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  • Writer's pictureScott Clendaniel

Very Important to Understand about healthcare pricing

Where you start each year with the pricing of your plan is so incredibly important! I can't emphasize that enough. Each year, you go out to market to find the best health insurance plans for your business. Upon receipt, the carriers are looking at your information to try to determine how to price your plan so they can win your business.

Let's say your plans are over-priced, meaning you're paying more than you should. As an underwriter, if a high-priced plan came across my desk, my immediate thought was to determine why is it priced so high? More than likely, it's because they didn't know any better and they were simply accepting incredibly high rates but there was a very real possibility that it was because of their claims.

Remember this... "the insurance company's job is to get you to buy at the highest rate they can and still earn your business". If you don't understand this then it could dramatically affect your rates.

Here is a very realistic scenario... When I was a Director of Underwriting, let's say your case hits my desk and you're paying $550,000 a year for health insurance but after reviewing your information and running all your numbers, my underwriting model says you're pricing should be between $400,000 and $500,000. That means my drop dead low number to win your business is $400,000 but my goal is somewhere in between. The higher the better when I was an underwriter!

If this was your company that hit my desk, I would be salivating and I would immediately call your broker and ask something to the affect of, "Are there any competitive bids in the door?"

After finding out what's in and what the rest of the market was doing, I would say something to the affect of, "We would love to earn this business and we are coming in very aggressively! We can save your client $50k. Would that win the business?". As you know, in this very common scenario, I still have $100,000 in my pocket if someone were to come in more aggressive than me.

Again, my job as an underwriter was to sell the business for the highest price I could and still earn the business. It's the job of EVERY insurance carrier in the market. The higher the pricing, the less chance of loss. For an underwriter, the higher pricing is not even about profits as much as it was about not having a loss. It's an underwriter's biggest fear!

Now, let's flip this scenario. Let's say your current pricing is $425,000 and my model says my drop dead number is $400,000. You can bet I'm coming in at $400,000. While it's not a big number considering, you never know, why not!

So, as you can see, where you're priced at can dramatically affect the competitive numbers you receive. If you're priced 50-100k more than you should, you're paying that EVERY single year! Two or three years of that and you've lost several hundred thousand that could have went towards new employees, new equipment or savings for when a pandemic hits and you need it most!

Look for my upcoming video on how I saved a 70 life group in Mount Holly, NJ over $120,000 in a single year while dramatically increasing their benefits. This scenario is exactly what I am talking about in this post. Until then, stay healthy and let us know if there is anything in the world we can do for you!

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