At least, this has been the case in Minneapolis-St. Paul market, where nearly 100 brokers are using this type of software. The model is forcing carriers to compete on price, and it is the most effective way to contain rate increases and keep healthcare affordable because it relies on private-sector competition instead of following small group market mandates imposed by state government.
Life underwriter Steve W. Haskins, president of RAM Benefits in Minneapolis, provides a recent example of the effectiveness of this new process.
Minnesota's small group rating structure is regulated so that a carrier's filed manual rates can be discounted up to 25 percent and increased up to 45 percent. This means that an employer can get a mean variation ranging from 0.75 to 1.45 from a carrier.
Haskins and two of his associates took their laptops to an employer client on May 1, 2008, completed all the enrollment information for the 22 employees that day, and sent PDFs to three carriers and printed and signed enrollment forms to another carrier the next day. They received firm proposal back by May 7 with rates ranging from 0.85, 1.0, 1.10 to 1.25 from the four leading carriers in this market.
The carrier quoting 0.85 was selected on May 8, and the coverage was put in force that day. This is the power of technology facilitating competition in the marketplace. The employer saved thousands of dollars due to the ability to market multiple carriers. The premiums ranged from $145,000.00 (0.85) to $214,000.00 (1.25).
Electronic signatures enable the broker to send encrypted PDFs concurrently to the carriers, making the process paperless and resulting in carrier selection within a week. Some brokers estimate that rate increases have been cut by up to 50 percent due to intense competition to keep or increase market share.
Cutting costs in the small group health arena matters because fewer small businesses can afford to offer competitive healthcare benefits to workers, one of the major tools they use to attract qualified talent.
Readers, take note: According to a survey conducted by the Kaiser Family Foundation, there has been a steady decline in businesses offering health benefits to workers. Three in five firms (60 percent) offered coverage to workers in 2005, down from 66 percent in 2003, and 69 percent in 2000, the survey found. The decreases were found primarily among the smaller businesses.
The survey also found that the most common reason why small employers were not offering medical benefits to their employers was cost. Nearly three-quarters (73 percent) of those employers within the survey blamed high premiums for not being able to provide health insurance to their employees.
Millions of Americans work for small business. According to government statistics, 19.6 million Americans work for companies employing fewer than 20 workers, 18.4 million work for firms employing between 20 to 99 workers.
While small businesses are a continuing source of strength and diversity for the American economy, the health insurance burden cannot be underestimated.
Medical carriers require a complete "picture" of each employee and their dependents' specific health history, but this paper-driven process, due to its traditional complexity, hinders many small employers from providing health insurance to employees.
The main obstacle for these small employers with fewer than 50 employees has always been the health underwriting requirement, or the use of medical or health information to evaluate risk. Personal health information is used to determine whether to deny or offer coverage and at what price.
But this process makes each employee manually complete a carrier-specific enrollment form with detailed health questions for themselves and their dependents. For a group of 20 lives being marketed to four carriers, this translates into 80 individual paper health statements.
The complexity involved in getting employees to complete the paper enrollment forms takes time, and in some cases, it can take months for businesses to receive rates from a carrier. Practically speaking, it is impossible to conduct a coordinated market-search in a meaningful, timely manner. The result is too little competition between carriers, and often the employer settles for whatever it is given.
In the Twin Cities, the advent of broker software costing the equivalent of about $6 to $10.00 per employee per year, which conducts a single online enrollment process that maps data to the carriers' exact enrollment forms, has finally put the client in the driver's seat. Incumbent carriers aggressively have to slash renewal rates to keep the business and maintain market share.
Private-sector competition is the best way of offering affordable heathcare coverage. With such software, the brokers can do their jobs properly--getting their clients the best deal quickly and easily by shopping plans to as many carriers as possible!
WENDY KESSLER is director of sales and marketing, with Bloomington, Minn.-based Benefit Resources Inc., which released its broker software UBenefit first in Minneapolis/St. Paul and currently is working in Wisconsin, Illinois and Indiana, with plans to enter the Ohio, Florida and Texas markets in fall 2008.
June 1, 2008
Copyright 2008© LRP Publications