Our Managing Partner, Karin Landry published an article in the Boston Business Journal focusing on the gap in employee benefits for gig workers, which has risen greatly during the pandemic. Check out the full article here.

“Why do I need a broker?” This is a question that surprisingly gets asked more than you would expect. In today’s society of consumerism, the internet, and “do it yourself” mentality, tied with the desire to save money, this is a valid question. I would ask in turn – would you go to court without legal representation? Of course not. It makes financial sense to use a broker as in most cases, you do not get charged for their services. Typically, brokers are paid by the insurance carrier, the one that you jointly decide best meets your needs as an employer. More importantly, brokers protect your best interests as an objective third party. There is no specific financial incentive for brokers to decide on one insurance provider over another.

An insurance broker acts as an intermediary between you and your insurer, lessening the administrative burden for you and negating the need for you to weed through complex policy jargon. We bring over 200 years of training and experience and our insurance know-how, and our goal is to always find a policy that best suits your coverage needs at the best possible price. Brokers do the shopping and analysis on your behalf, saving you the time of plodding through quotes from various carriers and trying to determine the optimal solution. We provide impartial advice based on the client’s unique situation.

Some of the benefits of using an insurance broker are:

These are very important considerations for you to take into account when deciding if a broker is right for you. The alternative is to spend a lot of your own time educating yourself, taking away valuable time from your day job and family. Insurance brokers go through strict educational and licensing requirements and have significant knowledge in the industry. Our deep understanding of your local market and the players involved ultimately yield enhanced, cost-effective coverage for you.

All that said, it’s important to note that not all brokers are the same. Some have specialized services and products or are focused on specific markets. For example, there are brokers with expertise in the property and casualty or life insurance areas but that just dabble in health insurance. Today some payroll companies are even offering employee benefit services as well but again, their bread and butter is payroll, not benefits. To offer an analogy – you would not go to a foot doctor to address a heart condition, so make sure your broker’s core competencies are the ones you need. 

In summary, your insurance needs are best met by a broker who works for you and not by an insurance company, who have their own interests to look out for. Brokers yield more choices, usually at a much lower cost to you and your business. Unless you happen to be an expert in insurance plans, why risk the headache and lose the resources needed to do it on your own? Further, a consultative broker like Spring will take the time to truly understand your business so we can constantly be on the lookout for new and innovative solutions that will align with your objectives.  

People are typically the largest investment a company makes. Taking care of those people through employee benefits is a niche area of your business, and you need an insurance broker who has the training and expertise necessary in today’s complicated and competitive marketplace. Spring’s approach to brokerage is collaborative and strategic, but we ultimately remove the legwork for you and ensure you have the best plan options available.

Due to COVID-19 we are now experiencing uncharted territory as we approach open enrollment. Check out this article that spotlights some of what we can expect this open enrollment season.

2020 has been a roller coaster of a year so far, and many people are questioning what this means in the world of health insurance moving forward. Check out this recap from BenefitsPRO’s webinar that spotlights steps employers cant take to prepare for an especially daunting enrollment season.

Our Managing Partner and Senior Vice President, Karin Landry and Karen English share their thoughts on how to develop strategic employee benefits plans in an article on HR Tech Outlook. Check out the full piece here.

As the COVID-19 pandemic is affecting more and more organizations worldwide and shifting what employees are seeking in healthcare. Here are 7 predictions we can expect to see in healthcare as the pandemic continues, written by our Managing Partner, Karin Landry.

As Seen in the Captive Review Group Captive Report

Medical stop-loss coverage protects self-insured groups from catastrophic medical claims. Medical stop-loss has long been used as risk management tool by small- and medium-sized organizations to limit their exposure to medical claims above their desired retention levels. This strategy has been used by single parent programs as well as group captive programs.

The reason this strategy has been more popular in the mid-market is because of two primary reasons. First, businesses have wanted to insulate themselves from catastrophic claims risk, as one large claim could have a material impact on the financial sustainability of the program. Second, the relatively small size of the groups means greater variability from an actuarial perspective. In comparison, large companies have stronger balance sheets allowing them to take on a more aggressive risk management strategy and reduce third party spend with insurers.

As I write this in April of 2020, there are a myriad of unprecedented challenges facing both small and large employers and medical stop-loss can help mitigate some of these concerns. Recently, we have seen a shift in the market where large employers are increasingly becoming interested in reviewing the possibility of leveraging a captive to provide medical stop-loss coverage. I anticipate this trend to continue. Below are four points as to why.

As we stare towards the possibility of a recession and reduced economic output, poor investment income will have an adverse impact on insurance company financials.

Prabal Lakhanpal

This past renewal season, we saw that markets are starting to harden, and given the current Covid-19 pandemic and the financial and economic climate, this is bound to continue. A variety of factors have contributed to this including regulatory changes (ACA and healthcare reform) and many recent natural disasters (Hurricane Harvey, California wildfires, etc.). Insurers for a large part of the past decade have benefitted from the favorable financial markets world over, thereby reducing their need to increase rates to continue to make their target earnings per share (EPS).

As we stare towards the possibility of a recession and reduced economic output, poor investment income will have an adverse impact on insurance company financials. Further, as markets tighten, access to inexpensive cash is becoming harder. Since most insurance companies are public, the increased pressure to keep their share prices buoyant is going to result in them wanting to beat their expected EPS – which requires higher profit margins. Finally, as reserves balances diminish due to market conditions, principles of conservatism are going to require them to shore up financials, and the easiest way to do this is by increasing premiums.

These factors coupled with the ongoing pandemic, which will likely result in an increase in aggregate claims, led me to believe hardening insurance markets are upon us. This is likely to result in an increase to reinsurance costs for employers who are currently self-insured. A well-structured medical stop-loss solution can help employers navigate these market conditions by providing them greater control over the program and creating an alternate avenue for reinsurance.

Hardening markets make captives more favorable, as they allow for customized coverage otherwise unavailable in the commercial market. Employers currently using captives have been provided an opportunity to leverage the captive program to fund for Covid-19-related expenses. For non-captive employers, this impact is felt directly on their financial statements.  

Claims costs have been increasing at an aggressive pace. The US has long been criticized for poor population health management, with rising chronic conditions like diabetes that are expensive to treat. In addition, the pricey cost of medication has made extremely high cost claims a reality of healthcare. Claims in excess of $1m are becoming commonplace. For large employers, who are traditionally self-insured, such claims cause volatility from a cashflow perspective, making it harder for finance teams to budget and build expected proformas. Using a medical stop-loss program eliminates this volatility as claims above the self-insured retention level are funded in the captive, creating a level funded premium plan.

According to studies by PwC, while medical cost trend has been flat for a couple years, it is expected to increase from 5.7% to 6% in 2020. This rise in healthcare costs is attributable to an increase in the utilization rates. Medical trend increases are outpacing those of inflation, which was 2.07% in 2018 and 1.55% in 2019.

As a result, employers have had to leverage solutions such as high deductible health plans and other forms of cost sharing to bend the healthcare cost curve. The crux of the issue is that now organizations are having to combat both rising medical trends as well as increasing claims costs, while still needing to retain talent and provide competitive benefits.

A well-crafted medical stop-loss solution can help ease the burden for employers and provide them a sustainable way to bend the healthcare cost curve. Development of a formal reserve mechanism is an efficient way for employers to set aside dollars to mitigate large cost increases in the future. While an employer cannot control what happens in the insurance and healthcare markets, they can make the decision to put themselves in a position to be able to navigate the landscape more efficiently. We are seeing an increasing number of CFOs drive conversations around better managing employee benefits spend as it is becoming one of the largest expense items for organizations.

By writing stop-loss into a captive, an employer can leverage captive savings to focus on initiatives most useful for its employee demographic. We have seen employers use the captive savings for wellbeing initiatives as well as cost control programs focused on disease management for conditions like diabetes or musculoskeletal problems. This kind of structure can then be tied with programs dedicated to population health management, wellness and health advocacy for a robust, employee-first package aimed at gradually reducing claims costs.

Using a captive provides employers access to data in a timely manner, allowing them to better analyze and review drivers of claims, in turn providing them an opportunity to implement measures that would focus on addressing those drivers. While this is possible without a captive, we have seen employers are more engaged when using a captive — meaning they are more likely to create a structured approach to claims and cost management leveraging the captive. In my view, this is because of lack of funds for such initiatives and the lack of a structured risk framework in some cases. Using a captive to underwrite medical stop-loss addresses both of these aspects.

Transparency is one of the core benefits of a captive. Once organizations begin to use a captive funding solution for its medical spend, they usually begin to expand their horizons for other cost reduction initiatives. One such initiative has been carving out drugs (Rx). Using a pharmacy benefit management (PBM) solution can generate additional savings ranging between 15% to 30% of Rx spend. These savings are in addition to those that an employer may recognize by restructuring their funding approach. Further, these savings have a multi layered benefit, reducing the overall medical trend and generating additional reserves for the program to offset possible cost increases in the future. 

In general, large employers are more accustomed to customization and retaining control, so a captive program for medical stop-loss aligns with their needs and enhances their ability to control their healthcare programs. Better data analytics and understanding of claims also provides employers the ability to be more reactive and make necessary changes quickly, in a much more agile setup. A captive provides monthly and quarterly reports which are usually much more detailed and timelier than those provided by a commercial insurer. Finally, adding additional risk to the captive also helps the risk managers develop a more comprehensive understanding of enterprise risk at large.

Conclusion

Medical stop-loss coverage in a captive continues to be a prudent business strategy for companies of all types and sizes. It creates multi-layered protection. Large employers are beginning to realize the attractiveness of such a program, whose advantages have been especially highlighted lately due to market and global economic shifts and conditions.

Spring has been awarded by Employee Benefits Advisor for this Rising Stars 2020 award! Check out the full article here.

Whether you’re an office manager, business owner, or a human resource or benefits professional, renewing your company’s health insurance plan may become automatic. Considering alternatives is a daunting task that many feel they lack the bandwidth to handle. However, at a time when healthcare costs are rising, the market is in flux, and employees are expecting more and unique benefits, choosing the most convenient option is probably not your best bet.

It’s imperative to routinely review your package, your results and rethink your strategies to make sure you’re minimizing your costs while giving employees the best coverage at a reasonable rate. You may think you’ve considered everything, but you probably haven’t. Before your renewal date, make sure to address the following questions.

1) Does your medical trend align with market standards?

Before you renew, take a hard look at the medical trend being used this year for next year’s renewal. The market has been seeing downward trends, so you’ll want to make sure you’re seeing that in your rates. For2019, renewals are in the low single digits.

2) If you’re self-insured, have you considered medical stop-loss?

While advantages of self-insurance include flexibility and savings opportunities, self-insured companies are also exposed to an extra level of risk – unexpected, catastrophic loss that they’re expected to cover themselves. Stop-loss insurance, sometimes called catastrophic insurance, can help mitigate this risk. Medical stop-loss is coverage specific to healthcare spend, and involves the establishment of a threshold by the employer over which they have external coverage for.

With an uncertain future for US healthcare, medical stop-loss is something all self-insured organizations should include in their program. Employers will need to consider where the stop-loss program attaches to make sure you don’t over or under purchase coverage. Also, captive stop-loss solutions should be considered to maximize your savings, providing a savings of 10% or more on your stop loss spend.

3) Do you have the right tools in place to support and communicate benefits with your employees?

You may have an impressive health plan and competitive benefits offerings, but if your employees aren’t aware of them, don’t know how to utilize them, or fi nd them irrelevant, you’re not going to see the results you’re hoping for.

It might be time to give these questions some thought:

Consider a formal or informal survey of employees to fi nd out what is working and not working. Further, there are a number of administrative tools, such as Bswift, that you may want to evaluate. For compliance and HR initiatives, ThinkHR and like platforms may be appropriate.

4) Is it time to consider an actuary?

An actuary is a certified professional that measures and predicts insurance risks and premium rates. They are math-based risk experts and can help organizations with insurance policy development, forecasting, valuations, audits, and more.

Most small businesses believe they have no need for actuarial services. However as organizations grow and consider more advanced and varying insurance options, the greater the need for an actuary becomes. While the work of an underwriter is crucial, actuaries take a deeper look at the numbers. They are a neutral third party, and can offer crucial information such as how much volatility you can expect over a one and five-year period. These insights allow you to make smarter insurance decisions.

5) Could your organization benefit from alternative funding strategies?

If you’re fully-insured, have you thought about aiming for a self-funded structure? If you’re self-insured, have you thought about a captive insurance company? If you’re a small businesses, have you thought about an Association Health Plan (AHP)?

We recommend thinking about these alternatives every couple of years. As businesses change and grow, along with market regulations and options, what once made sense for an organization may no longer be the best fi t.

Captives provide unparalleled transparency of and control over an insurance program, which helps with cost savings and customization. Once only an option for jumbo-sized employers, more and more smaller organizations are utilizing a captive structure, either as a standalone captive or part of a cell or group captive.

Further, the AHP market is expanding quickly, due in part to new regulations passed earlier this year. This is a great avenue for a small business to benefit from economies of scale and get the same rates as a large employer. For more information about how to set up or join an AHP, please get in touch.

Healthcare is complicated, but with that complexity comes new and exciting opportunities. Before you decide to maintain the status quo and renew your plan, take some time to think about what’s truly best for your organization and its workforce.