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6 Steps to Prepare for Your Benefits Renewal
Oct 25th, 2015
Ever get that feeling when something just does not feel right? Trust your intuition. Although you cannot control every factor that impacts the pricing of your benefit plan, you can protect yourself by following these simple steps in assessing your renewal.
Step 1
Review the Data – Is the data being used accurate? Have you had a change in your workforce that is not reflected in the information being used to assess the renewal? Making sure that the information is accurate ensures that the methodology being applied to the data will make sense.
Step 2
Review Congruency – Review your prior renewal in advance of your upcoming renewal. How did the broker position the rate adjustment last year? This will help you when you review the new renewal by ensuring the explanations are congruent.
Step 3
Know the Factors – It’s not rocket science. Medical/Dental plans are priced based on projected claims plus administration fees. The target loss ratio is the ratio between premiums and claims that ensures the insurance company can meet their obligations and make a profit (break-even if you will). If your claims versus premiums (loss ratio) are higher than the target loss ratio, you should expect an increase equivalent to the difference between your actual claiming ratio and the target loss ratio plus margin for increasing claims. If your loss ratio is lower than the target loss ratio, you should expect anywhere from a no change to a decrease depending on how close your loss ratio is to target.
Step 4
Know Your Partner – It’s a partnership between an insurer an the policyholder. As you your business, you expect to be compensated fairly for the products and services you offer your customers. This is no different with your insurers. They should make a profit, but not excessively. If over the lifetime of your contract your loss ratio has equaled the target loss ratio, everyone should be happy. If your loss ratio has been higher than your target loss ratio, your broker is wielding some power. If your loss ratio is quite a bit lower than target (10%<), time for change.
Step 5
Know Your Options - Self insurance, buying groups, association plans, and health spending accounts are all options. Each has their own pros and cons. Discuss them with your broker and don’t let them dismiss them, the process to review them in not onerous and should form part of a periodic review if you have engaged the right broker.
Step 6
Know Your Goals – Change happens and employee benefits are becoming relevant cost centers for businesses. But keep in mind that if benefits are implemented and managed properly, they should form part of your total compensation package. With this in mind, communication and education is key for their success and sustainability.