A lot of times, you’ll look at your carved-in deal, the carrier will come back, give you a new renewal, and close the gap. Some of the numbers the carriers present in the final moments can look attractive to an unsuspecting plan sponsor, but they still might be $100,000 behind on the first year of savings. The client then asks, “is it worth making that move right now?” Chances are they are not showing how their drug trend over time compares to the market, and you, as the consultant, need to give them at least a three-year, if not a five-year projection.
Carved-In vs. Carved-Out Trend Trajectory
As seen in this example comparing the typical carve-out trend against the bundled or carved-in trend, the eight percent trend represents the carrier, and from knowing your self-insured and fully insured groups, you are seeing 10%, 12%, and even 14% trend numbers coming from them. Then, we’re using a four percent trend to represent your carved-out arrangement. For us, we’re running below that, but using a conservative four percent trend, and looking over a five-year period, that $100,000 in savings suddenly accumulates to $600,000.
Consider Long-Term Objectives
I want you to think about this when you are in a position where the client might be pushing back on whether or not to carve-out because the savings number isn’t large enough. Carefully consider what that trend will amount to over time, and how it compares to the market. I encourage taking a three-year to five-year approach with them, and we can definitely help you run those numbers.
