How many times have you heard, “if we put multiple organizations together, we can get better rates”? Do you believe that? Let’s consider the positives and negatives.
- If you combine small groups to make them large enough to exceed 100 to 150 does it cut your costs? It does give you more options in terms of funding and flexibility in benefits. It does not necessarily lower your rates.
- If I combine several large companies, doesn’t it help us with our rates? First of all, we have heard that claims are claims are claims. Putting them together does not lower them. So where do I benefit? You can lower your fixed costs. However, you must understand that fixed costs amount to about 20% of your total cost. So if you lower them by 10%, it should lower your overall rate by 2%. That is not a huge number. You can move the specific caps and take more risk. Do the successful companies with low claims wish to support this idea?
- Simply put:
- To begin with, it is difficult to find benefit program(s) that everyone agrees upon. Next will everyone be agreeable with the rates?
- The key point is that there are winners and losers when you put groups together. Winners are happy and Losers would like to leave the group.
- The Winners: They are the organizations that joined and have the highest claims.
- The Losers: Those are the organization that joined but have the lowest claims.
- Result: Most of the time half of the people are happy while the others regret joining the group.
- Solution: There is no perfect solution, but if you have 150 or more employees, you need to concentrate on how to reduce your claims. This means evaluating your claims and taking appropriate actions. There are a number of ways to reduce your costs without reducing benefits, but how you go about doing so should be up to the company and the consultant. It begins with your size, how much you want to be involved in the process and how much risk you wish to take.
Are large consulting firms creating an increase in cost for healthcare?