We’re in the thick of working on January 2020 renewals for our clients, and it’s not a pretty picture this year. We’re seeing some of the worst renewals we’ve seen in several years from health insurance carriers. Some of this is attributable to the reinstatement of the ACA’s Health Insurance Tax, which was suspended in 2019 but is back in effect in 2020. But that only explains a small portion of the increases we’re seeing. In some cases, we’re seeing renewals coming in over 50%. No matter the employer, that’s a difficult pill to swallow.
When I take a step back and look at how most brokers have traditionally done their renewal work, it consists of preparing spreadsheet illustrations that show the 50% renewal on the far left, and then to the right a series plans with higher deductibles, out-of-pocket maximums and copays. Shifting costs to employees this way allows the employer to reduce the premium increase from 50% to, say, 40% or 30%. The second page might be a different insurance carrier, and maybe that carrier can offer a similar plan at only a 25% increase. If the employer offers more than one plan (increasingly common these days), a few pages later you might find a similar pattern of spreadsheets for the other plan. Let's call this the "spreadsheet parade."
The spreadsheet parade is a highly logical way for a broker to show his or her work. The problem is that when a plan sponsor stares at spreadsheets year after year, choosing the next plan down the line because it offers a lower premium increase, two things begin to happen. First, at some point the employer wakes up, takes a step back, and realizes that the plan they have now no longer resembles the plan they started with. Presumably at some point the employer sat down and asked, “what types of employees do I want to recruit and retain, and how should I set up my health plan to execute on that strategy?” But after picking the next plan down the line for several years, that strategy is no longer being executed. Second, when there are multiple plans offered, the mix of plan choices starts to get skewed. Again, the thoughtful employer would have originally carefully chosen their plans to offer meaningful choice to their employees, giving each employee a chance to find the plan that best meets their families’ needs. Just picking the next plan down the line causes the mix to get out of alignment quickly.
We promise each of our clients “think time,” meaning that we don’t just show up with a stack of spreadsheets – we show up with ideas. This year, with so much cost pressure on so many of our clients, a question has been asked during each of our brainstorming questions for our clients: “what if we started with a clean sheet of paper?” We are challenging ourselves to look beyond what has been done in years past and think about how to meet the client's challenges head-on this year, even if it means making tough decisions. As the saying goes, desperate times call for desperate measures, but we are looking at it as an opportunity. How can we harness the power of a plan sponsor – pressured by escalating costs and willing to think outside the box, to deliver a more thoughtful, efficient, sustainable benefits program? With a clean sheet of paper and the right advisor, we truly believe anything is possible.
Do you feel that you have a creative advisor, willing to start with a clean sheet of paper? Or are you stuck in the year-to-year spreadsheet parade? If the latter, give us a shout at bayoubenefits@gmail.com. We’d love to help you take a fresh look at your benefits.