The Role of Large Deductible Policies for PEOs in the Failures of Small Workers’ Compensation Insurers

or as this author would title it, “Another misguided effort to prove those that should have known better to be in the right and those that should have been protected to be in the wrong…”

The link below is to a study done in August of 2015 by

By James R. Jones CPCU, AIC, ARM, AIS

Executive Director, Katie School of Insurance & Financial Services at Illinois State University

PEO Large deductible study Aug 25

The white paper specifically discusses:

The Role of Large Deductible Policies for PEOs in the Failures of Small Workers’ Compensation Insurers

non-white paper language in “quotations” … “I have only copy/pasted part of the white paper and urge you to review it in your entirety…”

Background of this Study – Page 4

Following a series of workers’ compensation insurer insolvencies related to large deductible plans, the National Conference of Insurance Guaranty Funds (NCIGF)—a non-profit, member-funded association that provides national assistance and support to the property and casualty guaranty funds located in each of the 50 states and the District of Columbia—saw a need for further study of the issue examining the underlying causes of these insolvencies. The NCIGF provided technical assistance and support for this study.

…”totally appreciate that the NCIGF gets “stuck with the tab” for insurer insolvencies.  At the same time, also understand the frustration that they have no ability to legislate change that could be potentially impactful to this issue which is the role of the regulators.

The following factors (especially in combination) have been identified as having the potential to cause these workers compensation insurer insolvencies:

  •   Inadequate collateral posted by the employer using large deductible policies;  governed by the State Departments of Insurance…
  •   Employers that control the claims handling for injured workers through Third Party Administrators where the insurer has limited access to claims information; this is only allowed if the insurer allows it… again governed by the State Departments of Insurance…
  •   Cross-ownership of PEO employers and insurance companies used to provide workers’ compensation to the PEO.  governed by the State Departments of Insurance…
  •   Pursuit of aggressive growth strategies by insurers through MGAs and PEOs.  governed by the State Departments of Insurance…The ability to provide and ongoing manage the solvency, operations and ethics of an insuring entity is only governed by the State Departments of Insurance.

“This section is absolutely inaccurate”… 

Special Considerations for PEOs and Large Deductible Policies – Page 7

A professional employer organization (PEO) is a firm that provides a service under which an employer can outsource employee management tasks such as employee benefits, payroll and workers’ compensation, recruiting, risk/safety management, and training and development. The PEO hires a client company’s employees, thus becoming their employer of record for tax purposes and insurance purposes. The client then pays a fee for this service and “borrows” back its employees.

…there is no transfer of labor never mind “borrowing” in the coemployment model.  What is referenced above is a model known as “staffing” or payrolling” which is oft-confused with the coemployment model.  Coemployment equals two employers sharing emploument responsibilities versus the model described which is that of a sole employer (staffing company)  

…why?  so many more that do not involve PEO?  Someone to blame for lack of proper financial regulation?

In addition to solvency issues related to these abusive practices of providing illusory coverage, regulators should consider that a number of consumer protection laws governing insurance sales and marketing may also be violated as the PEO may obscure premium rates as the amounts paid to PEOs by client companies are fees, in lieu of insurance premiums.

“…really?  I know of no other industry sector more heavily regulated. 

NCCI and PEO’s – Page11

The latest study by their chief economist, Harry Shuford, specifically set out to address some of the negative assertions made against PEOs. In one conference presentation, he stated that getting rid of the tarnished reputation of PEOs was similar to “getting chewing gum out of your hair.”  However, despite the reputational issue, many of his findings showed the favorable value of PEOs in the workers’ compensation system. He urged the industry and regulators not to just speculate about PEOs but to investigate.

“The irony behind these NCCI studies were that they were also commissioned by parties that were not “friends of PEO” and the studies ended up doing just the opposite of what was hoped.  The PEO model equaled or out-performed the traditional workers’ compensation delivery model on all fronts.  This reality leads to lower costs to consumers and insurers alike

Actuarial science “investigates” versus “speculates” and as a result, Instead of proving out things like fraudulent behavior by PEO’s, the NCCI studies (3) proved out that the PEO business model performs as well if not better then the traditional model.”  

“Empirical evidence is catching up with the venom of the naysayers.  

All three NCCI reports done by Mr. Schuford can also be found on the Compass for review and affirmation that  with PEO, “Before you speculate, Investigate”.

-PRH

 

On Site HR Receives Award

It brings me great pride to announce that our friends at On Site HR/The Roberts Group have been awarded…

Texas Mutual’s Top Honor for Workplace Safety

Only 200 of these awards are awarded by Texas Mutual Insurance (TMI), the largest provider of workers’ compensation in the State of Texas with 66,000 policyholders.

As of end of year 2014, TMI wrote over $1.1 billion of Texas workers compensation insurance and controlled over 40% of the Texas workers’ compensation marketplace (the next closest was Zurich at 3.46%.

http://www.tdi.texas.gov/company/top40.html#wc

The award salutes employers that go above and beyond in maintaining safe work environments for their employees.  TMI every year awards a small fraction of their insureds who have exemplary safety records and exceptional safety programs.

Hats off LJ, Josh and Chris!

-PRH

————————————-

twitter.com/texasmutual

FOR IMMEDIATE RELEASE: March 25, 2016

Media Contacts:

Levente McCrary or Katie McKee

lmccrary@echristianpr.com

kmckee@echristianpr.com

Elizabeth Christian Public Relations

(512) 472-9599

Tarrant County Companies Receive

Texas Mutual’s Top Honor for Workplace Safety

 Tarrant County, Texas—Today, Texas Mutual Insurance Company announced that five employers in Tarrant County have been awarded the company’s top honor for workplace safety. Texas Mutual, the state’s leading provider of workers’ compensation insurance, recognized these companies for their dedication to workplace safety.

Honorees from Tarrant County include:

  • Walsh & Watts Inc.
  • Intercon Environmental Inc.
  • Brown Staffing Services DFW LTD
  • Offsite HR LLC

To qualify for this honor, a company must demonstrate its commitment to workplace safety by implementing an exemplary safety program and controlling workers’ compensation losses.

“At Texas Mutual we focus heavily on promoting workplace safety and educating employers about safe work practices,” Richard Gergasko, president and chief executive officer of Texas Mutual Insurance Company, said. “These awards recognize companies for their dedication to workplace safety and their commitment to the safety of their employees.”

This year, Texas Mutual distributed 200 safety awards to policyholders throughout the state who have exemplary safety records and exceptional safety programs.

About Texas Mutual Insurance Company

Austin-based Texas Mutual Insurance Company, a policyholder-owned company, is the state’s leading provider of workers’ compensation insurance. Texas Mutual provides coverage to 40 percent of the market, representing over 64,000 companies, many of which are small businesses. Since 1991, the company has provided a stable, competitively priced source of workers’ comp insurance for Texas employers. Helping employers prevent workplace accidents is an important part of Texas Mutual’s mission.

Technology Can Create a New Breed of Underwriters

Below is a great article about technology’s inevitable impact on underwriting.  The article was published on May 16th by Property Casualty 360.  Enjoy!

 

Where historically an underwriter’s job has been viewed as one of accepting or rejecting risks and also one of creating a homogenous portfolio of risks, we are witnessing the emergence of a new breed of underwriters because the advent of new technology. This new class of underwriters is leading the change in revolutionizing the insurance business and better equipped to handle risk management.

Technology holds the key to the shifting sands of market dynamics in the industry. We are surrounded by a combination of market forces that are moving customer expectations. There is a greater number of millennials joining the workforce, customers’ preferences and expectations are being reshaped and sharpened by providers such as Facebook, Amazon, Alibaba and Seamless. Even our transportation is becoming on-demand with providers such as Uber and Lyft. Money is being increasingly digitalized. In such a stimulating and progressive environment going through a great amount of flux, the nature of risk assessment and selection must address not only internal requirements, but those of the insured and the agent.

Status quo in underwriting

In conventional underwriting, agents send in their applications to an underwriting contact within the carrier’s organization.

Few companies have a really good handle on what it means to be a customer-centric insurer, because the concept can…3 ways to bridge the gap between risk and customer engagement

The underwriter receives the applications in a paper-based and mostly manual environment. The underwriting process is cumbersome, with the underwriter spending a considerable amount of time in researching the risk and populating data subsequently in an internal system. This stage commonly involves a lot of navigation back and forth through non-regularized systems such as e-mails and legacy systems, such as policy administration.

The underwriter is left with little bandwidth in closely examining, quoting and optimally pricing the risk.

As an industry, there is an overwhelming need for technology to create fluid connections among the various stakeholders in the insurance process.

The technology must include robust analytical capabilities that free the underwriter to address customer and agent needs as well as ensure appropriate risk pricing and positioning. A cohesive technology that spans across agent portal, policy and claims systems, document management and e-mail, to predictive models, analytics, business intelligence tools, and a variety of data services.

The application must also take into account the interconnected nature of the process and should bring in workflow capabilities to move tasks from agents to underwriters seamlessly. Empowered by technology, the underwriting staff can expand their view of risk by working with agents in real time to better manage their risk. Agents also have a window into the missing information about risks and exposures, and can remove obstacles the application process encounters. On the whole, we need to increase the ease of doing business between the carriers and the agents to better serve the insured.

Technology as a differentiator

As an industry, we have focused the underwriter’s role around receiving data that comes from the producer, checking to make sure the data is accurate and determining based upon the data, whether the risk is acceptable or not.

In addition, underwriters must assess whether the risk is even a risk that they would like to write. Technology has progressed to the extent that a volume of the risks that the carrier organization is screening can be underwritten through rules-driven profiling and straight-through processing. Carriers can take on the risks suited to their appetite by setting pre-qualification and eligibility rules. This helps build a better book of business and positively impacts profitability.

The present underwriting ecosystem is burdened with a policy-centric view of customers, leading to not meeting customer expectations of a seamless interaction with companies. The process must become customer-centric. Modern technology perfectively positioned should provide a single view of the insured’s account across the enterprise, lines of business, policy systems and devices. Applying these capabilities enables the underwriter to focus on increased agent efficiency and meeting customer expectations while better analyzing and pricing every risk.

Why is this necessary?

These new applications are rich in the sources of data available to the underwriter, which will increase the underwriter’s effectiveness and help them better manage their risk by reducing the amount of time spent searching through various data sources.

Standardizing the data used by the underwriters, embedding consistent rules throughout the organization and allowing underwriting knowledge to be codified and maintained will provide a single source of truth for the organization. As importantly, underwriters will  be able to identify cross sell and upsell opportunities across lines of business. In general, these applications will allow the underwriter to be more surgical in their approach to the business and generate loss ratios that will outperform the industry.

Underwriting is one of the few bastions left to fully leverage and use technology to the fullest. Given the current competitive landscape, it is essential that available technology be applied to the greatest extent to accurately price risks, create stronger relationships with agents and better serve customers.

Tony Cid is global head of commercial insurance at Jersey City, N.J.-based insurance software company Intellect SEEC.

 

Property Casualty 360 Logo

The American International Group (“AIG”) Decision

Bar none, there has been no more innovative and successful organization in the property and casualty insurance realm then AIG.  The following headline today:

AIG Chairman Defends Keeping Both Life and P/C Insurance Units – Insurancejournal.com

…amazes me to even be in consideration.  AIG did not just distribute the most product, they created the most.  Their entities provide the largest amount of “excess and surplus” (aka non-admitted) capacity then any other insurer times three in the country.

Not a life guy, so admittedly come from a position of not understanding how anyone with a right mind would ever consider selling the crown jewel of AIG – their property and casualty insurance portfolio.  It seems “investor activists” such as Carl Icahn have a different take:

“Icahn Renews Attack on AIG CEO Hancock; Insists ‘Drastic Shift’ Needed”

http://www.insurancejournal.com/news/national/2016/01/19/395397.htm

Icahn Renews Attack on AIG CEO Hancock; Insists ‘Drastic Shift’ Needed

Activist investor Carl Icahn has again called for American International Group (AIG)  to be divided into three separate companies and expressed doubt that AIG CEO Peter Hancock’splanned strategy presentation next week will satisfy his demand.

He said that if Hancock “fails to present a drastic strategic shift and instead is limited to only incremental changes such as small-scale asset sales and incremental cost cutting” then what “little credibility management now has will be lost.”

Icahn says the split would let AIG to “shrink below the threshold for systemically important financial institutions” (SIFI) and avoid SIFI-related regulatory restrictions.

“[I]t is abundantly clear to me there is only one sensible path for AIG to follow: become a smaller, simpler company with a path to de-SIFI,” he said in a letter on his website. – Carl Icahn

So the greatest insurer in the past century has to disband its units because the federal government has given it the equivalent of the “franchise tag” in the NFL.  Really man?

Let’s look at their numbers…

AIG Consolidated Operating Financial Highlights ($ in Millions, Except per Share Amounts) 1Q15 1Q16 Inc. / (Dec.)

Operating revenues $14,590 $12,737 (13%)

Pre-tax operating income (loss):

Commercial Insurance: Property Casualty 1,170 720 (38%)

Mortgage Guaranty 145 163 12%

Institutional Markets 147 6 (96%)

Total Commercial Insurance 1,462 889 (39%) “…the p and c side”

Consumer Insurance: Retirement 800 461 (42%)

Life 171 105 (39%) Personal Insurance (26)

222 N/M Total Consumer Insurance 945 788 (17%) “…the life side”

Total Insurance Operations 2,407 1,677 (30%)

and today’s article out of the journal.,,,

Breaking up AIG is a huge mistake as well as continuing to drill the current CEO.  How does one run a company when he is is constantly under seige… They have already lost many top execs recently such as John Doyle (Marsh) and Russell Johnston (QBE) whom I amagine had to be frustrated with more time spent defending the company versus advancing it.  These two Industry stalwarts, with the help of course of their colleagues, allowed AIG the second chance in this writer’s opinion and to see them leave and press like this is saddening.  Let’s hope Icahn gets bought out…

-PRH

By Sonali Basak and Emma Orr( | May 12, 2016 

American International Group Inc., which is shrinking under pressure from activist investors, is committed to retaining operations in both life insurance and property/casualty coverage, Chairman Doug Steenland said.

“We remain of the view that that is the right long-term position for AIG,” Steenland said Wednesday at the company’s annual meeting in New York. “Although, the specific components of what’s in each of those businesses may change.”

Billionaire Carl Icahn said last year that AIG is too big and should split into separate companies. Chief Executive Officer Peter Hancock instead is selling smaller units as part of a plan to free up $25 billion in capital to be returned to shareholders over two years. That has helped ease tension with activists including John Paulson, who was elected to the insurer’s board Wednesday along with a representative of Icahn’s firm.

Hancock reached a deal in January to sell a broker-dealer operation, and AIG’s mortgage insurance unit filed in March for an initial public offering. The CEO has also been cutting jobs.

“This is hard and sometimes painful work,” he said at the meeting. “We have much left to accomplish.”

AIG advanced 14 cents to $56.49 at 12:15 p.m. in New York. That compares with the closing price of $60.92 on Oct. 27, the day before Icahn disclosed a stake in the insurer and publicly called on Hancock to break up the company.

Florida Supreme Court Rules on Workers’ Compensation Cases

This week represented a great deal of movement on the Florida Workers’ Compensation front.  As mentioned on the Compass yesterday, there was a significant Florida Supreme Court ruling that will undoubtedly increase workers’ compensation rates in the state.

The Florida Association of Professional Employer Organizations (“FAPEO”) has allowed the Compass to post this very important briefing from FAPEO’s Deputy General Counsel, Torben Madson.  As Torben concisely concludes below:

“This significance of this case is that claimant attorneys will now be able to claim hourly fees which will likely increase litigation and create higher average workers’ compensation claim costs.”

The past week has been a very interesting one on the workers’ compensation front. First there was the 1st DCA  ruling in the Miles case and now the Florida Supreme Court has issued opinions on the Castellanos and Stahl cases. In the Castellanos case the court reviewed the constitutionality of the fee schedule in FS 440.34. In that case the Claimant was injured at work and had to go to trial on the compensability of his claim. The claimant prevailed at trial and filed a motion for attorney’s fees, seeking an hourly fee of $350 at trial but the Judge of Compensation Claims (JCC) ruled that section 440.34 limited attorney’s fees to a sliding scale based on the amount of benefits obtained and thus awarded an attorney fee that amounted to only $1.53 per hour for 107.2 hours of work. The case was appealed to the 1st DCA on the attorney fee issue.

The case was submitted to the Florida Supreme Court by the 1st DCA as a case of great importance with the question that the Supreme Court interpreted as challenging the constitutionality of FS 440.34. In their opinion the Supreme Court acknowledged the complexity of the workers’ compensation system to the detriment of claimants who  rely on” the assistance of a competent attorney to navigate the thicket” and that the JCC had concluded that it was “highly unlikely that [Castellanos] could have succeeded and obtained the favorable results he did without the assistance of capable counsel.” The Supreme Court decided the constitutional issue in this case solely on the basis of the constitutional rights of the claimant under due process and  determined that” …the statute establishes a conclusive irrebuttable presumption that the formula will produce an adequate fee in every case. This is clearly not true, and the inability of any injured worker to challenge the reasonableness of the fee award in his or her individual case is a facial constitutional due process issue.”

In a 5-2 decision the court held that the fee schedule in section 440.34 is unconstitutional and thus the statute reverts back to the immediate predecessor statute. The court did go on to send an interesting message about the ruling when they wrote “We emphasize, however, that the fee schedule remains the starting point, and that the revival of the predecessor statute does not mean that claimants’ attorneys will receive a windfall. Only where the claimant can demonstrate, based on the standard this Court articulated long ago in Lee Engineering, that the fee schedule results in an unreasonable fee—such as in a case like this—will the claimant’s attorney be entitled to a fee that deviates from the fee schedule”.

This significance of this case is that claimant attorneys will now be able to claim hourly fees which will likely increase litigation and create higher average workers’ compensation claim costs. On a bright note the Supreme Court did discharge jurisdiction in the Stahl v. Hialeah Hospital which challenged the constitutionality of workers’ compensation as the exclusive remedy.

fapeo-logo

Florida Supreme Court Finds Attorney Fee Schedule Unconstitutional

Wow – this will be impactful!  Just when I thought Florida workers’ compensation rates would go down this year…

The most important sentence of this article to me is the last one:

“According to the Office of Insurance Regulation, until the legislature addresses this decision, attorney fees will be evaluated under the “reasonable” award standard articulated in the Murray v. Mariner Health decision.”

http://www.insurancejournal.com/news/southeast/2016/04/28/406984.htm

For those that may not recall, Murray v Mariner was a monumental case in Florida workers’ compensation history.  Here is the 2008 rate impact as proposed by the NCCI based on this case:

“NCCI Proposes Rate Increase in Response to Emma Murray Decision NCCI estimates that the full impact of Emma Murray will be an increase in overall Florida workers compensation system costs of 18.6%. NCCI anticipates that it will take two years for the full impact to be realized, and therefore proposes a first year increase of half of the full impact. This equates to a proposed first year rate level increase of 8.9% in overall system costs.”

http://phyadv.com/wp-content/uploads/2011/11/NCCI_increase.pdf

The NCCI’s immediate reaction right after this decision was made:

“The impact on Florida’s workers compensation system costs is expected to be significant,” said Chris Bailey, a spokesman for NCCI.”

http://www.miamiherald.com/news/business/article74444272.html#storylink=cpy

I am sure there will be much more clarity to be had at the NCCI’s Annual Issues Symposium this next week in Orlando – www.ncci.com

Hope to see you there !

-PRH

Cybersecurity Report – Tax Refund Fraud

Yes, it is that time of year and in light of many of our expectations to obtain a refund from our government this post is designated to address and bring awareness to the some of the potential threats and scams that exist.

Tax Refund Fraud

This tax season, more people are falling victim to tax refund fraud. Tax refund fraud happens when someone submits your information to the IRS and claims the refund in your name, having the money sent to their address and not yours.

Prevention

File your tax refund early and quickly. Safeguard your social security number and personal details.

Recovery

Contact the IRS if you think this has happened to you.

Reference

Thieves Nab IRS PINs to Hijack Tax Refunds

DROWN Attack

DROWN is the exploitation of a problem that exists in the technology that keeps private web traffic secure. With it, an attacker can intercept web traffic, decrypt it, and look at its contents. The contents could include things like usernames, passwords, and credit card numbers.

Prevention: While this is not something that directly affects your personal computer, someone could intercept your web traffic at places like coffee shops or hotels. If possible, use a VPN when in these types of environments. You can check to see if your organization’s site, or sites that you frequent are vulnerable with https://drownattack.com/#check and informing the site’s administrators about it so they can fix it.

Recovery

Varies depending on if, how, and what information gets intercepted due to DROWN.

Reference

DROWN Attack

Another ransomware example.  Ransomware spreading emails take many forms. Here is another example:


From:  Thanh Sears
Date:   11 March 2016 at 10:29

FW: Payment 16-03-#507586 Dear [redacted],

We have received this documents from your bank, please review attached documents. Yours sincerely,

Thanh Sears – Financial Manager

Attachment: payment_doc_507586.zip


Prevention

As with the previous example, do not open email attachments if you do not know who it came from.

Recovery

As with the previous example, the best recovery is a known good recent backup.

Reference

Malware spam: “FW: Payment 16-03-#507586” / “We have received this documents from your bank, please review attached documents.”

Healthcare – Insight & Trends

Having spent the past 15 years in benefits, specifically healthcare, certain trends are undeniable.  The following is written with the intent of offering insight as to the current environment.

At the beginning of my quest to become a student-of-the-game regarding insurance related to healthcare, rich plan designs were abundant, and fairly standard.  A rich benefit plan design offers an employee low deductibles, out-of-pocket maximums (OOP), copays for office visits, and copays paid at the pharmacy.  Said another way, rich benefit plans carry with them low overall cost exposure for the person accessing care.  At the time, tolerance for cost shifting to employees by virtue of less coverage was generally deemed unacceptable by most employers.

Fast forward 15 years, and times have changed significantly.  It’s important to look at and understand the causes of “the shift” in market tolerance related to benefit levels.  Throughout the country, employer sponsored benefit programs have shifted away from plans considered as rich, and have overwhelmingly embraced the concept of shifting cost to the employee.  In other words, higher deductibles, OOPs, and copays.

This begs the obvious question: Why?

While I don’t propose that the below reasons offer 100% of the explanation, they certainly play a considerable role.

Here are a few key drivers:

  • Medical Advancement

While we all agree that the medical community has, and will continue to make incredible strides to treat and/or cure many conditions, it all comes with a price.  Technology has catapulted most industries in the US, and medicine remains to be at the forefront of increased capabilities driven by the technology boom. As we continue on the path of advancements in medicine, the cost of care increases, and we as the end users of medical care must increasingly share more in the cost of such advancements.  Ergo, “there’s no free lunch”.

Think about this for a moment.  When the concept of the hospital deductible was introduced to the US marketplace, the benchmark used to establish what the deductible amount should be was equivalent to an average night’s stay in a hospital.  The amount at the time: $100.  Today, it’s hard to imagine anything related to hospital care with a price tag of only $100 – certainly not a night’s stay.

  • Pharmaceutical Advancement

Some would argue that the advancements made by the pharmaceutical industry outpace that of medical.  I suppose that depends on who you talk to, but let’s point out the obvious.  The pharmaceutical companies, like the medical community, have made some truly incredible discoveries, again fueled by the technology boom.  All good news for us right?  Of course, provided cost isn’t in the equation…  The fact that post diagnosis we, as Americans, can go to the local pharmacy and obtain a prescription that is life changing is really something… truly amazing.

In addition to discovery and advancement, specific to pharma, we must look at other factors related to increased prescription costs.  The largest of which being marketing.

There are only 2 ways to market a product and/or service regardless of what that product/service is.  1)  push strategy 2) pull strategy.

The Push Strategy: 

The manufacturer “pushes” the product through channels to eventually reach the end consumer, or patient in this example.  In the not to distant past this was the exclusive marketing strategy used by pharmaceutical companies.  Meaning, the drug company would market to the physicians directly and therefore “push” the product through channels to reach the patient if and only if the physician deemed it the right course of care.

This too has changed…

The Pull Strategy:

Think TV and radio adds.  The pull strategy of marketing exists when the manufacturer markets directly to the end consumer, and therefore “pulls” the consumer through the business channels.  Now think fishing.  In this example the fish represents you and me, the consumer.  Throw in a line (the add), hook the fish (consumer), reel it in, through the channels, and back to the manufacturer – the pharmaceutical company.  There once was a day that pharmaceutical didn’t market directly to the end consumer.  We now live in a world where patients are making appointments to ask the physicians specifically about an add they heard.  This not only drives pharmaceutical costs, it also drives increased frequencies for doctor’s appointment.  Simply put, increased demand = increased costs.  Economics 101.

Now add the cost of said marketing…  the estimates vary, but suffice to say the price tag is considerable.

The above stated factors, as well as others not mentioned, create an undeniable need to shift costs to the end user; the consumers of healthcare…us.

A recent study released in April of 2016 by Zywave illustrates many of the results regarding cost shifting.  Zywave is a trusted provider of insurance information used by more than 3,000 brokerages worldwide including 90 of the top 100 US insurance firms.  For calendar year 2015, here are some of their findings, all based on a sample size of approximately 50,000 employers:

  • A steady trend of higher deductibles, higher out-of-pocket costs, and higher copays
  • Nearly half of all plans offered include a deductible of $2,500 or more
  • OOPs have increased nearly 30% over the past 3 years
  • Considerably higher ER copays in an effort to steer towards urgent care facilities
  • Nearly half of employers offer a plan with an office visit copay of at least $35
  • Approximately 40% of plans include a front-end prescription deductible of at least $250

While we as end users cannot change the driving factors illustrated in this article, it has become increasingly important for employer groups to consider partnerships with those in the industry who don’t just act as transactional brokers.  In part a transactional broker offers little to no guidance over the factors which can be controlled and positively influenced. Working with an advisor who can influence cost, utilization, and outcomes, is now more important than ever in years past.  Employers should seek out advisors who are true stewards of the insurance business, and embrace the methods of risk management, mitigation, and prevention, both at the employer and employee level.  Working with an advisor whose comfort zone and expertise circumvents around the power of negotiation is a key factor of controlling cost at all levels.

Written By: James F Hughes, Libertate Insurance, LLC