’s companies can move forward with options that work for everyone and still maintain a consistent platform compliant with ACA mandates.
Being able to set up benefits platforms that make sense to the company budget and still offer better coverage options for the employees is incredibly valuable. For staff members who can essentially customize their health coverage options individually and be reimbursed for out-of-pocket expenses is far more valuable than those old-school group plans. It demonstrates that the ICHRA is primed to meet the needs of both employers and employees in a new way that traditional group plans never could.
RiskManagers.us is a specialty company in the benefits market that, while not an insurance company, works directly with health entities, medical providers, and businesses to identify and develop cost effective benefits packages, emphasizing transparency and fairness in direct reimbursement compensation methods. RiskManagers.us is a specialty company in the benefits market that, while not an insurance company, guides plan sponsors towards solving health care, utilizing proven alternatives to the Chinese Solution.
