Are You Overpaying on Premiums? Why 0% Is the Worst Renewal

Your 0% Renewal Actually Means More Money Wasted

Nobody wants to pay more than they have to – for any service. Why then are so many fully insured employers excited to receive a 0% renewal increase? It’s likely because they don’t know that a 0% increase means that they are vastly overpaying for health insurance.

While that statement may seem tongue-in-cheek, we will break down the math involved to determine exactly how much you are overpaying when you receive a 0% renewal.

Understanding The Medical Loss Ratio

Now to start, it’s important to understand something called the medical loss ratio. It’s a simple fraction of claims over the premium.

The premium is the amount of money that you pay your insurance company each month, and the claims number is how much your insurance company pays doctors and hospitals to take care of people that are on your health plan.

Now, taking a look at a fraction, let’s say you have a premium that costs $1,000,000 per year, and in that same year, you have $850,000 worth of claims. That means you have an 85% loss ratio.

Let’s Factor In The 0% Renewal

The 0% renewal means that you have less than or equal to a 60% loss ratio. Now, if we take that same one million dollars and work back towards a 60% loss ratio, it means you have $600,000 worth of claims.

In order to understand how much you’re overpaying, we need to add back in the insurance company fees. Those are typically about 15%. In this case, the insurance company fees are about $150,000.

So, between your claims and your fees, you are paying just about $750,000 total each year, but your premium is $1,000,000. In total, you are overpaying by $250,000 a year.

Stable Self-Funding to Eliminate Unnecessary Costs

This type of situation is precisely why Crumdale Partners created the Franklin Health program. We want to keep money in employers’ hands, and we do so through our innovative approach to self-funding. We not only control costs but cut unnecessary claims spend through our core components:

Member Advocacy and Support
Independent TPAs
Custom Rx Programs
Active Claims Monitoring
Group Purchasing Stop-Loss

Our consultative and agile insurance solutions ensure you never overpay on premiums and get contracts and renewals with 100% transparency, so you know where every dollar goes.