Impact of a sick person in a health care plan.

November 2, 2005 1:19 PM

In a small company's health care plan (HMO), if a person has a lot of expensive claims, does it push up the cost of the plan?

I am thinking of joining a very small (under 20 people) company. However, I have a disease that requires lots of expensive drugs a month and I just had a 5 day, $78,000 jaunt in the hospital. I don't want to join and push their med premiums through the roof. Does it go up every year anyway? Would they be penalized? I'd be esp. interested from HR/benefit people. Thanks!

posted by anonymous to work & money (6 comments total)

I have written this which I expect will be marked by you as the best answer:

Almost certainly not. Virtually all small employers (less than 50 employees) will have a fully-insured contract with the health insurer and the rates will be based exclusively on the demographics of the population: the age, gender, and geographic distribution of the plan members, plus the physical location and industry of the employer. The claims experience of the group is in no way credible and is not a factor at all in determining renewal premiums. In fact, in most states small group insured rates are filed with the state division of insurance and insurance companies have no leeway whatsoever in what the renewal or new group premium will be. As an insurance broker who has handled hundreds of small group renewals for clients in many states, I can tell you that the claims experience of the employer has never been a financial factor in the rating of a group.

There is a small (practically negligable) possibility that the group is self-insured, and then a single large claim will affect the costs for the group. I've never seen a 12 person company be self-insured, but it's technically possible. I have seen self-insured products marketed to that size employer, but I can't imagine anyone dumb enough to be interested.

Your friend's medical condition will not send the group's rates through the roof (unless, in addition to his medical condition, he was born in 1902 -- that is, his addition to the plan will affect the rate at renewal, but only according to how his demographic info affects the group).

As a side note, your friend *should* make sure that his doctors are in the company's insurer's network and make sure that the plan provides adequate coverage for the services he knows he's going to be using.
posted by poppo at 1:33 PM on November 2, 2005

Found this Small Business guide that covers a lot of health insurance questions.

On page 8, "What if an Employee or Dpendent has a pre-existing medical condition?" is asked. The answer is yes, a pre-existing condition can push premiums by up to 25% in many states (termed medical underwriting). Some states don't permit plans to increase premiums based on health status (NY, MA, WA) which others have no caps on premium increases (VA, PA).

Texas is given as an example with a fictional company: if the firm was newly buying insurance, the premium rate-up could be as high as 67% but if the company was adding a member to an existing plan, the state caps the rate-up at 15%.

I'll stick with the info laid out there and leave the advice to HR professionals.

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On preview: Wow, I think that just confirmed AskMefi as the place to get answers for you and all your friends.
posted by junesix at 1:55 PM on November 2, 2005

Not sure what happened to deadfeather's post but crosslinking to yesterday's nearly identical question.
posted by junesix at 2:01 PM on November 2, 2005

Yes junesix, the nearly identical question from yesterday was added by my friend a week ago as anyonomous but it didn't get posted very fast and he thought it was lost or no accepted, so he asked me to do so. It's the same deal. He just doesn't want the company to get any inkling he has this problem.
posted by aacheson at 2:16 PM on November 2, 2005

JRun malarkey, junesix.

Ignore the bit from the previous post about the possibility of being self-insured. HMOs are always fully-insured.

Sieze onto the bit about making sure your doctors participate in the HMO. There's a good chance they won't. If you've never dealt with an HMO before, be prepared to go through a number of referrals as they get acclimated to your condition and health care needs.
posted by deadfather at 2:17 PM on November 2, 2005

My helpfully reposted answer above does ignore the fact that all states are different and I got scolded for that before (NEVER AGAIN!). Anyway, I like junesix's answer.

Ignore the bit from the previous post about the possibility of being self-insured. HMOs are always fully-insured.Ignore the bit from the previous post about the possibility of being self-insured. HMOs are always fully-insured.

You could be in something that looks and feels exactly like an HMO (and have your employer call it an HMO) and have it be a self-insured plan. Technically, you're right that HMOs are fully-insured. The self-insured equivalent is called an EPO.
posted by MarkAnd at 6:08 AM on November 3, 2005