Fully insured plans, where you pay a monthly premium for your health insurance coverage offer no incentive for either the employer, the insurance carrier, or the traditional insurance broker to lower claim costs.
To start, if the employer lowers claim costs within a fully insured plan, since their company is part of a much larger insurance pool, reducing their claims has little to no effect on their premium increases since the premium increases are based on the experience of the larger insurance pool, not the specific experience of the employer.
If the fully insured carrier lowers their claim costs, due to the medical loss ratio requirement that is part of the Affordable Care Act, the carrier would have to lower their premiums next year and or offer premium rebates which would upset shareholders and upper management, whose main job is to drive premium growth.
Lastly, since most health insurance brokers get paid a commission based on a percentage of the premium paid, the broker has a financial incentive to allow the premium to go up and therefore the underlying claims. There is generally a financial disincentive for traditional brokers to control premium costs or recommend alternative solutions.
By keeping employers focused on the destination, it’s much easier to overcome the perceived challenges of the journey. The bigger message to challenge employers is that health care costs are a simple function of frequency of claims multiplied by the unit cost of those claims.
Focusing on frequency and per unit cost is a function of managing the health care supply chain. This paradigm shift, is available for any group that chooses to pursue a self-funded or partially self-funded (level-funded) arrangement as employers only pay for the health claims their people consume. By managing the supply chain, which are the actual cost of the items utilized like office visits, surgeries, imaging, hospitals and drugs, buyers are able to pay attention to the cost and quality of each unit of healthcare, then collectively are able to lower costs together and improve the predictability of outcomes.
If employees are armed with eye-opening education and information they need, coupled with the incentives to drive action, the rewards are lower healthcare costs, lower employee contributions and increased profitability for employers. Reduce the health care costs, and you reduce the health insurance costs.