Fully-Insured Programs: A Trip to the Pine Barrens 

In multiple mobster movies, a guy has a bag put over his head, is thrown into the trunk of a car and is driven to the Pine Barrens (a remote part of central New Jersey) in the middle of the night.

The guy (or gal) doesn’t know where he’s going, but he knows it isn’t good. The driver tells him, “Everything will be all right, I’m your friend,” but he’s the one that put this poor guy in the car! The person in the trunk rarely has a good time upon arrival.

At some point, the victim realizes he cannot risk staying in the car and needs to get out at almost any cost. He leaps from the moving car.  He might land in a nice patch of grass or he might break an arm. Either way, he is out of the car, has the bag off of his head, and can now determine where he wants to go and at what pace. He now controls his destiny. 

This story parallels that of an employer in a fully-insured program. The bag over the employer’s head is the lack of meaningful loss data, and the driver of the car is the fully-insured carrier. The Pine Barrens are reduced income and the possibility of bankruptcy.  The leap from the car is the move to a loss sensitive program, the soft patch of grass is the immediate savings, and the broken arm is the possibility of not immediately saving money.  And of course, controlling your destiny is the same.

If you want to see your path to the Pine Barrens, try our Margin Erosion Model.