Canadian HR Reporter

26 www.hrreporter.com F E A T U R E S S P E C I A L F E A T U R E BENEFITS GUIDE YES, employers can get discounted group health insurance rates. In marketing their plan with alternative carriers, they may be surprised to see pricing of 10, 20 or even 30 per cent below their existing rates. Questions will likely arise: Have I been overpaying? Is this for a comparable plan or has something been cut or overlooked? Should I take advantage of the savings? Is this too good to be true? Before making a move, it's important to understand how a quote is put together and whether the pricing is logical. Without all the proper information and an understanding of the potential trajectory of the rates, it's impossible to make an informed decision. What's involved in a quote? Here's what happens behind the scenes when insurance providers generate employee benefit quotes, where the company has an existing plan and claims experience available. Once the advisor submits the company's information, insurance providers will quote pricing based on the demographics, plan design parameters and claims experience of the group. They typically want two to three years of claims experience if this is available. If the group presents a desirable risk, meaning there are no red flags o r i m m e d i at e d i s q u a l i fi e r s ( s u c h as too many high-cost claims such a s l o n g - t e r m d i s a b i l i ty o r h i g h - cost drugs), then a quote will be Beware of discounted rates Rates are often highly discounted, but, often, the premiums proposed are equal to or lower than the past claims. While claims can certainly drop, that's not the norm and it's illogical to assume this will happen. Discounted pricing is clearly not a sustainable pricing model as the insurer cannot continue to have a loss on the plan year over year. The result is that at the first renewal with the new carrier, the rates will be dramatically increased to the levels needed to be profitable to the insurer. So, how can you tell if the rates have been discounted? A pricing reduction from current rates does not necessarily mean the quote is too low to be sustainable. Of course, it's entirely possible that the employer has been overpaying and another carrier is a better cost option. Without proper care and attention over the years by the benefits advisor, insurance carriers will propose rates that are above the necessary levels. A lack of proper negotiation year over year means rates are higher than they should be. There are also incidences of advisors taking commissions that are above the typical, reasonable levels seen in the industry. Within many benefit pools, the claims experience specific to a group is not provided. Without this, it is commonplace for groups to be paying far higher premiums that necessary to fund their program. If the benefits are Before making a move, it's important for employers to understand how a quote is put together and whether the pricing is logical. Without the proper information, it's impossible to make an informed decision prepared. Of course, the insurance carrier wants to obtain the business and it knows that, to make a move, the employer will need to see some savings. Insurers are often willing to take a short-term loss to gain the business, knowing that it's unlikely the employer will move its plan again after just a year or so with the new carrier. But what is a "loss" to insurers? Don't they have deep pockets anyways? Yes and no. They are large entities with massive revenues, but they cannot let individual plans run at a loss. Based on historical claims experience, expectations for future claims and the administrative costs to run the plan, the insurers know the rates they need to charge to turn a profit. HOW TO DEAL WITH DISCOUNTED PRICING OF GROUP BENEFITS

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