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Benefits Made Simple

Simple

The greatest compliment any salesman can receive is when their clients tell them that explained the product or service in a manner to which they could understand it.

Insurance is polluted with jargon that just keeps getting thicker. The thicker the jargon, the less people understand benefits and by the time they are at my door, it takes hip waders to get though all of the misconceptions.

In an era where communication is as abundant on social media, insurance should easier to understand, but it’s not. It’s not because of the legalities involved in miscommunication…saying something, putting something out there that can be misconstrued by the reader and opps “Houston, we have problem”.

Being different is part of what we do and so I’m going to put all of that worry about legalities aside for a moment and hope you will read this in the light it is meant and try to explain benefits so we can all understand them.

Life Insurance, it’s the lottery that ALWAYS pays out…you pay your premiums each month (purchase your ticket each week) and eventually someone wins because death the one sure thing.

When it comes to group benefit, Life Insurance, Accidental Death and Dismemberment (AD&D), Dependent Life Insurance and Long Term Disability are four of the most common insured products. Pricing is typically based on the same national information on death and disability actuary tables and usually costs about a third of the overall cost of the total benefit dollars.

The other side of the benefit plan is a place where consumers live from day to day; prescription drugs, health services, vision, and dental care. We’ll refer to these benefits as experience benefits because they are based on consumer usage. An insurance carrier will price these benefits according to expectation of claims, trending, and inflationary measures. So, the more usage the higher the premiums. When usage goes down, do too should the premiums. The ‘insurance’ side of these benefits comes into play when usage exceeds certain levels for one individual and ‘stop-loss’ comes into play which removes the claim as experience.

Shopping for these takes strategy and know how. The plan design—types of benefits required, co-insurance levels (100% verses 80%), restrictions and limitations (least cost alternatives or generic drug equivalents), as well as and overall maximums (unlimited, $5,000, etc.) makes a big difference in price.

Providing coverage just to say there is a plan in place is one thing. Providing benefits which actually meet people’s expectations is what makes the difference. For the person who requires prescriptions, a least cost alternative may means they are out of pocket more than expected for the drug as prescribed by their doctor, which then erodes the value of the benefits in the eyes of the end user—the employee.

Just as an FYI, Least Cost Alternative (LCA) means If the medication prescribed is within an “interchangeable” grouping of medications (with the same active ingredients, dosage and form), the program may pay only up to the Least Cost Alternative (LCA) price, if one has been established for that grouping. As a consumer, I may be prescribed a prescription for cholesterol which has a generic equivalent; however, because there is a least cost alternative for cholesterol, my plan with the LCA attached will only cover the lowest cost cholesterol drug available, which may not suit my medical needs as intended by my doctor.

Having a good benefit plan doesn’t mean busting the pocket book, it means knowing what you are purchasing and purchasing the right products for your company.


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