My Plan Costs More Than Yours But It’s Cheaper

How do you compare financial performance between two group health plans? How do you determine which plan is outperforming the other in terms of dollars only?

Is the best method a comparison of net unit cost on a mature basis?

Paid Claims + Fixed Costs – Reserves / 12 mos / #Employees = Net Unit Cost

A study comparing net unit costs using this method was done. One group has higher paid claims, higher fixed costs and higher reserves and the other group has lower paid claims, lower fixed costs and lower reserves.

The results? The group with the higher paid claims, higher fixed costs and higher reserves has a net unit cost 45% less than the other group with lower paid claims, lower fixed costs and lower reserves.

What conclusion should you draw?