When is a 50% Rate Reduction Not Enough?
Based on the latest data, benefit claims activity since the onset of COVID-19 has been down 93.7% for non-drug health and dental benefits (year over year for April 2020). Insurers have reduced dental rates by between 50% and 60% and health care rates by 0-20% (non-drug health care accounts for 25-30% of total health claims on average). There are no additional reductions planned. Insurers are contending that claims will return to normal over the next few months and are quite willing to pull the reductions off the table as soon as it appears people will start visiting dentists, opticians and paramedical providers as they open back up.
“We believe it is not that simple and other than emergency procedures, employees and their children will continue to stay away from visiting providers. I am not sure how soon people will be running back to their providers for non life sustaining treatment or service, I think that is an answer we need to seek from plan sponsors”, said Charles Boldt, President and Operating Partner of Premier Health + Benefits (PHB) in a recent webcast. “From where we sit, we see a very slow transition back to normal, and because of this, margins are great for carriers even with a 50% reduction in funding,” said Boldt.
In the webcast, PHB illustrated the cash flow relief and six month typical savings from pre COVID, insurer rate reduction offerings and this hybrid ASO formula. Under the platform, life, AD+D, LTD, drug, out of province and ambulatory benefits would remain insured, while vision, dental and paramedical would be transition into an ASO contract – self funded. “This is a permanent solution for many organizations, their benefits costs would be whatever their claims costs are – all of these vision, paramedical and dental costs are limited contractually – and now, under these circumstances, its pure savings if they amend their current coverage over to a cost plus platform,” he added. To see an example of the potential client savings click on this link or e-mail us at email@example.com