Risk & Business Magazine Cooke Insurance Group Fall 2015 | Page 31

Health and Dental Insurance Cost Considerations for Group Plan Claim Funding BY: DANNY CORRIVEAU, COOKE INSURANCE A s discussed in the last issue of Risk & Business Magazine (Health Benefit Plans – Understanding the Cost of My Health Plan, p. 31, Risk & Business Magazine, Spring 2015), there are significant differences in the three models which are available to you for funding the claims you have with regard to health and dental insurance. The purpose of this article is to explain the differences between those three models in order to impart a better understanding of how they work and when to use each one. The first model is the Pool Plan model. In this model, claims are going to be pooled across the different companies in the program to share the claims. Pool Plan models are best implemented for small companies with under ten employees. This is because of the inherent volatility that can occur in short periods of time for these size group. The ultimate goal of this type of plan is to keep cost as stable as possible over time and avoid larger increase from one year to the next. No two pool plans are created equal. Some have more flexibility in the coverage you choose and others may have drug maximums which can impact your staff when in need of a catastrophic drug. You should ask for this information as well as a history of the rates stability for the group over the past 3 year’s performance of the pool. The second model is the Fully Insured model. This is the model most business are on in Atlantic Canada. For this model, claims of every group are going to be reviewed and adjusted during the plan renewal each year according to each group individually. Claims running high will result in a higher premium for the insured, as the insurer attempts to recoup some of their claim payouts and adjust for the following year funding of the claims. A number of factors can play a role here, including the administration costs, the potential for inflation, pooling risk, and reserve (which is a buffer for the company against you cancelling your insurance). Spreadsheets showing a lower cost may sound attractive for a business owner. However, if the claims history is not well disclosed, it may result in a surprise renewal the following year as the insurance company attempts to buy your business. They are betting that you won’t move again for a while given the work and effort to do so. If choosing this model, you should look at what your claims are, and what your premiums are and see what the difference is to make sure there exists a realistic relationship between the two. which would otherwise apply to the fully insure program such as reserve charges and inflation. The formula for calculating this, ultimately, ends up being stop-loss/ travel coverage to protect you against catastrophic event, administration fees, and claims. That’s it. No catch, no smoke and mirrors. The third model is the ASO/self-funded model. When looking at the long-term time frame of a business, this is the model that makes the most financial sense and will prove to be the most cost-effective as you will never over or under pay for your claims. The ASO model allows a given company to have complete control over their health plan and coverage they want to achieve for their staff and it can be modified to better serve the goals of the company. This also eliminates many additional charges If you are looking to start a new plan where there is currently none, ASO shouldn’t be your first choice for a few years so that history can be found before transitioning for that model. Understanding your choice in how to fund your claims between Pooled Plan, traditional or Fully Insured, and the ASO models will help you to better manage insurance for your group plans. If you have any questions or you want to go over your group plan options, shoot me an email at [email protected] and I will be glad to assist you in any way I can. Danny Corriveau, President of Cooke Capital, has a passion for consulting with businesses, large and small, seeking customized Group Health Plan solutions. His experience serving a broad client base enables Danny to respond quickly to the unique needs of both employers and employees enhancing long-term prosperity for his clients.  RISK & BUSINESS MAGAZINETM FALL 2015 31