In a recent video (#9 of my Frankly Speaking series), I discuss how the terminology of the insurance industry is actually working against it. Phrases and terms don’t mean what we think they mean. The result? They are able to protecting their high-priced middlemen.
When you have a plan from a typical insurance company, they call it a “fully-funded plan.” There is no such thing. Because of the ACA act, there is unlimited life time benefit that the carrier has to provide. Think about it – it is impossible to fully fund infinity! What we have in reality is a “prefunded” plan in the form of your premium. If you don’t give the premiums in advance, and thus maintain true control of your plan, it’s called “self-funded.”
You are either “prefunded” – which costs more and puts you in a situation where you don’t know what your costs are; or, you’re “self-funded,” and you only pay for what you use. The real difference? “Premiums” cost 20 to 40 percent higher than the discounted rate that typical big companies get (and what our ECCHIC clients get).
Big insurance wants to protect the middlemen because it allows them to post obscene profits every quarter. But you don’t have to be part of that. Last week I had an evaluation meeting with one of our clients. The company has 14 employees and is a distributor of industrial supplies to the manufacturing community. In 2016, the company had two levels of benefits:
- A deductible of $1,500 then 100%.
- A deductible of $2,500 then 100%.
The premium in 2016 was around $9,200 per month for the employees and dependents. We recommended maintaining the same benefits, setting their benefit budget at $9,200, and keeping the same doctors. We removed the middlemen for prescriptions and basic medical services. We restructured their plan so they could actually see and understand their costs for all medical and pharmacy needs. We showed them how to use the insurance, medical, and pharmacy system the same way the large employers like Caterpillar Tractor (who has thousands of employees) do. How’d that work out for them?
- Their benefit budget is still $9,200 in 2019.
- They have accumulated more than $50,000 in their insurance program which funds. More than the $0 that would be in their hands if they stayed with their previous insurance company.
- The employees’ deductibles and out of pocket is still $1,500 and $2,500.
- They still have the same doctors.
- The employees still have the same cost.
Now management is considering and possibly preparing to add more benefits within the original $9,200/month budget. These additional benefits would be disability insurance (also known as income protection) and more life insurance!
Understand the big main-stream insurance companies want the small business owner to be confused. The terminology, the plans, the assumptions they want you to make, etc., are all designed to protect their middlemen and keep their profits high. Let’s be clear: If you’re with a traditional big insurance company, you are paying retail prices for things you don’t use.
At ECCHIC, we partner with the small business owner to cut through all this together. Let’s just have you pay wholesale, and only for what you actually use. You know what term we use for this? “Savings.” It’s a term I don’t think you need an explanation of.