How a Midwestern firm used creative risk segmentation to provide health insurance coverage for an employee with chronic illness
The Problem
A Midwestern company with 100 employees across seven locations discovered that an employee in their Northeast office was disqualified from coverage under their new self-funded health plan. As a result, the company had to consider returning to a more costly fully-insured health plan for all employees.
The company did not discover this problem until it was able to analyze health data from their self-insured plan, which wasn’t available under their prior fully-insured carrier.
What is risk segmentation?
One way for companies to deal with higher risks is to segment groups into risk tiers and charge different premiums for each tier.
The Solution
How did the company implement risk segmentation?
By adopting a risk segmentation strategy, the Midwestern company was able to segment its Northeast office onto a fully-insured plan that covered the high-risk employee. Meanwhile, employees at the other six locations remained on the company’s self-insured health plan.
By removing the 16 employees in their Northeast office, the company had enough employees to meet the legal requirements to maintain a self-funded health plan.
As an added bonus, risk segmentation helped the company achieve significant savings. By creatively structuring its self-funded health plan and segmenting out the Northeast location, the company realized greater underwriting profit. This savings went straight to the company’s bottom line.
Is risk segmentation right for your business?
To assess a self-insured health plan or risk segmentation is right for you, contact an RMC professional today.
