Thursday, June 12, 2008

The Dreaded Medical Insurance Renewal

My company has just completed our medical insurance renewal. Once again, our current carrier has increased our medical insurance premiums for the upcoming plan year. The 12% increase was not astronomical, but accompanied with the current soft sales forecast, an increase in our business insurance that was astronomical (40%), and increases in fixed costs; utilities, shipping etc. our owners felt they had no choice, but to pass the increase in medical insurance cost on to their employees.

They did look at alternatives:
- Switching carriers. Another insurance carrier submitted a quote with a similar plan design for a total cost decrease of 3%. Unfortunately, this new carrier did not offer adequate preferred provider organization (or “PPO”) coverage for all our locations. Also, this same group of employee’s medical expenditures would be subject to usual and customary charges. In the long run, our owners decided this carrier was essentially buying our business for one year. Most likely next year, they too would increase our premiums and we would be in the same situation we are in now.

-Our agent did use this more attractive quote as leverage against our current carrier in an attempt to persuade them to lower their original quote down from the 12% increase, but they refused to budge.

- Offering a dual plan choice; our current plan plus an HSA Health Savings Account. Surprisingly, the premiums for the HSA plan were not that attractive. That, in addition to the additional work involved in rolling out such a plan, they decided against it.

The Final Decision:
After much discussion, our owners decided to stay with our current carrier, tweaking the plan design so that the plan would be more affordable. The deductible was increased along with the maximum total out-of-pocket cost. And of course the % of premium the employee pays out of their own pocket was increased. To soften the increase a flexible spending account, was added to the total benefit package.

How the employees responded:
The employees accepted the announcement of higher medical costs with few complaints. I asked one of our more outspoken employees why he was so complacent this time around. He responded by saying, “This increase comes as no surprise. I read the newspapers. There are articles almost daily about the rising costs of medical insurance. Our company is not alone. I talk with my friends who work at other companies. They are experiencing increased costs and a reduction of benefits as well. I don’t like, it but there is nothing I can do about it."

Enough Said.


  1. Wow, I understand why no one says anything (bad economic forecast, insurance companies quite simply have everyone over the barrel, everyone's tired, everyone just feels fortunate to have a job, etc.) but how long can this sort of thing go on? I personally think 12% is a pretty sizeable increase. I know my salary didn't go up 12% last year, or the year before that either.

  2. Savvy Working Girl9:25 PM

    Thank you citizen reader for putting the 12% increase into perspective. I am disappointed to see I am becoming immune to how catastrophic these increases really are. Our company had a renewal in 2001 with an increase of 60%, so now anything under 20% doesn’t seem so bad. The enormity and seriousness of these increases are not lost on our owners. I remember a couple of years ago, our President becoming irate after our agent once again presented a renewal increase. He pointed out if he gave these kinds of increases to our customers’ year over year it wouldn’t be long and we would no longer have any customers.