Health Insurance Renewals Make Little Actuarial Sense These Days It Seems


We are seeing group health renewals that make no actuarial sense these days. Renewals are all across the board. We are seeing renewals as high as +120%, with significant spread differences between carriers bidding on business. One of the BUCA’s told us last week, on a renewal we were working on with them, that they were not going to give any credit on claims exceeding the pooling point. And, there appears to be little interest amongst the carriers to negotiate renewals.

We are seeing carriers, bidding on the same group, using the same claim experience, duplicating benefits, with cost basis differencials of as high as 38%. Two underwriters, looking at the same data, are coming up with rates that statistically have no correlation.

I reviewed the renewal history of a group in Texas last week, and wrote to the client that I found the past two year’s rate adjustments to be unsupportable based on their own claim history. The client, whose background is in the health care field/insurance, wrote back and offered the following explanation:

Welcome to healthcare reform!  A lot of insurance companies are taking a playbook from the drug companies.  Over the last 3 years the drug companies have systematically and substantially raised their prices. They did so because they knew the government was going to beat them up for discounts.   The insurance companies are doing the same thing.  They know the government is going to beat them up so they increased their rates even when the MLR seems in line.  Most insurance companies don’t experience rate at 100%, they have a modified experienced /community rating system.  It allows them to “hedge” their bets during uncertain times. 
Guess what….We are in very uncertain times particularly if you are an insurance company.  Premiums always represents risk.  Some of the risk  inherently rests with the client, evidenced by the MLR; however, some of the risk is outside the client, which includes among other elements, regulatory hostility, provider contract renewals, increases in Rx prices and the like.
Though I understand Bill’s assertion, about what XXXXXXXXXXXXXXX should have done, the extra charges reflect their nervousness to the items mentioned supra and the government is making a lot of people nervous.  As I said, welcome to healthcare reform!

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