While Troy did her research, Schloss came up with projections that showed what 1991's pricing structure would look like. Since insurer rates typically vary widely by size and type of company, region, and other factors, Schloss did a range of projections, fine-tuned to growing companies operating within the Delaware-Maryland-New Jersey market.
"It didn't look good," he admits. "There were just no signs of any price abatements. Health-care costs were continuing to go up, and government cost-shifting was only intensifying the trend. That meant companies could typically expect to see another round of double-digit health-care inflation." That prospect was troublesome to Troy, who needed to keep the overall increase for health-care coverage to HBCS's growing employee base at around 18%.
* * *
September-October
Although it was still too early in the year for renewal bids, Schloss contacted the company's carrier to get a sense of its thinking on price hikes. The previous year, when projections had appeared too high, Troy had shopped around for the first time and switched carriers.
For 1991 Schloss expected renewal rates for the same coverage to run at least as high as the industry trend. That would kill Troy's budget and push her department's costs out of line with the rest of HBCS's operations. So the financial negotiations began.
First, Troy and Schloss examined the company's claims and loss records closely, so they could demonstrate to their insurer that HBCS's policy costs didn't warrant such a high increase. In the past they had used this method to help keep renewal rates under control. This time Schloss was worried, based on his sense that HBCS's insurer had recently stopped pricing aggressively because it was no longer interested in building -- or even holding on to -- market share in the group-health end of the business.
More time-consuming was their examination of the company's options. "Whether shopping or staying with the same carrier, I had the same basic decisions to make," Troy says. "If the price came in too high, I had to accept it, change the policies to lower the cost of coverage, pass more of the cost on to our employees, or come up with some combination of my choices."
Schloss and Troy worked over the pros and cons long before they addressed the issue of remaining with HBCS's existing carrier. Among their strategic decisions: HBCS would stay within Troy's budget, whether that meant making minor changes in plan design or looking for a new carrier.
* * *
November-December
Here's when insurance became Troy's major preoccupation -- during the other months of the year, she had spent about a third of her time on insurance matters. Schloss came to her with some bad news: HBCS's insurance carrier had decided to pull out of the group-health-insurance market entirely, so the company had no choice but to start shopping around. Fortunately, with close to 120 employees, its risk pool was large enough to attract competing bids.
By mid-December, HBCS's insurance negotiations were nearly completed. Schloss had a bid from an insurance carrier that offered almost the same package at rates just a few dollars higher than those for 1990. "The only significant things our employees were going to lose were the opportunity to pay cash out of their own pockets to get a $100 deductible instead of the standard $200 deductible, and a $500-deductible option," explains Troy, "and they were going to lose those only because the carrier didn't offer them. It seemed like a great deal, and it was going to keep our overall cost increase way below the industry norm."
Schloss's focus as always was on controlling costs. So even though the new carrier was quoting a good price, the broker proposed ways HBCS could cut even more from its 1991 insurance fees. "This year," he says, "we talked about removing orthodontics coverage from the dental plan, eliminating the prescription-drug card, and even raising the cap on out-of-pocket expenses from two to three times the deductible." Eliminating or reducing any of those benefits would have lowered HBCS's premiums.
But Troy's role here was to weigh potential cost savings against other factors, including the popularity of the benefits and what their removal would do to employee relations. "Since we were already able to stay within our desired budget, we could afford to pass up the savings opportunities," she concluded.
* * *
January
With 1991's insurance package in place, Troy began to concentrate on employee education. "We want our employees to understand that we're paying a lot of money for insurance, and we're designing the best kind of plan we can afford in the current economic environment. We tell them that if they don't use or need the benefits we're buying, then we're just wasting our money, which hurts the whole company and our growth prospects."
Employee education began with that first memorandum after New Year's Day, which spelled out the major details of the coverage and invited employees to question-and-answer sessions, which Troy limited to about 40 people per session.
By the end of January employees had submitted insurance forms describing the type of coverage they had chosen for plan year 1991 and the contributions they wanted to make for additional coverage.
* * *
February-March-April
As the new insurance year got under way, employees were being educated constantly, if informally, about the 1991 insurance package. "We wrote about the new plan in our company newsletter," Troy says, "and sent out memos as necessary or to clarify procedures whenever we started getting too many questions from employees about a particular part of the process." In the past her memos have covered developments in the world of health care or insurance, such as changes in the state law that governs which parent's insurer provides primary coverage for dependents. This year, because of the company's switch in insurance carriers, Troy focused on helping employees with the new paperwork and filing requirements.
* * *
May-June
In the past, these months have required the least effort from Troy. Although she would continue to collect information about insurance trends, she would do so in a low-key way, since it would be too early to anticipate the next year's cost developments. And by that time, employees usually were used to the new year's plan, which meant that Troy could spend less time on education. But this year was different.
In May Troy circulated amendments to the company's insurance manual containing 1991 coverage descriptions. The manual is a testament to how completely the company believes its insurance-management success rests upon employee education. "If people felt insecure about their insurance coverage, didn't understand it, or didn't believe that we were being above board about our motivations in keeping the plan flexible, we'd suffer from higher employee turnover," she says.
