A Fully Insured Renewal Story - Feel the Pain...

Here's a fully-insured renewal story from a small company I'm networked with... Feel the pain, my friends....

Here’s What You Need to Know:

1. Premiums paid by company to BCBS: 323K

2. Claims paid out by BCBS to cover company claims: 181K

3.“Pooling Effect” Applied by BCBS: 139K

4. Administrative Costs Applied by BCBS: 56K

5. Sum of #2 through #4, BCBS Stated Cost Line: 376K

6. Result: BCBS gives company 1% rate increase

*** Note: BCBS uses past premiums paid, not resulting in claims cost, to decrease the % increase that would be called for (#5-#1).

That's right - this company had claims representing 60% of the total fully-insured premiums paid into the system for the year - a great year in claims experience by any measure.  And took a 1% increase...

 

Sigh...

 

Comments

[Jim C]

How large was this group?

[Kathryn West, CLU, REBC, RHU]

While it seems unfair that this company received a 1% rate increase it really isn't. The increase was related to the entire pool's experience, not just the individual group. While a pooling charge may seem unfair when a group is having a good claims year, they benefit in those years when they may have one or more catastrophic claims. Insurance is all about pooling. Without it there would be no need for insurance because everyone would be responsible for their own incurred claims. That's a scary thought.