There are only a few ways to negotiate with an insurance carrier on fully insured plans. For most carriers, claims history is the most important factor in determining pricing. Therefore, you better know your claims if you wish to negotiate with its leverage. Over the next few months, I am going to share five simple ideas to help you save money on your benefits. Out of the five, I hope you find at least one of them useful.
Here’s the first one: Know Your Claims!
Fully Insured and Self Insured
Insurance plans are fully insured or self insured. Most large companies have both. Typically, large multinational companies have self insured medical plans and fully insured non-medical plans. Medium and smaller companies tend to have a majority of fully insured plans. Therefore, it is likely that your company has at least a few fully insured plans. Only fully insured plans will be discussed in this blog.
What’s Inside a Premium?
Premium can be broken down in two parts, claims and retention. When an insurance company prices a new premium, they estimate future claims by looking at your claims history. Estimated Claims + Retention = Premium. Retention is approximately 20%-25% of the premium cost and consists of the following: premium tax, overhead/administration, margin/profit, and commission/fees.
A Happy Insurance Carrier
Insurance carriers want claims to be around 75%-80% of premium. If claims are over 80%, the carrier starts to lose money; if they are below 75%, they start raking in the profits.
Do a thorough analysis of your claims. If your claims history is running less than 75%-80%, demand a decrease in premium. If you do not get it, there is some reason why the carrier does not want to insure your risk. For example, a carrier may not want to cover offshore drillers, so they jack up the price to reduce that demographic in their pool.
If you claims are over 80% you are getting a good deal. However, there are some carriers that may want your group and will offer you a better deal, even if you are running over 90% claims.
Please tell me your thoughts and share your experiences. Know your claims!
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