If you think the benefits industry is child’s play, you’re mistaken. I’ve listened to a number of benefits brokers “pitches” and if I find their approach confusing then chances are you will too! It’s not difficult to see that the biggest mistakes made on benefit plans are due to misinformation and the self-serving needs of the benefits consultant.
Get a second opinion! Remember initial cost does not represent long term value and a sustainability solution.
Remember that there are two costs to your benefit plan; the cheque you pay for today’s premiums or claims and the internal cost of administering the plan.
Here are 10 things that you need to question or scrutinize your benefits broker on:
| 1 |
Understand the differences in plan funding models. Different models offer different risks, fees, commissions and residual costs. Understand the differences between insured, ASO, HSA or hybrids of different types |
| 2 |
Don’t Keep Jumping Carriers. IBNR fees will be lost every time you leave a carrier (approx. 8+%) of your total premium. Better still, find out if your carrier gives you an option to get your IBNR reserve back |
| 3 |
Ask If Your Broker Discloses his commissions. The norm within the industry is to not divulge his/her earnings. Likely the worse job they do, the more they get paid because their compensation is tied to premium costs. |
| 4 |
Scrutinize your renewals? Ask things like what are the fees, does your carrier work off a 12 month or 15-month trend factor, what cost containment initiatives are available to help create a sustainable plan. Put your broker to the task to help come up with some solutions |
| 5 |
Insist Upon a Disability Management program. Some carriers will charge you for this service but in actuality, it will reduce claims and should drive down premiums. This service should not be an add-on cost |
| 6 |
Don’t be afraid to question your benefits broker. Many use confusing terms and insurance vernacular. Don’t be made to feel like an idiot. You have a right to scrutinize anything you don’t understand. I sat in the client’s seat for many years and understand how they operate. |
| 7 |
Start Your Plan Design Conservatively. The phrase “Go Big or Go Home” should not apply here. Start small and see how your costs trend. You can always increase the benefits at any point down the road. |
| 8 |
Assess what value-added benefits you’re entitled to. Dealing directly with an insurance carrier may not be getting you as great a deal as you might think. Small and medium-sized companies (10-500 employees) would be better served using a reputable TPA instead |
| 9 |
If the price is too good to be true, then it is. Insurance companies will buy your business and then justify their substantial increases at renewal. The only long term sustainable solution is imposing cost containment strategies and efficiencies when you’re setting up your plan. |
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Encourage employee education to help contain costs. Look to the users of the plan as the keepers of the plan and you will be rewarded. A knowledgeable workforce is usually a sympathetic workforce.
Chris Coulter is the Founder and President of The Finish Line Group. He works with business owners to leverage their businesses to increase their wealth, reduce corporate and personal taxes, create viable succession strategies, enable employee retention strategies and allow them to exit their businesses on their terms.
Chris’ passion for what he does evolve from the mistakes he made in his first business; by not diversifying his risk and not utilizing a lot of the opportunities within his business to create significant wealth. Chris found out the difficult way and now educates business owners on how to avoid many of his former oversights and ultimately control where their finish line ends. |
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