Special thanks to Gavin Mosley for igniting the spark for this posting.
After years of working with employers on building benefits, I think there are one of two roads for employee group benefit plan discussions:
1. Build a plan according to the rates (premium)
2. Build a customized plan according to coverage (to pay claims as outlined)
Let’s say we go down the first road…Built on Premium. As the old adage goes, “sell on rates, lose on rates” and so will be the case in short order, no matter the dialogue. When the rate guarantees are over and the quality of service and commitment to consulting on your behalf has lapsed, what is an organization left with?
All parties in this scenario will be disappointed, except the insurance underwriter and here’s why:
· The needs of employee coverage will be subverted by the overall cost. This is why so many organizations, despite critical data, still do not include an Employee Assistance Plan as part of their offering.
· The needs of the employee group who will be covered are often overlooked in favour of the ability of “saying” there are benefits in place. If we don’t understand what’s important to the staff and how these needs overlap with productivity flow, then you have made a major financial decision without considering all the applicable metrics.
· When the plan is utilized and rate ultimately go up, the company will endeavor to remove coverage. This is a punishment for those utilizing what was made available to them.
· More and more of the cost sharing burden will be felt by the employee. An example would be, a 50% premium split via payroll deduction will combine with a larger co-insurance, perhaps a deductible.
o Let’s look at $100 claim with a calendar year deductible and 20% co-insurance (80% coverage according to the policy)
o The $20 is an after-tax expense 100% paid by the employee. This means, depending on the tax bracket, the employee may have to have earned about $26.40 to pay that $20 out of pocket
o Add to this if there is a $50 deductible payable (applicable to first claim of the year)
o The employee receives a reimbursement worth roughly $23.60 and that is on top of them paying the 50% payroll deducted premium
If someone asked what the employee values about this plan, what do you think the answer would be?
How the insurer wins? The insurance provider gets paid monthly regardless of claims and the plan is set to fail on claim reimbursements, so the carrier reaps a profit.
Yes, you can build a Customized Plan on a budget, and that is the ultimate goal. This involves a thorough examination of needs and wants, understanding the ultimate motivation and purpose of coverage.
· A customized plan will typically perform as expected by paying the claims as they are incurred.
· Because there was time spent in consultation at the onset, it is customized design, so there are typically no big surprises come renewal time.
· Employees have both an appreciate of coverage and understanding of costs. The value is set in the buy-in and engagement.
· Time is spent on communication and reinforcing the message of valued non-taxable compensation.
· More times than not, the overall costs fall in line with expectation based on the claims.
· Many tools are utilized to build the plan, including, but not limited to self-funded options like health spending accounts and administrative only services, as well as traditional benefits and add on services for financial stability.
· Building a program to align with the overall compensation and wellness of an organization will add to the corporate culture by improving the attraction and retention of best talent assets.
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