Published in Dealer Magazine, March, 2007
“What do you mean by bidding health insurance, my broker does it for me?” This is a question we sometimes hear. Here’s the problem…
Since the inception of this magazine, I have been touting the benefits of better insurance coverage and premiums derived from a truly competitive bid process. As far back as I can remember, our dealer clients have requested that we apply our “Insurance Warrior” skills to health insurance. To be frank, I resisted. But as General George Custer said at the beginning of the Battle of Little Bighorn, “Hey Bob, do you think 12,000 Indians can all be wrong?” So here we are, now managing bid processes for auto dealer health insurance with very good result.
“What do you mean by bidding health insurance, my broker does it for me?” This is a question we sometimes hear. Here’s the problem. The health insurance industry has done a wonderful job of convincing the buying public that all bids should come through one broker or sometimes they call themselves consultants. True consultants, remember, are not involved in the sale of your insurance, have no relationship with your insurance carrier, receive no benefits from your insurance carrier and are above everything else, objective. That being said, why would you expect to get the very best deal available if one broker who will benefit from the sale of your insurance is in charge of the process? There is nothing to motivate him to fight for you.
It is true that just about any health insurance broker can go to just about any insurance company and get an “off the shelf” bid. But you don’t want an “off the shelf” bid. This stuff is expensive and you need the best coverage at the best price. Running a truly competitive bid process where the bidders have something at stake is the only way to do it. In addition, a bid process with multiple bidding brokers will assure that your choices are not dictated by the market preferences of one broker.
We have all suffered through extraordinary price increases over the past few years. Though the increases we see now, are less than they were in the recent past, they are ever increasing just the same. Most dealers fall into the 51 to 500 employee category which over the last ten years has received the highest rates of increase, often regardless of the group’s loss experience. According to some recent surveys, the 2007 increases for some in this group may be as high as 15%. In many cases, aggressive negotiation and effective bidding will keep these increases to a minimum without negatively affecting coverage.
One statistic insurance carriers look into is the percentage of employees on the plan in relation to those that could be on the plan or “employee utilization”. The theory is that if you have low utilization, your plan will have a higher percentage of unhealthy people. That theory is often borne out by poor loss experience. So there are benefits to getting more employees on your plan, although that does drive your total cost up. So the question you may want to ask is “does my plan encourage the healthiest of employees to enroll?” To encourage the healthiest of employees to join, you may want to look at your plan design. There may be something other than cost that is driving them away. Or, it may be that they have not been properly educated on what your plan has to offer. In any case, it will pay to review the plan you have in place and consider many of the new options that may be available to you and your employees. An objective consultant can help you analyze both the costs and benefits of any plan change.
There is a lot more that we can talk about in future articles like the specifics of plan design, ancillary coverages, provider networks and self funded programs. But this article is about bidding your coverage for the best price and best product. You can negotiate health insurance rates, especially if you have good loss experience. That negotiation however, will be the most successful if you have other options available to you. The way to get those options is a competitive bid process with multiple insurance brought to you by multiple brokers who will make money if you buy their product or not make money if you don’t. A bid process with multiple brokers will also expose you to a number of different options that one broker may not show you due to their preferences, biases and relationships with insurance companies.
Pressure, it’s all about market pressure. Using one broker who is in control of your health insurance bid process will not create the market pressure necessary to achieve the best results for your employees and your bottom line.
