With global inflation at a 30 year high, negotiating affordable and sustainable price increases for your faculty health insurance is harder than ever.
We always tell our clients:
“If you do nothing to manage your health insurance plan, such as making year-on-year plan design adjustments – or anything at all to help manage the plan’s utilization – then you can expect your health insurance premiums to increase year-on-year by at least medical inflation“.
Meaning expected premium increases of 8-10% year-on-year pre-covid, with these percentages driving higher post-covid – quickly becoming unsustainable for any finance department.
Soaring Healthcare Costs
The bad news is that soaring healthcare costs and increased healthcare utilization as a result of the COVID pandemic are contributing to the highest projected increases in worldwide medical costs in more than 10 years. Higher medical costs means higher medical inflation which means higher medical insurance premiums. In a recent survey of global health insurers, more than 75% are projecting higher medical trends over the next 2-3 years.
In recent meetings with our clients, we are also seeing a corresponding spike in claims for treatment that were delayed as a result of the COVID pandemic. Depending on when the country you are in stopped COVID restrictions (in 2022 in most countries; early 2023 in China), the next few months saw a glut of musculoskeletal surgeries, with those claims now showing on your claims reports, right around the time you are trying to negotiate your renewal with your insurer for your summer renewal. It probably comes as no surprise that working from home and months of online learning had a very negative impact on your staff’s physical health (not to mention their mental health).
A Perfect Storm
The result is a gathering perfect storm of a spike in claims from delayed treatment coming at the same time as ever increasing healthcare costs.
So how to get back to the times of year-on-year single digit increases for your health insurance? Especially if you are reluctant to make wholesale plan design changes or adjustments.
Increase Your Deductible As High As You Can
Our number one recommendation would be to increase your plan’s deductible. Increase it as high as you can. Our recommendation would be to increase it to at least US$500, or to as much as US$1,000 if possible.
What is a deductible? A deductible is a set amount of money that your employees will pay out of their pocket before their insurance kicks in. You might not realize it, but if your deductible is less than US$300, it’s lower than the deductible at many of the leading international schools, so you probably have lots of room to increase your deductible and keep your plan competitive (by the way, the average deductible in the USA is US$1,700+).
High-deductible plans are the perfect way to share the costs of your school’s health insurance plan with your faculty without having to reduce your plan’s core/key benefits. A higher deductible also changes how your faculty members will use the plan. The higher the deductible, the lower your plan’s premiums – not just in year one, but for many years to come.
Here are 4 advantages of high deductibles for international schools:
- Lower premiums – Increasing your plan’s deductibles results in significant decreases in your health insurance premiums. An increase in your deductible of US$500 can result in a saving of 10-15% to your premiums, and in a medium-to-large school that can add up to a meaningful amount of money. Remember that this is not just a short-term savings, but that the savings are compounded year-on-year because you reset the baseline for any later increases, and a higher deductible will change the behavior of how your staff use the plan, resulting in lower claims utilizations. We can guarantee that introducing a high deductible to your plan will improve your claims utilizations and save you a lot of money in the long-term because we have seen our clients benefit from just such a change.
- Pass on costs without reducing core cover – When making any type of plan design changes it’s critical that you don’t touch the core in-patient part of the plan. While a deductible of US$1,000 might seem high, it’s nothing when you are able to let faculty know that they will continue to have 100% cover up to a million dollars (for example) in the event of a serious car accident, cancer treatment or a heart attack.
- Increase consumerism, change behavior – With higher deductibles, employees are more likely to research and compare healthcare costs, which can lead to more informed decisions about their healthcare. This increased consumerism can encourage employees to be more cost-conscious (AKA not always going to the most expensive medical facilities) when it comes to their healthcare decisions, which can help contain healthcare costs and reduce your plans’ claims.
- Tie the deductible to a wellness fund – Soften the blow of the increased deductible and turn it into a positive by giving your faculty members the equivalent amount in cash at the beginning of the policy year. Call it a “Wellness Fund”. Employees can keep that cash to spend on healthcare, or they can spend it on a new bike, a gym membership, or a spa treatment. Anything at all. It’s their money to spend as they see fit. The long-term savings generated by increasing the deductible will far outstrip the cost of this new “Wellness Fund” initiative. The school still saves on health insurance. And the faculty receives something in return, reducing their resistance to change.
It’s OK to Ask For Help
Keep in mind that changes in plan design and an increase in your plan’s deductible can be viewed by your faculty members as a sign that the school cares more about money than their health. The key is to manage the message with clear communication, backed up by data, knowledge and an explanation of why changes have come about. If these suggestions seem complex and the thought of facing your employees with plan changes on your own is daunting, consider reaching out to an experienced, qualified broker or consultant for help. One World Cover has helped hundreds of schools make plan design changes over the past 15 years, and those schools are now reaping the benefits – and savings.
One World Cover | Health Insurance Specialists If you are concerned that your current health insurance plan might not be sufficient for your needs at this uncertain time and are interested in us reviewing (free-of-charge, no obligation) your insurance cover to ensure you are fully protected – or can be better protected in the future – please get in touch. We are happy to help. In the meantime, stay healthy.