If you’re a Business Owner, CFO, or HR Professional that views your employees as assets and investments…
How would it feel to hear that your nonprofit organization is going to save $1.6 million in health insurance costs over the next five years?
It might sound a bit gimmicky at first, right? You’re probably thinking: If this were a real possibility, I’d already be taking advantage of it.
Well, here’s the thing. There’s simply reviewing and choosing from the listed plan options provided by an insurance carrier (which is the route most go), and then there’s enlisting the services of a benefits advisor to look at every coverage option, listed and unlisted, to implement a strategy that improves coverage and reduces costs.
So, if you’re a business owner or human resource professional and you’re looking for ways to achieve savings on health insurance costs, consider what the assistance of an experienced and dedicated advisor could mean for your company or organization. Here, we’ll walk through a case study involving one of our non-profit clients to demonstrate this very thing.
Health Insurance Case Study: Big Savings for Non-Profit
So, let’s take a look at how we were able to achieve significant savings in health insurance costs for one of our Millen Group clients. This particular client is a highly respected non-profit based in Richmond, Virginia, that’s been around a long time and done a lot of incredible work for the community.
And to give you a sense of what kind of savings we’re talking about, here are the key points of what we were able to do for this non-profit organization:
- Immediate Savings: $140,000 (kicks in the first month).
- Long-Term Savings: $1,600,000 (over five years).
Now, this is a significant amount for any organization, but even more so for a non-profit. If you’re at all familiar with how these organizations operate then you know that they’re mission driven, not profit driven (as their name suggests).
So, this means that the pay for employees is typically not the highest in the industry. That is to say an employee would probably be paid more for a similar role at a for-profit company. However, one of the ways non-profits compensate for this is with an impressive employee benefits package that helps attract and retain employees committed to the organization’s mission.
It’s an effective strategy. However, offering the best benefits comes at a cost. High costs to be more precise, as well as high usage and lots of risk assumed by the medical insurance carriers.
So, how then did we pull this off?
When it came time to renew their current health insurance policy, this non-profit received a 32% renewal increase from their carrier. No, that’s not a typo. They received a 32% renewal increase. An increase like that could crush any organization, let alone a non-profit. Additionally, from the published rates that the carrier made available, the best option cost-wise was a 15% renewal. But even this option came with hidden pitfalls.
Published vs. Unpublished Insurance Rates
As we touched on earlier in the introduction, there’s a difference between the published insurance rates you’re seeing from your carrier and the unpublished rates that most aren’t seeing (also known as listed and unlisted rates).
But why is this exactly?
If you’re wondering why you aren’t seeing both the published and unpublished rates when it comes to your plan options, the answer is a pretty straightforward one. For most, it would overwhelm and confuse. For the untrained eye, that amount of data tends to have a paralyzing effect rather than a clarifying one.
Learning what to look for, how to apply it, what questions to ask, and so on, can take years of experience to be done consistently and effectively. And if you’re running a business or an HR department and managing all the hiring, training, recruiting, etc., the last thing you want to be doing is sifting through all that health insurance data. That’s not your job.
Utilize An Advisor to Seek Out Unpublished Rates
You want an experienced advisor to help you make the right fiduciary decisions for your company. The insurance companies pay advisors like us a flat rate to assist with these complexities.
Keep in mind that the published rates you’re seeing from the carrier can come with hidden pitfalls, as well. For example, if your company was just hit with a hefty renewal increase and you’re looking for a more cost-friendly alternative, other plan features beyond cost can have a negative impact.
In the case of our non-profit client, the best available published rate was a 15% renewal. While, of course, this was much better than the 32% increase, the 15% renewal plan came with a drastically different network. Big changes to your network can result in unpleasant surprises when you travel out of state or discover that your specialist is not covered in the new network.
So, what we can do is dig through the many unlisted, unpublished options to find the best coverage for your company. With our non-profit client we were able to take that 32% renewal increase down to just 7% while actually improving their coverage in the process.
Our Approach: Implement a Zero Deductible Strategy
MillenGroup is one of the few benefits advisory firms in the nation with a strategy for a zero deductible solution while also improving your coverage. Anyone can drop the rate by putting in an HSA plan, but we don’t stop there. We can make your coverage even better than it was before with essentially no deductible.
Wait a minute. Is that even possible?
The idea of cutting your rate while making your coverage better is unfathomable for most people. But we use a strategy that has been refined for years using data, facts, and historical trend. When we see that the non-profit’s historical trend on medical has been a 12% annualized increase, we can apply our strategy and change medical plans to decrease their spend immediately in the first year by $140,000. This means that their medical costs will drop approximately $12,000 a month.
Three other coverage factors we discussed with our non-profit client were long-term disability, worksite benefits, and regional versus national plans.
This is a factor that doesn’t tend to grab many people’s attention, but we recommended a change to our client’s long-term disability insurance. Typically, most feel this doesn’t require much attention, but it’s important that you look at what the contract says so that you get paid and know how long the coverage lasts for.
Our client also had a bunch of worksite benefits in place, which is great. Worksite benefits, accident plans, cancer and critical illness insurance, these are cost-effective methods that help to offset medical expenses and provide security. However, the carrier they were currently using was considerably overpriced, easily 30% too high, so we wanted to make some changes there.
Regional vs. National Plan
At the time, our client had a regional plan in place. Of course, there’s nothing inherently wrong with having a regional plan but we wanted to highlight the coverage limitations when compared to that of a national provider. For example, what this might mean if they were traveling or had a family member head off to college in a different state.
Closing Thoughts: Reach Out for Savings
This is the advice we give on a regular basis. If you’re an employer, reach out and give us a call. We can glean a lot of information from a 15-minute phone call with a few simple coverage questions. How many employees? What’s your demographic? What issues are you having? Where are your pain points? Is your company growing or declining? And so on. In pretty quick order we can give you a sense of what options might be available for your company.
We love this stuff!
This is what we do. We love digging deep, solving problems, and making things better. We work with small and midsize companies anywhere in the country. So, if you’re not satisfied with the 15% (or more) renewal rate you’re seeing from your carrier each year, give us a call.