Small Group health insurance is an ever increasing cost for employer groups. Most employers and brokers use similar strategies when it comes to managing rate increases. They lower benefits and add cost share to employees which could include higher copays, having employees pay some or all of the rate increase or utilizing a high deductible option. At the end of the day, there is not a great way to manage rate increases but there are alternatives. Small group alternate funding can create substantial savings for a group without any risk.
Small group alternative funding method. Small group (1-50 eligible employees) are community rated which reduces options for saving money. There is no question that the best way to lower a small groups cost is to use a small group fully insured experience rated strategy. Most brokers and group are not aware that you can even do this but it is perfectly legal and there are carriers that do it.
With this funding arrangement, group rates are determined by the groups demographics. The renewals are determined by loss ratio. This arrangement is something that groups over 50 are familiar with but it is relatively new in the small group circle. The best part about this set up is the savings it can generate. A good candidate group for this set up can expect to lower rates by 20% to 25% with eqivalent benefits. Groups are also eligible for premium reimbursements if they run well for the year. If a group does not run well, there is no obligation to renew and they are not on the hook for any of the additional claims. They simply pay the scheduled monthly premium and if the renewal comes in high, they can move on to a different carrier.
Groups often experience much lower annual renewals with this funding method. Since the renewal is based on the groups experience, it is not uncommon to have a low single digit renewal.
This strategy is vastly underutilized due to a the fact that many do not know about it and those that are aware of it often do not understand it fully. Feel free to call or email our office to discuss further.