Have you ever received an increase in your premium payments for your insurance plan without any explanation as to why? With traditional insurance plans, this lack of transparency is common, leaving you blindly paying the increased premium without any justification.

This can make it difficult for business owners to determine whether they are getting the most value for their money. Unfortunately, this is exactly what traditional brokers and carriers want – to keep their customers in the dark and avoid justifying increased premiums. If only business owners could peak behind the curtain and see what's going on!? Well friends, this is actually possible. Let me show you how...

Consider Alex, the owner of Widget Co, which has 100 employees. Alex recently received a 20% increase on his health insurance premiums and asked his broker for an explanation. Despite the broker providing some allusive reasons for the increase, Alex was left feeling helpless and unable to take action. However, the reality is that one employee was responsible for the majority of the premium increase. If Alex had been aware of this, he could have worked with both the carrier and the employee to find a better solution for all parties involved, while minimizing the premium increase.

From the carriers' perspective, there may be several reasons why they would want to avoid showing the reasons for the increase in premium, including:

1. Complexity of the pricing model: The pricing model for health insurance plans is often complex and can involve a variety of different factors, such as claims history, risk factors, and other variables. Explaining this complexity to customers can be time-consuming and may require a significant amount of resources.

2. Competitive advantage: Carriers may be hesitant to reveal their pricing models to competitors, as this could provide valuable insights into their underwriting practices and pricing strategies.

3. Underwriting risk: Carriers may also be concerned about the risk of adverse selection, which occurs when higher-risk individuals are more likely to enroll in a health insurance plan. If carriers disclose too much information about their underwriting practices, this could potentially lead to adverse selection and could drive up premiums for all customers.

4. Changing market conditions: Finally, carriers may be hesitant to provide too much transparency because it could reveal weaknesses in their business model or pricing strategies, which could be exploited by competitors or could lead to increased scrutiny from regulators.

But with all that being said, the strongest reason for keeping the business owner in the dark has to do with incentives. You see, traditional carriers (and often their brokers) often have no incentive to provide transparency to their customers, as they financially benefit from maintaining the status quo and avoiding scrutiny of their pricing practices. This can create a power imbalance between brokers/carriers and their customers, and can make it difficult for businesses to find the most cost-effective and value-driven insurance plans.

Peaking behind the curtain

Let's revisit Alex, who had grown frustrated with the constant increases in his health insurance coverage and set out to explore other options. Much to his surprise, he discovered alternative funding arrangements, such as HRAs, Level Funding and Captives, which his current broker had never shared with him. By exploring these options, Alex was finally able to take control of his healthcare spending and gain more transparency into his insurance plans. Let's take a closer look at what these options are:

HRAs

HRAs, or Health Reimbursement Arrangements, can also help business owners gain more insight into the underlying cost of their healthcare spending and the factors driving their health insurance premiums. HRAs are a type of benefit plan that allows employers to set aside funds to reimburse their employees for certain healthcare expenses. This provides more transparency and control over healthcare spending, as employees are encouraged to shop around for the most cost-effective healthcare services and procedures.

By offering an HRA, business owners can gain more insight into the specific healthcare services and procedures that their employees are using, and can use this information to negotiate better pricing with healthcare providers. Additionally, by setting aside funds for healthcare expenses, business owners can gain more control over their healthcare spending and may be better able to predict and manage their healthcare costs. This can help reduce the impact of unexpected increases in premiums and provide more stability and predictability to the business.

Level Funding

Level funding is an alternative funding arrangement that allows business owners to gain more transparency into their health insurance premiums and see why they increased. With level funding, a company pays a fixed monthly premium based on the expected claims of their employees, with the ability to receive a refund if claims are lower than expected. By separating the cost of claims from the insurance carrier's administrative expenses, business owners can gain more insight into the underlying cost of their healthcare services and procedures. This can help business owners make more informed decisions about their healthcare spending and provide a better value for their employees.

Captives

Captives are another alternative funding arrangement that can help business owners gain more transparency into their health insurance premiums and understand the factors driving their costs. With a captive, a group of businesses come together to form their own insurance company, which is owned and controlled by the members of the group. This allows business owners to take control of their health insurance plans and customize them to meet their specific needs. By pooling their risks together, businesses in a captive can often achieve more stable and predictable premiums, and gain a better understanding of the underlying cost of healthcare services and procedures.

Taking action

After exploring his options, Alex decided to become a part of an existing captive. By doing so, he was able to gain more transparency into his healthcare spending and reduce the impact of unexpected increases in premiums, without the administrative burden of creating his own insurance company.

Working with the captive, Alex was able to customize his health insurance plan to better meet the unique needs of his employees. They gained more control over their healthcare spending and were able to negotiate more favorable pricing with healthcare providers. This allowed them to provide a more cost-effective and valuable benefit to their employees, with better coverage and the ability to go to the same providers.

For Alex's employees, the experience was positive as well. They appreciated the transparency and control over their healthcare spending, and felt more empowered to make informed decisions about their healthcare services and procedures. With the captive, they were able to access a wider range of healthcare providers and services, and had the ability to shop around for the most cost-effective options. Overall, working with the captive allowed Alex to take control of his healthcare spending and provide a more valuable benefit to his employees, while also gaining more transparency into the factors driving his health insurance premiums.

Captives may or may not be right for your company. Your company may benefit from HRA's, Level Funding or even Self-funding. But the point is, there are other options out there that will allow for you to finally peak behind the curtain and take control of your health care spend. If you want help exploring your options, we are here to help.