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With the year-end of 2021 just around the corner, many employers will soon be discussing their group employee insurance benefits policy renewal. With our economy beginning its recovery path after a year of the pandemic outbreak, we are observing a change of members’ behavior with some of the delayed medical treatments beginning to show up this year.
77% of employers emphasize their renewal focus is to explore cost-effective benefit designs.
3 Key Factors of Medical Premium Pricing:
1. Benefit Provisions & Terms & Conditions
It refers to the benefit plan design and the T&Cs that binds the rule of claims adjudication and exposed risk. T&Cs such as “waive pre-existing conditions” or “waive all specialist referral letters” would mean that these types of policies would have more lenient plan rules to govern the incoming medical treatment and claims.
e.g. if the plan design is rich, it would offers no incentive for the members to seek for medical treatments that are more cost effective. The medical cost under these type of “high-end” plan designs is difficult to predict and maintain.
2. Member Profile (i.e. Average age, Gender mix, Occupation, Geographical)
It refers to provide insurer the background information to assess the group underlying member risk.
e.g. If the average age of the insured is higher, the expected medical cost per member should be higher. If the industry expose the members to engage in higher risk activities, which in turn results in higher chance to get injuried or fall sick, the expected medical cost would also be higher.
3. Medical Claims History & Trend
It refers to the actual member utilization of the medical policy. From insurer’s perspective, the historical medical claims experience provide the insurer with references on how would the members risk translate to the actual medical claims.
e.g. With more historical claims data (i.e. 36 months), it allows insurer to assess the member pure risk cost trend and claiming patterns. In general, prudent pricing approach would suggest insurers to target their premium level to breakeven over a medium term (i.e. 2 – 3 years).
Tips for your next Medical Insurance Renewal Negotiation:
1. Review Top Claimants Medical Conditions & Status
It is crucial to understand if there is any recurring high-cost medical treatment for the upcoming renewal. If it is foreseeable that there will be recurring claims or any planned surgery in the future, insurers will be more conservative when offering their renewal quotation. On the other hand, if a patient incurred a large medical claim but left the company, insurers would consider to remove this one-off experience from their pricing consideration. Likewise, if there are any members require chronic medical treatments, insurers will be less lenient when reviewing the claims.
2. Assess Medical Cost Projection Assumptions
Insurers are required to impose projection assumption to buffer for any unseen claims not arising in claims data. Depending on data availability and size, employers may challenge the default projection assumption imposed by incumbent insurer. To allow more room for insurer to work on assumption that better fits the employer case, we shall aim to share 36 months of historical claims data.
3. Actuarial Cost Validation Renewal Approach with Sustainability
To review your employee benefits cost effectively, employers could seek help from consulting firm that offers consultative brokerage support that includes benefit review and actuarial cost validation when managing their benefits cost. Instead of managing renewal cost with short term horizon, employers should take a longer renewal horizon (i.e. multi-year renewal) to smoothen the plan experience.
4. Cost-sharing and Containment Plan Changes
As the medical claim cost is closely related to the member medical spending patterns, putting in place a reasonable cost-sharing benefit arrangement will assist employers to maintain their group medical cost. Employers may introduce cost-sharing at 80% to 90% to non-network claims to encourage network usage.
Want a better deal for your coming group medical renewal? Talk to us!
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