In our last article titled “3 Factors Affecting Rate Stability of Your Employee Benefits Plans”, we mentioned how we provide quarterly claims updates to our clients. These claims updates might not seem like much at first, but as an employer, it’s truly the best way to stay on top of your employee benefits plan costs.
What Is a Claims Update and Why Should You Care?
Claims updates provide a quarterly financial snapshot of the employee benefits plan, including the total value of claims paid versus the insurer’s original target. Each category is broken down for added convenience, so employers can review the claims paid for specific products and services such as drugs, medical items, massage, chiropractor, acupuncturists, and dental, if these are part of the benefits plan.
However, the most important aspect of the update is that clients will be able to see whether they are using more than the insured amount relative to their premiums, or if they are within the insurer’s target ratio. Why is this important? If the paid claims ratio is higher than the targeted ratio, then there is a good chance that the cost of the plan will go up upon renewal. It essentially means that more claims were paid out than originally anticipated by the insurance company, and they will need to re-adjust their rates for the following year to match the actual usage of your plan.
What Can You Do with This Information?
A quick glance over these updates can save any employer a lot of surprises upon renewal. If above-average claims are concerning, a client should discuss options with a knowledgeable benefits consultant. When our clients express concern about these reports, here are some options that we consider:
1. Do Nothing – New employee benefits plans are generally subject to some variance from the original target claims ratio, because no claims history has been established. The first 3 years serve as a benchmark to help establish a solid claims history after which rates will normally stabilize. Upon renewal, we work on our client’s behalf to ensure they get a fair renewal rate that reflects their claims history. It might cost more for the benefits plan than originally expected, but if the plan is successful and employees are happy, it could be worth the extra costs.
2. Modify the Plan – If the budget for the employee benefits plan is tight, then we discuss options to either reduce the amounts covered and services offered, or suggests a different plan structure.Read this case study to see how we were able to help one our clients reduce premiums with a self-funding dental option. However, overages are not always a bad thing. For example, overuse can suggest that employees really value certain services such as massages, and this becomes an opportunity to enhance that specific benefits offering to make employees happier.
3. Change the Costs Split – A client might want to consider reducing the amount that they are contributing to the plan versus their employees. If the employer originally set out to cover 80% of the employee benefits plan premium, they might want to reduce that to 70%. While this could be a valid option for some clients, it’s important to consider how this move could affect employee speculation or morale. If this option is chosen, communication will be vital to ensure no one is making assumptions about why this might be happening.
Regardless of what options are discussed or what actions are taken, we always strongly recommend against the knee-jerk reaction of switching providers. To find out why, read one of our other blog posts called To Shop or Not? When to Consider a Competitive Market Tender.
Working with Your Trusted Benefits Consultant Delivers the Best Results
Time and time again, our clients trust our advice at BenefitDeck because we have the industry knowledge to expertly deliver solutions when they express concerns about their claims updates. However, not every client will have high claims ratios or cause for concern. Taking a few minute to glance over claims updates is a highly-beneficial practice that keeps employers informed about the overall performance of their employee benefits plan.
Whether you are with a business, association, or owner operator, we have the solution for your needs.