Many larger employers, particularly those that are experience rated or self-funded, often find themselves in the position where former employees are driving up their healthcare expenses due to their enrollment in COBRA.
COBRA is a federally mandated benefit that allows employees to continue their healthcare benefits for a period of time after an employee terminates. For many former employees, they are moving onto another job (with healthcare benefits) or into retirement, so they have no need to continue their healthcare benefits. For those former employees, there is little or no impact on the former employer’s healthcare expenses.
But what about the employee that left their job due to a personal health issue? Or left to care for a sick dependent? What if they are a high-cost claimant? High-cost claimants comprise 1-2% of subscribers but generate a third or more of all healthcare expenses. Those former employees can add significant costs to the employer’s experience, driving up their rates. Businesses can’t legally kick them off the plan, as they have rights under COBRA, so what can you do?
What if you could move them off your plan and, at the same time, give them better coverage at a lower cost? It sounds too good to be true, but it is actually possible. At Bond, we provide healthcare solutions (group, individual, government funded) and as a result, we can, in most cases, solve this dilemma and turn this into a win-win.
For example, Bob is a 48-year-old living with diabetes and has been in and out of work over the past two years. He is currently out on disability with limited income. He incurred approximately $180,000 in medical claims in 2019 and another $205,000 in 2020. His 2021 costs will likely be in the same range, so he cannot afford to be without coverage. When he was working, he was paying $463 per month for coverage for him and his wife. He is currently covered under COBRA and now picks up the full cost of coverage. His new premium is just over $2,200 per month.
Bob’s former employer is looking at an increase in healthcare costs of 20%. This will bring Bob’s monthly premium up significantly, and how will he pay for it? The solution is New York State of Health (NYSOH). By assisting Bob to enroll in the NYSOH, he was able to purchase subsidized coverage. Based on Bob’s income, he was able to obtain a policy with richer benefits, utilizing the same network for just $25 per month. A real win for Bob and his wife. And additionally, by Bob going off his former employer’s plan, we could re-negotiate the group benefits for the company. By removing Bob’s claims, their loss ratio dropped significantly (from 113% to 83%), which in turn reduced the renewal from a 20% increase to a 6% increase. Now this was a win (and savings!) for all.
Healthcare costs can get out of control, but often there are solutions. Give us a call to see how we can help you control your healthcare costs.