by John Harman, CEO and Founder, Integra Insurance Solutions
When deciding whether to switch from a client-sponsored plan (CSP) to a master medical plan, there are many factors a PEO should consider. First, why do it? Most switch for administrative ease—one renewal instead of many. A second reason is to streamline plan design offerings versus countless options in the open market. Large group pricing is typically more favorable than Affordable Care Act (ACA) coverage, with average savings of 6 to 8 percent and the ability to evaluate or review. These are all good reasons to make the move, but unfortunately getting a master medical plan isn’t always easy. This leaves many PEOs to ask, “How do we best position ourselves for success?”
Sins of the Past
In “The Seven Habits of Highly Effective People,” Stephen Covey writes, “Seek first to understand and then to be understood.” To understand why carriers are reluctant to write master plans for PEOs, let’s look at industry history. In the early to mid-1990s, PEO health plans were more prevalent and had little structure. Many PEOs had little or no risk management and offered only a single set of composite rates. For these PEOs, risk grew and rates increased over time. Eventually, many PEOs were only attracting or retaining high-risk groups. Consequently, plans went into a death spiral of increasing rates and higher risk groups, many times leaving the carrier with large claims. In response, carriers shied away from writing new risk and began carefully managing the risk they already had on their books. By the early 2000s, many PEOs moved to a tiered composite set of rates and began using models that improved performance. Still, carriers were wary of the past and cautious with new business opportunities. To address this, many carriers established dedicated PEO teams and criteria to measure risk for those seeking master medical plans. So, what are those criteria and how do you make your PEO stand out?
When the ACA passed in 2010, many speculated how it would affect group medical insurance for the small groups PEOs serve. [Please click "Read More" to continue reading]