The changing world of employee benefits

October 2009 » Features » BUSINESS STRATEGIES
Gregory Kamps, CEBS

Many changes are taking place on the employee benefits side of the insurance world. Nevertheless, searching for coverage for your employees is still generally accomplished through a broker, agent, or consultant. Depending on the size of your business, reviewing the market for a new carrier should start about 90 days prior to your renewal date. If you are a large employer (500 or more lives) you may consider working with your agent/broker to send out a request for proposal (RFP). The RFP process should start 180 days or longer before renewal.

The RFP method is also a way to find the agency the best fits your needs. Today, employers are expecting more from their agents. The ability to search the market is common for every agent because they all have access to the same markets. However, depending on the size of your group, you should be looking for more than this from your agent. Many agencies have within their organization ERISA attorneys, underwriters, actuaries, human resources advisors, wellness coordinators, pharmacy analysts, newsletters, webinars for clients, and a great deal more. If you are self-funded or considering it, these are programs you definitely want from the agency you work with.

The search for a new agent can be conducted at a different time than your policy renewal. In fact, most want the new agency in place prior to the upcoming renewal.

Plan designs are a place to start to save premium dollars. While there is a lot of discussion regarding what is not working with our current system, some programs are quietly making a positive difference in premiums. They are generally referred to as Consumer-Driven Health Plans (CDHP). While these can mean different things to different people, this article focuses on two types of health plans —€” Health Savings Accounts (HSAs) and Health Reimbursement Accounts (HRAs). In each case, the programs consist of two parts: the insurance coverage and the account to offset a portion of the insurance plan.

HSAs, which have received the most attention, require a specific plan design and allow the employee to put pretax money into an account to help offset the high-deductible plan. The plan design is set by the U.S. Internal Revenue Service (IRS) in regard to the deductible and out-of-pocket requirements. These can change annually. The savings account is established at a qualified financial institution —€” most commonly a bank in the form of a checking account; however, some insurance companies can also handle these. The employee contributes to the account and in some cases the employer may also elect to contribute. Employees are responsible for maintaining the account and making sure they only use it for qualified expenses as established by the IRS. Employers contributing to the account need to be aware that the employee is 100-percent vested in the money once it goes into the account and is free to take it with them should they leave employment at any time.

HRA is the other program that, while it does not receive the most publicity, does allow for the most flexibility and control by the employer. This plan can be used with any plan design. The most common method is to increase the existing deductible from, for example, $500 to $1,000. This generates a premium savings. The employer agrees to reimburse employees a portion of this new deductible from that savings.

In this example, the employer commonly will reimburse the employee the second $500 of the new $1,000 deductible. A third party administrator (TPA) is hired to handle the claims (in some cases insurance carriers provide this service also). Employer money is used to pay the claims, unlike the HSA, but the claim has to be substantiated before a payout is made. The TPA can set up individual accounts to rollover unused amounts each year or a portion depending on the employers objectives. Plan designs can be set up to reimburse higher co-pays or higher out-of-pocket expenses.

The objective of all CDHPs is to make employees better consumers of health care. The HSA accomplishes this in the best manner because it is the employee—€™s money. However, with the right design, the HRA can also accomplish this. Having access to a deductible utilization report from your current carrier is a good place to start. Studies show that about 30 percent of your employees actually hit their deductible each year. Having this information will also help you determine which type of CDHP could work for you.

Reviewing your Pharmacy Benefit Manager (PBM), if you are self funded, is also an avenue toward saving money for your program. Most TPAs will offer the PBM they are most familiar with, but that doesn—€™t necessarily equate to the greatest savings or rebates for you. Today there are co-ops and alternative PBMs that negotiate strong discounts for your drug program and a more accurate accounting of rebates.

Wellness programs also have existed for a couple of years but have undergone changes. Wellness initiatives available today are not short-term fixes but rather programs that will take time to show results in terms of lower claims and, in return, lower rate increases (if you are fully insured). Wellness initiatives range from annual physicals to health risk assessments, blood draws, and risk coaches. Some agencies offer these to their clients internally, or vendors are available. Always start with your current insurance carrier or TPA. Many of them have programs available to their clients that you may not be aware of.

More employers of all sizes are getting involved in wellness because 70 percent of health claims are preventable, and these programs help with prevention.

Voluntary insurance products are also becoming more common. As employers move to higher deductibles, limited medical plans are offered to employees on a voluntary basis if the employer elects not to assist with the higher deductible. If an employer-sponsored plan is dropped, a voluntary plan is used as a substitute.

Additionally, voluntary plans can enhance existing plans as buy ups. The most common is voluntary life insurance. Most employees only have the life plan provided on a group basis as their life insurance. Voluntary plans are portable and an inexpensive way to supplement what an employer provides. Short-term disability is another example. The employer provides a base plan and allows employees to buy up.

There are a lot of options available to help stem the rise in benefits premiums. Some have been around a long time, others are fairly new. Your agent should be able to work with you on all of these and, if not, then refer to the paragraph about searching for a new agent.

Gregory Kamps, CEBS, is area Vice President for Gallagher Benefit Services. He can be contacted at greg_kamps@ajg.com.


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