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
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