Understanding the Math of Your Health Plan Renewals

HR Resource
February 18, 2013 — 2,210 views  
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Whether you’re interested in creating a new health plan for your employees or a renewal of the current health plan, you must prepare them carefully in order to ensure that they are effective. Preparation includes acquiring a thorough knowledge of the current situation, assessing the various alternatives at your disposal, and formulating a plan that will best suit your employees as well as the company. Costs are a huge factor in health plan renewals. Careful examination of your resources will help you identify the best solutions for your business. Put in economic terms, maximum utilization of minimum resources is essential in creating a cost-effective health plan. Following are a few tips you may use to revise your company’s current health plans.

Knowledge of the External Market

Before you consider taking the necessary steps in health plan renewals, you must check the financial strength of the current plan. Strength ratings publishers for health insurance carriers and HMOs, such as Standard and Poor’s, Moody’s Investors Service, and Fitch Ratings must be consulted before a renewal is devised. Independent organizations like The Joint Commission and the NCQA perform care reviews which must be checked for their external quality. Your plan may have a diversified portfolio, and its impact must be evaluated along with the presence or lack of multiple product lines. The level of experience, knowledge, plan design and underwriting expertise of your plan must also be carefully determined prior to its renewal.

Maintenance, Knowledge, and Effective Utilization of Data

Claims must be reviewed on a quarterly basis if your company has been offering a particular health plan for a long period of time. It is important to maintain the history and information of all changes made to the plan over the past 24 months. Renewal projections may be requested from your insurance carrier as they can significantly reduce costs in formulating an effective health plan. Cost-saving opportunities will arise when claims data is analyzed to good effect.

Benchmarking the Plan

Benchmark data can be obtained from your broker, as this will help you compare your company’s health plan with those of other companies. The comparison will depend upon factors such as the average yearly costs incurred by your company, demographics, average contributions made by employees on a monthly basis, deductibles, co-insurance, and co-payments, etc.

Evaluating Current Carriers and Leveraging Costs

When renewing the health plan for your employees, you must evaluate the financial aspects of your current insurance carrier. These aspects include returns on investment on wellness programs and disease management, discounts delivered, and frequency of new products offered by them. In order to save money, you may consider changes to your plan design such as implementing an organized prescription drug plan, raising co-pays or deductibles, increasing cost-sharing among employees, and making provisions for customer-driven plans. You may look for alternative insurance carriers if their offers are more cost-effective than your current plan. Once you have selected the best option available to your company, make sure that an eligibility audit is carried out so as to ensure that you have chosen the most cost-effective plan.                    

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