It’s that time of the year; you receive a call from your benefits consultant, reminding you of your company’s annual benefits plan renewals. A lot of our clients use this time to re-evaluate their benefits program, evaluating plan modifications and compensation strategy to accommodate their company’s overall growth plans. As a benefits plan consultant, we are always prepared to help them through the process, and make sure they are getting the best value for the plan the company implements. If you are renewing your benefits plan, here are some of the key aspects that you should know.
1. What is an employee benefits plan renewal, and why is it necessary?
Most companies are aware that they will have to renew their contracts with the insurance companies that provide their employee benefits plans; but it is more than just signing a contract. Every year, insurers will conduct an annual assessment of each client’s demographics and claim levels to determine if the plan rates are meeting their break-even loss ratios. If they determine claims have surpassed the expected amounts or the average employee age has increased, they will adjust the rates to accommodate the upcoming year. The opposite scenario also occurs, where new rates can also reflect discounts depending on the same variables decreasing.
2. When do renewals happen?
Employee benefits plan renewals happen every year. However, in the first year of a contract with an insurance company, it is typical for renewals to occur after 15-16 months of the initial contract start date. These extra few months allow the insurer to properly assess the first year of the company’s usage before deeming any rate increases or decreases necessary. In either case, insurance companies should provide assessments and policy renewals to the consultant 45-60 days prior to the actual renewal.
At BenefitDeck, we receive the insurer’s initial assessment on your behalf, review it to make sure it is accurate and fair, and begin negotiations if a better rate is justified. We aim to have a renewal report to you 30 days prior to the renewal date. This gives our clients enough time to reflect on any changes, discuss any modifications internally and continue offering employees this value-added perk without any delays.
3. What is the renewal process?
As a service-oriented benefits consultant, our job is to do all the initial work on behalf of our clients. When the insurance company sends us the renewal proposal, we take time to do our own calculations and detailed analysis based on claims usage and employee demographics. This helps us ensure that what is being proposed is fair for our clients. If for any reason, we feel that the rate can be lowered or that there is an opportunity to negotiate, we will go back to insurer with a counter-proposal and a deadline.
Thereafter, we are ready to present the proposal to our client. A preliminary discussion over the phone with our client allows us to address any necessary policy changes. We then meet our clients in person to finalize the renewal and have their commitment in renewing the policy. As a benefits consultant, we work for you. We do our due diligence to ensure you are getting the best possible rate to meet all of your needs, every single year.
4. What are some key considerations of a benefits plan renewal?
There are three key considerations that are factored into employee benefits plan renewals. These factors are considered by the insurer before they submit the renewal proposal and are also the same metrics that we calculate when we do our own plan assessment on behalf of our clients. Should we see any discrepancies, we leverage our close-knit relationships with the insurance provider to negotiate better rates and terms.
a. Pooled Benefits – This includes group benefits such as disability insurance. This is generally affected by demographics of the company. Therefore, if the average employee age increases or decreases annually, there is a chance the rate will change in accordance.
b. Experience-Rated Benefits – This would include insurance offerings for health and dental. Rate increases or decreases are based on plan usage. If in one year, more than the estimated claims are made, the rates will increase to accommodate a similar level of claims for the following policy year.
c. Target Loss Ratio – Every insurance provider will aim for a break-even loss ratio to make sure their plans are accurately priced. For example, a ratio of 75% means an insurance provider sets their break-even at 75 cents paid out per one dollar spent. If a more than average amount of claims were submitted in one year, the client might surpass the insurer’s break-even ratio and thus should expect a rate increase. A benefits plan consultant can help validate break-even ratio and potentially work with the insurer to remain flexible in the event there is a slight overage.
5. What happens when your premium goes up? Are these rates negotiable?
When you work with a reliable benefits consultant, you should not have any surprises. For instance, our team at BenefitDeck aims to keep you informed throughout the year if the amount of claims is significantly rising above the insurer’s break-even loss ratio. This allows you expect some rate changes upon renewal or anticipate some plan changes in case your benefits plan budget cannot accommodate the potential increase.
Committed to our clients’ best interests, we will also do what we can to negotiate rate reductions on your behalf. If this is not possible, we will work with you to find solutions that will help you keep a competitive employee benefits plan in the framework of your budget. This might include a contribution split such as sharing the cost with your employees, or using some of the salary budget to supplement any increases in the benefits plan costs.
6. How do I know if my renewal rates are fair?
As your benefits consultant, we take the time to validate all the calculations and criteria that are the basis your renewal proposal. We verify our own work amongst various staff members, triple-checking calculations in our analysis. This way, you can trust that whatever we are submitting has been fully vetted. In addition, our industry benchmark data allows us to evaluate the clients plan compared to those in the same industry. This provides an additional level of peace-of-mind that your plan, and its associated average cost per person, is at par with those competing for the same top-notch talent.
Whether you are with a business, association, or owner operator, we have the solution for your needs.