How do your health insurance claims impact your company's sales?

Here's the thing, you know that expenses impact your bottom line...you don't need me to tell you that. Higher expenses lead to lower profit margins and vice versa.

My guess is you have a good handle on your top suppliers (think raw materials, equipment, etc.). You've squeezed them because you know it's necessary to get the best possible cost.

But what happens when your #2 or #3 expense gets a 20% increase in cost? I'm talking about your health insurance plan.

Your profit margin takes a huge hit. And if you want to maintain a profit margin, you need to increase your revenue next year. Which means you need to increase staff, resources, etc.

Your health insurance plan has suppliers too. And if you are not placing the same level of scrutiny on your healthcare suppliers as you are on your raw materials suppliers, then my advice is simple: Crush your sales next year.

Transcript

How do your health insurance claims impact your company's sales? To explain, let's assume you're a $50 million revenue company with a$5 million healthcare budget, and you have a net operating income of $5 million or 10%. You just renewed your health insurance plan at a 20% increase or a$1 million increase for a total healthcare budget of $6 million. Now, assuming you don't grow at all, your profit margin just reduced to $4 million or 8%, so how do you get back to the 10% profit margin? Well, you have two choices. Now, you can either increase revenue or decrease expenses. Now you've already squeezed your raw material suppliers, so you're left with either reducing your healthcare expenses or increasing your overall sales for the next year. Here's the issue with impacting revenue or increasing sales. If you need to increase your profit margin by a million dollars in, you're operating at a 10% profit margin, guess what?You have to increase your sales by $10 million, not a million by $10 million just to be back at the same percentage profit margin you were the year before you ever think about it that way. Now, the alternative is you cut expenses on your healthcare plan by 20%. So here's the question I have for you that I want you to consider. Now. Have you squeezed the healthcare suppliers on your health insurance plan the same way you've squeezed your suppliers for your raw materials? If the answer is no, my advice to you is to focus on your healthcare expenses before you staff up for an additional $10 million in required sales for the next year.

About the Author

Mike Kroupa, Self-Funding Insurance Expert

I grew up in a house that was constantly under construction and the experience helped me uncover one of my passions, remodeling. After running a successful remodeling business with my brother during college, I decided I wanted to keep this as a hobby. Instead, I took my advisor’s recommendation and started down the actuarial path, which ultimately led me to insurance.

Since then, I have focused my career teaching employers how to better manage their health insurance plans. I found myself frustrated year after year of doing the same thing because it didn’t feel like I was making an impact. Healthcare costs were continuing to increase, and it felt like the only options employers were left with was increasing deductibles, increasing contributions, and switching carriers.

There was a turning point for me in 2020 as I found Health Rosetta, an ecosystem for scaling adoption of practical fixes to our health care system. As my clients started adopting these fixes, I found myself getting passionate about what I was doing for the first time. Then I realized my hobby of remodeling was driving the passion because I was remodeling health plans. Even better, I was having an impact because patients (employees, spouses and children) were getting the best care they ever have and saving a lot of money in the process.

Get in contact with Mike:

Phone: 630.738.1835 Email: mkroupa@gocgo.com LinkedIn: Mike Kroupa

Mike Square

How do your health insurance claims impact your company's sales?

Transcript

Subscribe to Our Blog