Inflation + Tight Reinsurance Markets = Renewal Disaster

U.S. employers are at a breaking point as healthcare costs continue to soar, and inflation tightens its grip across every sector. Blistering inflation, especially food and energy, combined with tight labor markets have driven average wage increases to almost double what employers were budgeting over the prior decade. The squeeze from increased payroll is putting plan sponsors in a vulnerable position.

Now comes the renewal. Dialing in renewal increases has historically been a game of cat and mouse with network business. Get a big renewal, negotiate, and worst-case scenario, get a quote from ClaimDOC to really put that finishing touch of pressure to keep the renewal at an 8-10% increase. “A Fair Renewal” that makes every CFO dislike their broker more than the broker ever knows. When a broker does the obligatory “how’s business” then shoves a big renewal in their face, there is someone in the room who wants nothing more than an excuse to fire them.

Word on the street is stop loss markets are getting bludgeoned this year on their network business. This has sent shock waves through the risk-taker community, and the losses aren’t just in the big carrier markets. Independent Third-Party Administrators (TPA) have provided a great mechanism for unbundling self-insured businesses. Nonetheless, these arrangements still primarily rely on networks that have been abysmal at protecting spend on facility claims.

To add more salt to the wound, there are risk-takers who migrated to the latest and greatest in underwriting technology. These tools have been excellent for some of our MGU partners to use situationally. However, over-reliance and inconsistent results contributed to industry struggles with loss ratios. These models hit the market with a splash. Unfortunately, some plan sponsors are seeing delayed reimbursements followed by hefty renewals.

The investors backing risk-takers are sour, and someone will pay this renewal season. It’s not rocket science; the underwriters will be expected to improve loss ratios by marking risk more conservatively, leading to higher premiums. It’s just the start and we are already seeing plan sponsors getting pounded. Brokers and their clients are looking for a lifeline when stop loss isn’t backing off their major increase, and we are here for them. 

With healthcare expenses expected to surge by an estimated 8.5% in 2024, the combination of factors is migrating ClaimDOC’s value proposition from being a better way, to a necessary way. The act of getting hit from all sides is pushing organizations to reevaluate their health plan and explore alternative solutions during this renewal season. They don’t want ideas to change costs on the margin; they are demanding solutions to help keep them in a financial position to offer competitive pay and bonus structures.

Rethinking Traditional Networks: The Power of Network Replacement

Even when you self-insure your health plan, you may still find yourself with little to no influence over contracts between the network (insurance company) and healthcare providers (hospitals). Unfortunately, these contracts typically favor everyone except the employer and employees to which they offer benefits. If your organization needs to cut costs, it may be time to consider a network replacement solution that empowers your organization to secure healthcare services at a fair and reasonable price. Network replacement often represents the largest component of cost savings for any health plan.

Implementing these strategies requires a degree of expertise and thorough due diligence, but the potential rewards are immense. Lowering costs for both employers and employees while ensuring more manageable renewals paves the way for long-term sustainability.

You can either be the hammer or the nail. Working with us lets you take control and make this health plan renewal season an opportunity to revitalize your approach. At ClaimDOC, we are passionate advocates of a unique network replacement model that prioritizes the well-being of our members and the satisfaction of our clients. With over a decade of experience, we understand the complexities involved in implementing a new health plan. It’s time to think creatively and strategically to overcome the economic and industry challenges plan sponsors face.

Change Agents or Survivors – Don’t Care

We don’t hate on brokers who still use networks. ClaimDOC DirectAccess™ is the most effective alternative to networks, yet, it’s not right for everyone. Brokers and the firms they work for are for-profit businesses. They can generate business and revenues in whatever way they want. It’s like when a team gets upset thinking their opponent is running up the score – if you don’t like it then do something about it. In many situations, we haven’t been able to change the way established brokers think about managing claims spend.

Our sales team has continued to chip away with ongoing outreach and education to the most resistant brokers. This year, market environments are influencing broker behavior in ways that we often can’t. Here is a list of some firms that have written business with us in the last six months – USI, Lockton, Marsh, HUB, Brown & Brown, McGriff – with additional deals tracking with CBIZ, Higginbotham, and Gallagher. Plan sponsors are getting pushed to a financial breaking point and putting their broker on the hot seat. Brokers are left with choosing whether to sink or swim. They are choosing survival. Although they might not fully understand the mission, most are taking the opportunity to learn.

It’s unfortunate we are seeing plan sponsors put in this position, but it feels good to be able to do something about it. Get away from the network solutions, dramatically change your projected claims spend, and get your renewal under control. Here’s to hoping more brokers and clients want to be the hammer this renewal season.