The Renewal Ritual – No wonder you hate it….

The Renewal Ritual – No wonder you hate it….

Ah yes!  The great health insurance renewal ritual is upon us again!  A time-honored tradition where companies, employees, and providers alike gather around a towering bonfire of paperwork, praying to the deities of deductibles and premiums.

The process begins with the arrival of the holy renewal.  In the scant occasion your renewal increase is sub 10%, you take it and run.  You don’t bat an eye, you just grab it and gallop baby.  And why wouldn’t you?  10% seems like you got a good deal.

That’s how jaded employers and employees have become.

A more common scenario is you get a 15-40% renewal increase, and all of a sudden, your hair is on fire, and you instruct your broker to spring into action to “shop the market”, or “find us a better deal”….and the comedy of errors begins.

Next comes the quoting odyssey.  A journey filled with peril, where one must navigate the labyrinthine forms, each asking for the same information in slightly different ways, and it’s nothing more than a race to the bottom.  Who’s going to come up with the lowest rates?  Seriously though, how many brokers does it take to get a quote?

You are wrestling with choices about increasing payroll deductions on employees, raising plan deductibles to get premium relief, maybe going to a HMO network….maybe even a cost-sharing program!  Starting to sound familiar?

No wonder employers HATE the renewal season.  It’s a hilarious mess.

Unfortunately, this is precisely how many organizations choose their benefit plans, and more dangerously….their brokers!  Yep, think about how many times companies go with the broker who brings them the lowest quote.  That’s like picking a housekeeper because they know how to use a vacuum cleaner.  A broker’s value shouldn’t be determined by their ability to get a quote!  But I digress….

But cheer up, we’re here to show you a better way, and hopefully…..hopefully, get a few good ideas through to you.

1. If you receive a renewal offer of less than 10%, don’t just take it and run.  Don’t just immediately agree to renew.  If your initial renewal offer is 10% or less, there’s a very good chance you shouldn’t be receiving an increase at all.  If your group is over 50 employees (Texas), you can negotiate those renewals…..SO DO IT!!!  Don’t settle for 10%, and don’t agree to “no shop” agreements.  When a carrier offers a renewal and a “no shop” agreement, that’s a great indication it’s the perfect time to shop around for a better deal.  If you are under 50 employees and you get a renewal offer of 10% or below, those are the years to explore alternative funding options like level-funding, or self-funding.  REMEMBER:  You’re not attractive when your loss ratios are 200% and you got a 40% renewal offer.  You are most attractive to carriers/underwriters when your loss ratios are lower, and renewals are reasonable. (good years)
2. Stop asking 36 brokers to get you quotes.  It’s a waste of everyone’s time and energy.  Seriously.  How about this instead….interview brokers well before your renewal season.  Ask them good questions about their services and solutions to help your company.  Demand transparency and ask if they have any issues disclosing ALL COMPENSATION they receive related to your company.  Find the right broker first, THEN work with them on strategy, and ya, they can get you all the quotes your heart desires.  News flash, your broker can’t get a better rate than me from a fully-insured carrier, and visa versa.  Our value is not in our ability to get quotes, and frankly….we don’t need the practice.
3. Stop “reacting” to a renewal, and start “planning” for the future.  With your newly acquired broker, develop a strategy, and not just for a single renewal cycle, but for 3-5 renewal cycles.  This makes a tremendous difference.
4. Keep an open mind to newer innovations and strategies.  One of the most dangerous thoughts/ideas is “we’ve always done it this way”.  Health care and benefits is in the midst of a transformative revolution, and there are some fantastic strategies out there to lower healthcare costs while improving employee benefits.  Listen, vet these ideas out.  Don’t just assume that the only way to finance healthcare risk is by transferring it to an expensive health insurance plan.

The health insurance renewal ritual is certainly a sacred dance, handed down from generation to generation.  And though it may seem a comedy of errors to some, remember, dear reader….it’s no laughing matter.  It’s all fun and games until someone gets a 40% rate hike.

Josh Butler

Josh is the President of Butler Benefits & Consulting. Passionate about healthcare reform and helping employers save money while improving the quality of employee benefits.

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