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5 Ways Organizations Can Save Money on Rising Medical Insurance Costs

08.17.2016

As Seen in BizTalk in the St. Louis Business JournalPremiums for medical coverage increased 27 percent during the past five years (an average annual increase of 5.4 percent) according to the Kaiser Family Foundation/Health Research & Educational Trust (HRET) 2015 Employer Health Benefits Survey. Recent conversations with clients indicate that cost increases this year may be above that. With an average employer contribution of 72 percent of that cost, many organizations are seeking ways to keep medical insurance costs in check year to year.

Negotiate for Lower Fees

A local paving materials supplier recently faced a 20 percent increase in the company’s medical insurance cost. An independent insurance consultant worked with them to negotiate with carriers for lower fees. The consultant also revised the medical plan offerings and worked with the incumbent insurance broker to communicate to employees how the new plan design benefits them. The new plan was well received by employees and saved the company 25 percent in medical costs.

Similarly, last year a regional school district selected two new insurance brokers to get competitive quotes on medical insurance. The district administrators had not recently shopped around to compare prices for their health benefits, so they wanted to get a sense of the competitive cost of the risk-sharing program their medical benefits were in. The district ultimately switched providers, maintained the same benefits as previously offered under the group risk-sharing program and experienced cost cuts that were passed back to the teachers.

Even Self-Insurance Needs Monitoring

In self-insured plans, instead of purchasing health insurance from an insurance company, an employer is its own insurer. A Third Party Administrator (TPA) often administers the insurance plan and the employer bears the risk associated with offering the health benefits.

Last year, management of a self-insured independent, full-service hospital reviewed its rates with an insurance consultant and noticed they were paying twice as much as normal. As a self-funded entity, the hospital had to develop rates to determine what to charge itself. The hospital was paying more than $3 million for coverage, and its stop-loss cost was two to three times what it should have been. Employers typically purchase stop-loss insurance to protect themselves from very large claims. By moving to a better health care insurance provider, the hospital saved $800,000 on its new insurance package.

How to Improve Medical Coverage While Saving Money

Organizations should not take for granted that the best price available or best coverage option is automatically presented to them every year. Often, this takes persistence and perhaps some out-of-the-box thinking. Before renewing medical coverage, an employer should consider the following strategies:

  1. Challenge your provider to give you the best price available and consider a competitive bid for your medical insurance to make sure you are getting the best price.
  2. Run a claims audit to assure that your insurer is paying your claims correctly and that you are only paying for those claims eligible for benefits.
  3. Request a benefits plan design review from an independent insurance consultant to determine the appropriate insurance plan design to deliver better benefits.
  4. Consider starting a captive insurance company. Captive insurance companies present a formal method to reinsure or develop a fund to reduce reliance on private insurance. Recent developments have made this option more accessible for smaller to mid-sized companies.
  5. Implement a wellness program to help lower or control the cost of medical benefits, using company dollars strategically and measuring return on investment.


PLUS: Watch our Brown Boarding Business Series episode that discusses the benefits of an independent insurance review.

Bill Goddard, CPCU

Click here to schedule a meeting to discuss your insurance costs, or contact Bill Goddard, Principal, Insurance Advisory Services, at bgoddard@bswllc.com or 314.983.1253.

STAY TUNED: Every other week our subject matter experts share thought leadership and strategic business advice on the St. Louis Business Journal business blog, BizTalk.

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