A local HMO,
with 75,000 members and operating in
one area of their state had an opportunity
to quote a large major employer. The
employer had over 2,000 members (employees
& dependents) in the HMO service area,
all of whom were covered by their self
funded plan – with a variety of mostly
low cost options.
The HMO offered
a quote for their standard co-pay based
HMO product without considering plan
design differences or cost differentials.
The employer had provided prior experience
as part of their RFP package, but the
HMO decided that it was “not credible”
and instead prepared manual rates.
During the rate
negotiation process, the HMO agreed
to offer an out of network benefit and
then agreed to offer their plan on a
statewide basis through a wrap-network
they had an existing relationship with
Initially, the health plan was ecstatic
when they learned that they’d enrolled
almost 10,000 members throughout the
entire state. They quickly turned to
panic, when they began to understand:
vast majority of members that enrolled
were outside of their core service
area and they had limited ability
to manage them.
experience they dismissed as not credible
was in fact accurate; the group’s
experience was much worse.
- Their benefit plan was dramatically
richer than all of the self funded
options the employees had. Despite
the higher cost, this led to dramatic
selection issues when employees saw
the benefit comparison.
group’s loss ratio was well in excess
of 100% and resulted in significant
losses for the plan.
While this is one plan’s real life horror
story, others can learn from it.
Send us your horror story. We’ll pick
the best (or worst) one and publish it
in an upcoming newsletter - email to:
strategically when underwriting a
large case, particularly when there
are other options. Put yourself in
the employees’ position. What are
they thinking about when making their
benefit decision? A plan has the right
to know what the options are when
they’re being asked to assume the
ignore a group’s experience. If it
doesn’t look accurate, don’t hesitate
to question it.
your core strengths and stick to them.
- Don’t be afraid to walk away from
business that doesn’t meet the plan’s