Everyone thinks size matters when purchasing employer sponsored medical insurance. It doesn’t
The State of Texas employee benefit program for state employees is an example that size doesn’t matter. The state plan pays 100% of the health plan premium for eligible full-time employees and 50% of the premium for their eligible dependents. Eligible part-time employees get a 50% state contribution for themselves and 25% for their dependents.
Now that’s generous!
It’s also unusual because most plan sponsors aren’t as generous in their contribution levels. In the state’s example, the spread of risk factor is greater than normal, and the immense size of the group would warrant pricing points greater than market driven rates enjoyed by smaller groups. At least that is what we were taught in school where, we were told, big is better when purchasing things because the bigger you are the better you can negotiate better pricing from eager sellers of goods and services.
But in health care purchasing size doesn’t matter.
A small school district in deep South Texas has proven size doesn’t matter. They recently awarded their group health insurance contract to the same carrier the state employee benefit plan has – Blue Cross.
How do their rates compare to the state’s plan?
Below are COBRA rates for the Texas state employee benefit plan. The net rate is 2% less.
Health Insurance HealthSelect of Texas®
Employee Only $ 634.22
Employee & Spouse $1,363.60
Employee & Children $1,122.55
Employee & Family $1,851.93
SOURCE: Plan Year 2022 Rates COBRA Continuation Coverage (texas.gov)
How do these rates compare to the rates a small Texas school district received as a result of a competitive bid process?
Contrary to popular perception that size matters, they are lower! They’re even lower than TRS ActiveCare rates, another government health plan covering over 400,000 members.
A five life plumbing company purchasing a Blue Cross health plan enjoys the same PPO “discounts” as a 400,000 life government health plan.
Pygmy’s and giants have something in common……….they are both the same size.
