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The definition of insanity, when it comes to health insurance…

Tuesday, October 17, 2017

Authored by Rick Klein, Senior Vice President in Horton’s Employee Benefit Solutions

As the old adage goes, “the definition of insanity is the practice of doing something over and over again hoping for a different result.” 

When it comes to managing health insurance programs for employers, this definition is spot on. For the entirety of my career as an employee benefits advisor, I have tried to manage the process of placing and then renewing insurance policies for private businesses; businesses that are run by the smartest and most entrepreneurial people that you will ever meet. Yet, year after year, they complain about uncontrollable and ever-increasing costs and the frustration about not being able to affect any change with regards to their health plan. If only they would take the same disciplined strategic approach that they bring in managing their business to the process of evaluating their health insurance (a cost that ranks second on most companies’ balance sheets) maybe they would avoid some of this frustration.

Far too often ownership feels compelled to simply accept the proposal presented to them by the insurance company or, maybe the “negotiated” renewal from their consultant. Why? For good and not so good reasons. First, by design, in most commercial fully insured products, there is a lack of data supporting an increase. The increase is typically justified with terms like “unfavorable loss ratio,” “a significant number of high claims” and/or suggesting a poor performance of the overall risk pool at the insurance company; in other words blaming the renewal on non-verifiable data. Additionally, over time business owners have been conditioned to believe there is nothing they can do to control the claims of their employees and dependents thus accepting the demographic hand that they have been dealt. 

Choosing frustration over action is easy for ownership. Falling prey to a herd mentality where there is safety in numbers they succumb to insurance company marketing and perception and as a result, rationalize the following excuses:

  • “I need to be with a large insurance company like my peers;
  • When I do not understand something, I would rather default to what I am familiar with as opposed to what I am not.”;
  • “I need a BUCA (Blue Cross, United HealthCare, CIGNA, Aetna) plan because they are ‘the best. I want the best for my employees.”; and my personal favorite, 
  • “I am more comfortable paying a high price to transfer my risk to an insurance company because self-insuring is too risky.” 

If business owners applied the same concepts to their other business operations that they do with their health insurance – making decisions based on incomplete information, misconceptions, and with emotion – they may find themselves in the same place with their overall business as they currently find themselves in trying to control their health insurance spending – in a very uncomfortable place. Well, there is a better way to break this insane cycle; join a health care coalition and self-fund your risk!

What is a health care coalition? That is what I am planning on explaining to you over the next several weeks as part of a new health care program designed for employers with 50 to 400 employees.  This series of informational messages will provide insight into a coalition buying program using a captive funding program (a strategy that allows employers to purchase insurance on a scale like their Fortune 500 peers while maintaining independence and autonomy) and introduce you to best in class tools and vendors that complement this strategy.

Be back with more info soon but in the meantime feel free to reach me at  or 708-845-3123 for more immediate information or to ask any questions.

Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.

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