Southwestern Benefit Designers
Southwestern Benefit Designers

 Case Study: M Company

11.10.22 01:02 PM By Forrest Huggins

Allstate initial quote (pre-underwriting) vs final pricing after u/w produced a 7.8% lower final price

By David Rubey, Sr. Advisor -- Group & Individual Health, Life, and Disability

After u/w we typically see pricing lower than the initial quote. Therefore, to accurately show premium differences/savings it is best to get employees to complete the medical questions up-front.   However, we know that is not always realistic, so Allstate will provide an illustrative quote on census data. 


NOTE; this group has a recent newborn with ongoing potential medical bills, along with some other employees with claims, i.e. it is not some perfect / no-claims, best possible case scenario, and they still received lower premium rates after underwriting. 


Comparison of premium of the Fully Insured Guarantee Issue renewal plan. This is also lowest premium of all major FI / GI carrier quotes.


                                                                HMO plan with $3,500 deductible                          Allstate PPO w/ National PPO                   Renewal % higher than Allstate

Employee Only:                                                         $503.09                                                                      $347.07                                                                     45%

Employee + Spouse:                                                 $1,006.18                                                                   $832.93                                                                     21%   

Employee + Child(ren):                                             $1,006.18                                                                   $659.42                                                                     53%

Employee + Family:                                                   $1,509.27                                                                   $1,110.58                                                                  36%


 


Comparing to PPO rates so as to be closer to Apples to Apples price comparison

Current carrier PPO Plan Option:

EE Only:                                                                       $564.75                                                                         63%

EE + S:                                                                          $1,129.50                                                                      37%

EE + C:                                                                          $1,129.50                                                                      71%

EE + F:                                                                          $1,694.75                                                                       53%

* Both renewal and Allstate plans have a $3,500 deductible.   Renewal max out-of-pocket is $7,900 while Allstate's is $8,550. 

 

Most employee of this group have Family coverage.  Based on current enrollment this group will save over 35% with a well recognized national PPO network vs renewal with an HMO network.  If comparing to PPO network pricing, the cost saving would exceed 50%.  Since this group now has employees in other states, a national PPO network is important to them.


The Allstate plan is also on a level premium funded participating contract.  This simply means that approx. 6 months after the plan year end, Allstate will compare claim dollars spent vs claim fund dollars.  If there is a positive balance, 50% of the balance will be paid back to “M” company.  If there is a negative balance, “M” company will not pay any more than the initial premium already paid. 


Seeing a nearly 8% pricing difference in the quote after medical questionnaires were completed shows the importance of getting these done up front when possible.  After the full underwriting is done, there is still  ZERO obligation to use Allstate.  However, with most of our clients, the potential to save 25%, 30%, even 50%+ is motivation enough for employees to complete the questionnaires. This is especially true when the employees are sharing in the cost of the insurance. In looking at the EE + Family cost, presuming the company pays 50% of employee only price and $0 towards spouse/child premium costs, the employees are looking at saving, approximately $485/mo or roughly $5,800 per year out of their pocket (or added to their bring home pay).  That is effectively a SIGNIFICANT pay increase for the employee, while on this group of 10 employees, it is also SAVING the company over $18,500 per year in their costs, with potential to save even more in good claim years. 

With this type of saving, employers can offer more benefits to better compete with larger employers, like group life, AND employees will have more money to have for other ancillary lines of coverage like voluntary life, dental, vision, Accident Medical/GAP coverage, etc.  similar to what many larger employers are offering in an effort to attract and retain top level employees.