Are your enhanced benefits, formerly known as “voluntary benefits,” in line with your broker’s overall strategy or your carrier reps’ sales agenda? It can’t be both.
Employers need to spot aggressive broker agendas and know why their healthcare costs are rising. By thoroughly analyzing the enhanced benefits market, a good broker can provide specific options that allow your employee-funded benefits to strategically dovetail with your current medical plan. When was the last time your single-carrier, “voluntary benefits,” sales rep took the time and effort to do this for you?
Most single-carrier sales reps prioritize pushing product in order to drive production and grab a quick commission. They aren’t able to shop the market outside of their own carrier portfolio to strategize with your broker regarding plan placement.
Recently, a colleague approached me after discovering that a long-time client had provided employees enhanced benefits from a single-carrier sales rep for the past several years. The client thought all was well. However, our analysis unveiled two realities that hadn’t been brought to the client’s attention. First, employees were overpaying for coverage. Second, the product placement was inconsistent with the broker’s long-term healthcare and cost-mitigation strategy.
The single-carrier sales rep convinced the client that they were grandfathered into the best accident indemnity policy on the market. It paid $100 for doctors’ visits up to twice a year, per individual, or four times a year, per family. The sales rep marketed this by emphasizing how the benefits payout will cover the cost of the entire plan. As much as this is true, it only works if the policyholder files all of their office visits with the insurance company each year.
The client and policyholders never realized they were paying an inflated per pay cycle premium to cover the reimbursement expense for doctors’ office visits. Many times, policies are designed to feature payouts that far surpass the expense incurred by the policyholder. Carrier sales reps use these designs to sell. They draw the customer in, get them excited, and prey on the fact that, statistically, most will forget to file the paperwork properly.
This egregious accident plan design ends up rewarding frequent visits to physicians’ offices, which provides an inconsistent message to the employee that isn’t in line with a responsible broker’s goal of reducing medical plan overuse.
Knowing how insurance premiums are derived will help you understand why it’s important to reduce unnecessary utilization.
From a high level, health insurance costs are largely impacted by claims, and claims are affected by four main cost factors (both unit cost and quantity consumed):
2. Prescription Drugs
3. Ambulatory Surgical Centers
4. Physician Office Visits.
Most employers aren’t aware that a big reason their health insurance rates increase each year is because of over utilization. The more super-users there are on their plan, the higher the overall cost and the higher the health insurance increases will be annually.
It’s not so much the doctors’ visits that lead to the massive yearly increases, but rather what is prescribed to patients after they go in for what they assumed would be a routine office visit. Many times, patients are pushed into the more profitable part of the healthcare system, which provides an opportunity for unnecessary prescriptions, diagnostic exams and procedures.
The solution I recommended for this client was to replace the incumbent accident plan with a more robust design that only encourages annual wellness visits. This lowered the front-end cost significantly for each policyholder and put the plan completely in line with the healthcare strategy that the broker and employer had worked so hard to create.
Over-insuring an employee’s income is another problem that can occur without a proper strategy.
A different colleague asked me to audit their top client’s enhanced benefit portfolio. Looking at the client’s existing health insurance plan design and enhanced benefits invoices, I uncovered something truly troubling. The client had offered a employer-funded group short-term disability (STD) plan for many years. Additionally, they had allowed random carrier sales reps to sell employee-funded STD policies alongside the already installed and employer-funded group plan.
The carrier sales rep had placed a product with zero strategy what-so-ever and by auditing their invoices, I found that more than 80% of their employees were insured for more than 100% of their annual salary.
As an employer, making sure that all your benefits align is mission-critical to minimizing both redundancy and overspending. With an effective strategy in place, enhanced benefits prove to be a very valuable benefits offering for the employer and employees too.
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