Doug Truax, CEO and founder of Everlong Captive Health Insurance, recently said that employers who switch to a captive health care insurance model can save money, helping to mitigate the rates and health care costs that continue to increase globally with no end in sight.
"The costs are just too high," Truax said. "Basically, the health insurance carriers have been making a lot of money. If you look at the S&P 500 over the last 10, 15 years and see how the health insurance carriers did compared to the average, it’s really pretty crazy."
According to a Global Medical Trends Report from Aon, health care expenses are expected to increase globally by 9.2% next year. This is up from 7.4% and is the highest rate since 2015.
“North America was the only region without an increased trend rate, holding steady at 6.6% due to the delayed impacts of inflation on U.S. medical trends,” according to the 2023 Global Medical Trends Report from Aon. “North American trend rates will continue to experience upward pressure over the next couple of years, further accelerating the cost and affordability challenges already present in that region. Although the 2023 rates may feel comparatively low, there are still significant pressures within the North American health care system that are catalyzing higher health care costs.”
Research published by Deloitte in July estimates that health inequities, which currently sit at $320 billion in annual spending could reach as much as $1 trillion by 2040.
"If the United States reaches this threshold, we could see a direct impact on affordability, quality and access to care beyond the challenges that already exist. The projected rise in health care spending could cost the average American at least $3,000 annually, up from today’s cost of $1,000 per year. And the increase in spending likely would have a greater impact on historically underserved populations," according to the research.
The report goes to identify five key factors needing to be changed to help mitigate health care inequities. Those included prioritizing creating systems that can serve all patients, cross-sector partnerships, progressive measures for organizations to identify and monitor changing health care systems, identifying health care equity barriers and creating trust and inclusion.
“At the local level, companies looking to mitigate the increased costs are using a familiar set of strategies,” according to Aon's report. "Another way that leading employers are adopting is the use of captive insurance vehicles. Captives provide a far greater control over pricing and facilitate the linkage between well-being initiatives and health care spend. Any underwriting profits on the portfolio can also be reinvested in further wellness and health care initiatives."
The report specifies that businesses are using three main strategies to mitigate costs: Long-term health care financing through captive health insurance, the use of health care analytics and a broader well-being strategy.
"I do think that forward-thinking brokers talk about the should-haves, like predictive claims management and things like that, and the could-haves, like the dividends that you could get back. Now, that, to me, is real value to your clients, and that’s how you differentiate yourself and demonstrate your value to your clients, and improve their condition by providing a better way to purchase group health insurance. And just to plug us, obviously, a purpose-built, high-performance health insurance captive solution that allows for the integration of sophisticated tools to help your clients make informed decisions with upside, not the same old decisions with the same capped result," Truax said in Episode 4 of Everlong's podcast.
According to the Deloitte report, health care in the U.S. as a system is under pressure to decrease cost and spending while improving quality but instead, inequities continue to grow depending on different factors including race, gender, age, location, disability status and sexual orientation.
"In addition to the negative impact on outcomes and spending within the health system, health disparities can have broader consequences for the economy and quality of life. Health disparities account for roughly $42 billion in lost productivity per year, not including additional economic losses due to premature deaths. Health disparities also can have devastating consequences on the quality and value of life for the people, families and communities most impacted," the study said.
Truax explained that Everlong offers incentives to employers for wellness program participation, which saves businesses money overall because they end up having less employees needing to use their policy, so less claims and less money being spent on health care.
"So it’s a multi-generational family owned automotive group, car dealerships, credit facilities, safety supply services and really before they joined our captive, they had an issue because they couldn’t find a model that looked more like what their industry looks like," Truax said to emphasize what Everlong can do for businesses. "So we basically presented an approach to stabilize, and lowered all their renewal trends while providing full pass through transparency and relationship-driven innovation. They got a five-year average stop-loss increase of just 3.1%, they got no risk of future lasers and they have full transparency of what they were looking for, and the premiums include the organ transplant coverage, which I mentioned before. And also, when you start netting out the money that they’ve been getting back in dividends over time, they’re on a -6% trend line for the stop-loss, and also, on the claim side it’s been trending down. So, self-funded company significantly lowering their PEPY exposure, and with the recent dividends exceeding $57,000, they’re up to now $2.3 million in savings since they’ve joined Everlong."
Truax said that while health insurance costs and rates continue to rise with no end in sight until the health care system changes, businesses could benefit greatly from switching to a captive health insurance model.