If you’ve been tasked to investigate setting up a new employee benefit plan for your company, you will be overwhelmed by options. The process can be daunting, and the consequences can be dire. Most benefit consultants will push you towards an Insured plan, but you have options.
There are many more questions to ask when implementing a benefit plan, but here are 9 important questions you need to ask your employee benefits provider.
1. What are the various benefit funding models available to our company, which one would you suggest and which one do most of your clients choose and why?
Funding models typically available are Insured, ASO, Retention Accounting and HSSA. They are available as stand-alone options or can be used in conjunction with one another. These options have a varying degree of risk, flexibility and administrative fees. Insure the potentially catastrophic components and put the non-catastrophic components into a hybrid ASO or HSA model.
It would be best if you explored all options to determine which option is best for your company.
2. How are you compensated, and will you offer full disclosure of commissions earned? Is this a percentage of the insurance premium/ claims experience or a flat fee?
Brokers and consultants are usually compensated as a percentage of premiums in the case of Insured plans or percentage of claims for ASO plans. The problem is, the more the plan is mismanaged, the more the consultant, the broker earns. Where is the incentive to fix the problem?
Also, ensure that insured benefits are compensated at the crown commission scale that is set by the insurer. Many in-house TPA’s (Third Party Administrators) will ignore recommended commission levels and charge anywhere from 2-3 times the suggested commission rate.
Ensure that the broker, consultant, discloses his/her commission rate.
3. How do you manage benefits plan costs?
There is no simple answer to this question as premiums and costs are directly tied to claims. Choosing the right funding model, certain plan design strategies and employee education are all keys here. The key is all components need to be looked at during varying times of the year and see how things are trending.
If they say that they go to market your plan every year, then that is a greater cause for concern. This will ultimately cost you more and greatly limit your options in the future!
4. Does your company offer any other additional services that can assist my employees and me?
You may be investigating group retirement or pension plans for your employees. Outsourced human resources can prove to be valuable, especially to smaller companies. Individual Life, disability and critical illness for business owners and executives can prove to be an asset. Group disability and critical illness can be great for employees but not always great for business owners. The offering of Financial Wellness coaching for employees or tax deferral strategies may also be of interest. Strategic Executive compensation strategies are also a huge concern for business owners.
Ensuring that policies dovetail with one another is important whether these additional services are in-house or in the form of strategic partnerships.
5. Ask to talk to references
Few companies actually talk to a benefits provider’s clients when evaluating who they’d like to do business with if they’ve experienced double-digit increases, gone to the market every year or two or don’t get a detailed analysis of where and why a company’s cost is increasing these should be red flags. History tends to repeat itself. Be better informed!
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.