This is an 8 minute video that immediately gets to the point as to how group insurance operates, and why it is possible to gain substantial savings on a company’s insurance premium. This video gives many examples of the costs and savings possible, and why the trend has been for group insurance policies to increase in price.
Many businesses do not realize that the administrative cost of their group insurance plan is simply the difference between premiums paid, and the claims the insurance company anticipates having to pay. For example, given a business with 6 to 24 employees, the insurance company expects a claim loss ratio of 75%. That means they will pay $75 in claims for every $100 of premium. That leaves $25 for administration. Taken as a percentage of claims, that is a 33% administrative fee. There are substantial savings possible by lowering the administrative fees.
Another concept discussed in the video is that group health and dental insurance is not really insurance. The employer indirectly pays the health and dental claims. The risk of these claims is not shared with other employers, which is what insurance is, the sharing of risk. If the actual claims of the employees are higher than allowed for, the employer will see significant increases in the insurance premium.
Myles Rempel of Ten Star Financial says “Most employers can benefit greatly from understanding the basic mechanics of group insurance, and enjoy the cost savings available by re-arranging how it is paid for.”
By Myles Rempel