Well, it’s been quite an interesting renewal/marketing season already, hasn’t it? Trend factors are lower than they’ve been in years. Some carriers are out there offering premium holidays for new clients who sign up before January 1. And when’s the last time you saw a carrier offer a double-digit rate decrease right out of the chute?
Some are likening this to the mid-nineties — the last time that reform of the health care system entered the national debate — when, according to the Mercer National Survey of Employer-Sponsored Health Plans, employers’ costs for health insurance were lower than CPI from 1994 through 1997.
Back in the 90’s, HMOs were enjoying a substantial pricing advantage over other types of health plans and employers could actually lower their overall costs for insurance by providing incentives for employees to switch from more expensive plans to lower cost alternatives. Today, however, HMOs have lost much of their pricing advantage in the market. In fact, according to the Mercer survey, in 2010, the average per employee cost for HMOs was actually higher than that for PPOs. Consumer-directed health plans offer a distinct pricing advantage, but they are still relatively new models and, although gaining market share every year, still haven’t approached the levels that HMOs were beginning to enjoy 15 years ago.
Is it possible that, both then and now, there was some artificial suppression of prices going on, with the specter of a massive system overhaul looming? Perhaps. But one major difference in these time periods is that in the 90’s, health reform was a debate. Now it’s a law, and part of that law is the 85% minimum loss ratio carriers must maintain for their insured groups with more than 100 lives. Carriers are loathe to go through the extremely complex exercise of returning surplus premium if their loss ratio dips below 85% and, as such, it appears that they are being much less conservative with their pricing for insured products than they may have been in the past.
Enjoy it while you can. If they cut things too close to the bone, any significant uptick in utilization could make next year’s renewals painful.
Since we’re talking about health reform, another aspect of PPACA impacting this renewal season is the upcoming 60-day notice requirement for plan changes. Even though it’s not likely to be required until some time in 2012, many employers are trying to get ahead of the curve and getting procedures in place that will be compliant. This means that many open enrollments that used to be scheduled in November are now being planned for October. Enrollment periods that were formerly scheduled for October are not likely to be pushed back to September, so October stands to be a busy, busy month. Carriers are often asked to participate in open enrollment meetings and it remains to be seen whether they’ll be sufficiently staffed to meet the demand this year.
I’d suggest lining up your carrier reps early.
These are definitely unprecedented times. What health reform will look like after next year’s election is anybody’s guess. But this renewal season will certainly be one to remember.
Lane is principal at Mercer in Washington, DC. He can be reached at firstname.lastname@example.org or 202-331-5222.
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