Client success story: group benefits
Businesses often want to reward loyal employees through programs known as group benefits wherein the employer covers a substantial portion of the employees’ healthcare costs.
One of our customers has 20 employees and he wanted to take good care of them. He directed us to sort out a challenge he was experiencing with his plan.
Because the current plan covers 100% of health and dental costs, his employees were using the plan quite heavily which caused their premiums to increase dramatically. The situation was unworkable for everyone involved. Read to discover how we put Adrian’s group benefits plan on stable ground.
When we first examined the plan, we discovered that the premium was too low for the amount of use the plan was experiencing. We informed Adrian that his rates would increase when the policy came up for renewal. In fact, the cost nearly doubled.
There is no accountability with 100% plans. Such plans encourage employees to spend more than they actually need. Any costly medicines or dental treatments would be free.
To transform these plans into something that works for everyone, we introduced something known as “co-insurance.” This is when employees pay a portion of their claim out of their own pocket. Industry standard co-insurance coverage is 80%, meaning the company would cover $80 out of a $100 procedure, as an example. Most plans fall between 70-90%.
Co-insurance brings employees to have some skin in the game. Even paying as little as 10%, employees become present to the impact of overusing the plan. For instance, instead of doing all their dental work in one go, they may space out the procedures a bit. They may also look into more affordable solutions.
We adjusted Adrian’s plan to cover 80% of employees’ medical expenses. His premium will still go up simply because usage on his plan has been so high. However, the increase is more moderate. We expect the co-insurance to lower usage which will reduce his premium in the future.
At the end of the day, group benefits must be stable and sustainable. Increases should at most be 5-8% a year from inflation.
It was unfortunate informing the employees that rates will increase, but there was no other choice. Otherwise, they will lose all of their coverage once the plan becomes too expensive for the company. We will stay in communication with Adrian to ensure his plan remains on track.
What’s your experience with group benefits? Drop us a comment below.