Small staffing companies are a challenge for insurance underwriters. When a company is small to midsize, the insurance risks they experience are far less predictable than those of larger companies. This is when the concept of buying power comes into play. Joining forces with several staffing companies to partner in purchasing health insurance is a new concept that has shown unmistakable value. By creating a pool large enough to duplicate the predictability of a large company — usually a group of 1,200 to 7,000 participants — companies drive costs down and make the risks more predictable.
The Protocall Group, a staffing company in the Philadelphia and South Jersey market, pays more than 8,000 temporary employees each year as well as 80 full-time employees working out of nine branches. We joined a coalition more than a year and a half ago after experiencing continuous increases in our health insurance costs.
Here are some benefits we’ve enjoyed by joining a coalition to purchase health insurance:
More predictable data. Although individual staffing companies purchase each healthcare component separately, they become a member of a much larger entity that can document more predictable data for claims and create safety in numbers. The group coalition model uses more than half of the typical specific stop-loss premium to fund a “captive layer” shared among all members. This added layer of risk protection helps to even out the ups-and-downs of any one employer and provides greater risk diversification through the larger pool.
This diversification mitigates risk to each individual company. For example, a company of 50 employees has a one-infive chance of having a bad claims year, while a company (or captive) with 400 employees has a one-in-20 chance of having a bad claims year.
Total transparency. In the formation of a partnership in buying insurance, you get transparent reports that may include broker fees, stop-loss insurance costs and monthly claims.
The safety net. The safety net is that we have another layer of insurance that sits on top of our pool of monies paid in by the coalition members. The 35-member coalition my company belongs to has more than 7,000 insured employees, including temporary and in-house staff. Thus, our pool of monies is substantial. On top of the pool is “stoploss insurance” that kicks in if our individual company claims exceed $30,000. Each coalition member has its own pricing and contribution to the pool.
Underwriting. The idea of a coalition of staffing companies was relatively new to the insurance industry and the staffing members in ASGroup, an association of noncompeting staffing firms.
The coalition managers had serious concerns about underwriting our group, knowing that most of our employees are temporary and had no previous claims history. Familiar with workers’ compensation claims, which can continue for nearly eight years, coalition managers were apprehensive about the idea of self-insurance. But once they knew our temporary staff consists mainly of “young workers” that typically have fewer claims, they were on board. And once we understood that healthcare claims only go out to 18 months, we all felt comfortable with our risk.
Money back. We were motivated to join just after the Affordable Care Act was passed, when our rates rose 30% due to reclassification. Around the same time, an ASGroup board member brought TSE, a staffing coalition of 35 companies, to speak at one of our meetings.
Massachusetts had been under healthcare reform prior to the passing of the ACA, and our board member was all too familiar with the struggle to insure employees affordably. We had major concerns since this approach to paying for health insurance was so new but, to date, we are very satisfied with the results. In fact, in January, we received a check back for $8,900. Never before had we received a refund from health insurance. Have you?
