Is the ACEC Life/Health Trust a Good Option for Engineering Firms?
- March 27, 2020
- Posted by: Gus Altuzarra
- Category: ACEC Life/Health Trust
To start, let me give you a little background info on the Trust and know how it works for engineering companies looking for ACEC group health insurance. Then we will review some potential scenarios when joining the trust.
It’s important to know that the ACEC Life/Health Trust is a not in the business of making unnecessary profits. The Trust runs operations by taking a small management fee and any surplus premiums go to reserves – not it’s management. The Trust’s sole purpose is to serve its member firms and respective employees. That being said, the Trust is in the business of protecting itself as a whole and that means pricing its membership base appropriately, given the risk.
What does this mean for you as a Principal of an engineering company as you consider joining the Trust for the first time? To put it bluntly – there are winners and there are losers. Some firms can have a great experience and save hundreds of thousands if not millions of dollars in premium while others can have a couple decent years and then get stopped dead in their tracks with a sizable, double digit rate increase.
Here’s some examples:
To put this into context, let’s look at a few examples. We have three, 60-person engineering companies and they all are considering joining the Trust at the same time. Right now, they are each spending $500,000 per year for medical insurance for their employees and their dependents. Here is an overview of their initial proposals and subsequent savings over the next 10 years. These examples are being used to illustrate that every company’s experience with the Trust is unique.
- Initial Proposals:
- Company A – 7% savings
- Company B – 2% increase
- Company C – 12% savings
Company A takes the offer to join the Trust and saves 7% or $35,000 the first year in the Trust. They have a great first year and perform better than expected. They get a 2% increase the first year and are thrilled with the Trust. They implement the AHIP wellness program (offered by the Trust) within their organization and are underwritten with a subgroup of the Trust that performs 5-10% better than the general Trust population. They go on to receive increases between -2% and 9% for the next 5 years. They have an estimated annual savings of 10% per year or $500,000 over 10 years.
Company B decides not to join the Trust. They don’t have access to claims data at their existing carrier and don’t know much about how they performed relative to their claims. They get a 6% increase the next year and are happy with their decision. That being said, they don’t know how they would have performed on a plan that is rated based on utilization. They revisit the Trust every other year and four years later they get a good offer to save 6% and decide to join yielding savings of about 5% per year for the next 6 years or $150,000. This is an average of 3% savings over the whole (10 year) time year period.
Company C decides to join the Trust and saves 12% or $60,000 the first year in the Trust. They have two employees get diagnosed with cancer the first year and have a bad claims year right off the bat. They get a 20% increase the first renewal but get in negotiated down to a 17%. They have another not so good claims year and get a 15% rate increase year two. Their broker has access to standard commercial markets as well and moves them to a fully insured carrier on year three. They stick with the fully-insured, standard carrier for two years and then re-evaluate. At that time their broker gets another quote from ACEC yielding 7% annual savings and moves them back to the Trust. From there they go on to save 6% per year on average for the next 6 years or $180,000. When you add the $60,000 savings year one, the total savings is $240,000 over 10 years or 4.8% over the whole time period.
The moral of the story is that every firm’s experience with the Trust is going to be slightly different. The key is going to be working with a broker that knows how to navigate the Trust and its different product offerings. It might make sense to hold off on joining the Trust right away and it might make sense to leave the Trust for a couple years if you have some adverse claims years. You can read more about Choosing the Right Broker here.
Overall, the ACEC Life/Health Trust saves engineering companies tens of millions of dollars in premium per year. The Trust is able to accomplish this because of its purchasing power (over 1800 firms currently) and innovative plan designs. The average company stays in the Trust for about seven years and 85% of firms renew their plans with the Trust each year. On top of that, engineering firms that otherwise wouldn’t have access to enterprise level benefit plans now have access to them. If you can take advantage of the Trust when it’s able to offer compelling savings and leverage local, traditional markets when it’s not, you have developed the recipe for success and can’t lose.
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If your firm hasn’t looked into the trust before or it’s been more than a year or two since you last check it out – I’d highly recommend it. Get a quote by clicking the button below and filling out a short form, or give us a call at 877-840-4985.