Our expertise does not begin and end with a marketing for quotations. In fact, every year, as consultants, we work our clients and the insurance provider to determine a fair renewal based on a number of factors, including, but not limited to:
· Existing demographics, which can be impacted by changeover of staff, sudden increases or decreases to the population.
· Claim experience, which is substantially influenced by those fresh to benefits or leaving and wanting to “use” all that they can prior to starting a new position. (Perhaps the new position has a waiting period, and they need to fill the gap in coverage.)
· Historical claim trends impacting existing and future rates.
· Market and economic factors. Benefit plans are not immune to inflation or the increasing costs of goods and services as it applies to health and dental, both medication and provider services can range between 6-18% depending on the provider and service year over year.
· What trends and pricing are being seen across sectors.
· Any on-going, existing, perhaps maintenance medical—pharmacy requirements from staff members and their dependents.
Financial stability is critical.
Understanding financials are always a priority for clients, regardless of reasoning on premium hikes, there is often a first reaction of “let’s go elsewhere and see what we can find for better rates”. However, often overlooked is while moving providers would result typically in a minimum of a 10% decrease, it’s the first renewal, once the rate guarantee ended with the new provider, that there is a catch up. In many cases, the new rates would increase usually 15% or more to recover their initial investment in enticing you to move providers. This occurs due to a number of reasons, including, but not limited to:
· The new provider discounted rates for the sale.
· They need to establish reserve funding within the disability and pooled benefits.
· Expecting more stable claims, but claims have increased greater than their expectations.
· The target for claims was set lower than the previous insurer.
· Your plan was priced using manual rates and at the first renewal, experience pricing is applied.
· Economic factors have increased pricing due to trend, inflation, and risk.
· There has been a demographic shift of more than 25% of the population.
Consider, your current plan may include a claim target of 81.5% for pharmacy, health, vision and dental care and the new provider may set the target at 72%. This means for every dollar of premium, the new provider expects $0.28 to operate, compared to $0.18 from the initial carrier. That ten cents on every dollar will make a world of difference on expectations of claims at renewal time.
What happens too when definitions of coverage are modified or changed from the previous policy. Additionally, moving insurers may have resulted in:
· Target for claims decreasing.
· Non-evidence limits not being applied.
· Change in coverage.
· Different definitions of coverage.
· Increased limitations.
· Pharmacy and health care pooling increased from existing $10,000 to what is becoming common on new groups at $15,000.
The balance between plan design and rates.
We all want a deal and often forget that rate reductions do happen. But often overlooked is you can usually “deal” with your existing provider. If you would settle for modifications on coverage from another carrier to move your business, why not do that with the existing provider when possible? Because, when you move providers, you also walk away from invested money.
Year-over-year we track and measure renewal rates across many providers for our clients and this is what we have found:
Private Extended Health Care Benefits
- 100% Pharmacy (unlimited maximum) and no deductible
- 100% Health Care
- $500 Paramedical per person, per practitioner
- Travel
· 24-month survival benefit
11-staff company plan
Year 2000: Single cost $36.66 | Family $70.79
Moved benefit insurers three times.
Year 2022: Single cost $122.67 | Family $338.02
Average annual increase 15.2%, over 22-years
24-staff company plan
2001: Single cost $35.66 | Family $92.49
Never moved benefit insurers.
Year 2023: Single cost $90.54 | Family $238.32
Average annual increase 7.1%, over 22-years
62-staff company plan
Plan design established in 2011 with little change since.
Never moved benefit insurers.
From 2011 to 2023:
Actual increase 1.62% in 12-years
Critical in our mission to be effective for clients is to ensure they understand WHY rates adjust in the first place and how plans respond over time. Like a good investment, in order to grow and bear fruit, time is required.
Before considering a move to another carrier, remember to have a look at your existing plan, keeping the following in mind:
· There are many factors to consider; however, at the end of the day, premiums need to cover claim up to the break-even or stop-loss.
· Credibility matters. This is the portion of your own claims experience used in the renewal rate calculation, versus the percentage that is based on the insurer’s block of business overall performance. The larger and longer you are with a carrier, the higher the credibility.
· Inflation, consider the economic factors impacting ALL goods and services, this means benefits will be impacted too.
· What is the target loss ratio for claims, and can this be increased?
· An aging demographic. All age bands use differently, however, the risk of claims and the need for greater coverage increases with age and health factors. Your own population matters to the risk associated with coverage alternatives.
We’d be pleased to engage in a meaningful conversation on this and other benefit topics. Give us a call.
Note: this was written without the aid of Artificial Intelligence (AI)
Disclaimer: Please note that the information provided, while authoritative, is not guaranteed for accuracy and legality. The site is read by a world-wide audience and employment, taxation, legal vary accordingly. Please seek legal, accounting and human resources counsel from qualified professionals to make certain your legal/accounting/compliance interpretation and decisions are correct for your location. This information is for guidance, ideas, and assistance.
