Marketing & Underwriting
One Acorn client was a start-up company in the United States. Their business model was to be a source of outsourcing for the airline industry. The CFO provided Acorn with a very aggressive budget amount from which to develop an employee medical and dental insurance plan. The population of the company was expected to expand by 600%. The current population was fully insured. The premium rate structure was far greater than the desired structure on a per employee basis. Alternative insured plans were priced comparably. The pricing reflected the age, gender, geographic location and benefit structure desired by the management employees.
THE ACORN SOLUTION: A self funded insurance plan with the appropriate individual aggregate stop loss insurance protection. Acorn then developed an employee contribution schedule which coupled with the self funded plan provided a pricing structure slightly below the CFO’s aggressive budget cost. Why self funding? The biggest advantage provided by self funding is the claims lag. This is even more apparent in a rapidly expanding company. A start-up company begins with investment capital but very little revenue. The self funded approach allows the employer to offer a quality health plan without putting forth substantial premium dollars. The claims activity will naturally increase to reflect the risk of the population but the company’s revenue will be rapidly expanding as well. The overall risk was always protected by strong stop loss contracts for both the individual and aggregate exposure.
A 450 employee group has a self insured plan. They receive a 15.9 % increase in claims liability and a 10% increase in administration costs. Acorn is the broker for the non-medical lines. The current broker for the medical plan provides two alternative proposals from national insurers which are not competitive and recommends that they stay with the current TPA renewal. The HR Director explains her dilemma to Acorn. We ask if they received a proposal from a regional insurance carrier/TPA. The response is no. To Acorn it is unfathomable that they did not have a proposal from the most competitive network/TPA. Acorn markets the plan to this TPA/network. The Third Party Administrator (TPA) prefers to market the stop loss. We accept their offer but inform them we will solicit stop loss from other markets available to Acorn. We, Acorn, analyze all of the claims experience data including the large claim reports. We obtain additional information regarding these claimants and their conditions. Our marketing results in a 35% decrease off of the proposed renewal claims liability as well as a 5% decrease in administration fees and a 10% decrease in stop loss premiums.
A 150 employee client receives a 9.5% increase in their medical premium. The market trend is 12%. Some may consider this a good renewal. Our client was not happy. It was 9.5% more than they were currently paying and that was not acceptable. We went to work. The current plan was an POS/HMO plan and the carrier was not releasing any experience. Since the increase was below market trend, we presented this as “good claims experience” to the carriers whom we marketed the plan. Initial marketing results were positive but not enough. Acorn worked the carriers for greater savings. In addition, we went back to the current carrier and worked with them sharing insights into their competition. The current carrier came back with a 8% decrease off of the current pre-renewal rates. SOMETIMES WE SURPRISE OURSELVES. These results were beyond what we thought were possible. The BEST part of this experience is that both the carrier and our client employer came away from this process with the feeling that they won. Our client received a renewal far lower than they anticipated. The carrier was able to fight off the competition and maintain the account.
GOOD COMMUNICATION DRIVES CREATIVITY: One of our clients informed us that they did not want to accept the renewal presented by the company and they did not want to change their benefits for their employees. Based on a marketing of the plan, the renewal rate structure was competitive with no other carriers offering savings without plan changes. Here is the dilemma: A 10% increase needs to be reduced to zero. There are no competitive proposals to leverage the incumbent carrier. No changes to office visit copays or prescription drug copays. Acorn introduced a very narrow self-funding technique by adding a deductible to hospital admissions and out-patient services. The deductible reduced the premium to below the current premium. The deductible would be funded through either a Health Reimbursement Arrangement or a Section 125 Flexible Spending Account. Acorn Benefits, LLC has used the HRA for many fully insured groups that want to lower premiums but maintain their level of benefits. Our client’s communication about the renewal was the key that started the process. Our client was very pleased with the results.