Benefit review: is the price right?
"Low-ball" pricing: Any time a rate seems too good to be true, you should exercise caution. Often vendors offer a firstyear price that is too low for the benefits offered to encourage your organization to buy their product. Their second-year rate will jump substantially. Any vendor that offers a low-ball rate is betting your organization will not move coverage in year two to maintain stability. They recoup any loss with the second-year price increase. This may be a good approach in certain organizations to keep pricing as low as possible, but most organizations prefer a more stable pricing structure.
"Apples to apples" price comparing: If one vendor offers significantly low pricing, they may not have the same contractual provisions as your current vendor. Some common examples include:
* Life insurance reduction schedules -- When comparing the cost of life insurance, look at each carrier's reduction schedule. Most contracts include a benefit reduction at age 65 or 70. These reduction schedules can vary widely. Your organization may be very accepting of change-in-life benefit reduction schedules, but you need to have this information when comparing the cost.
* LTD contract provisions - Long-term disability contracts are loaded with complicated provisions. The carriers all have different provisions written into their standard contract language. For long-term disability coverage, it is imperative to review in detail the contract provisions of the current and proposed alternatives. Many carriers have more restrictive contract language when it comes to benefit duration for self-reported symptoms, partial disability benefits, pre-existing condition limitations, etc. The more restrictive the contract language, the lower the premium.
Reasonable and customary fee schedules -- Often when reviewing medical or dental plan pricing, it is important to review the reasonable and customary fee schedules used for benefits paid outside a network arrangement. Even if your organization launches the same plan parameters, if a new carrier reimburses at a lower percentile of reasonable and customary, your employees could experience a reduction in benefits.
Multi-year rate guarantees -- Most organizations will jump at the opportunity to lock down a two- or three-year rate guarantee. Currently, the life and disability markets are very soft. By locking down your options for multiple years or not checking pricing every other year, you could be losing an opportunity to save premium dollars.
Bright Ideas--Improve Communication
The more your employees know about your benefit plan, the more effectively they can choose to use it. Consider launching a quarterly newsletter or if you already do, devote a portion of the newsletter to benefits news and helpful health information:
* Each quarter focus on the details of one benefit plan, medical, dental, life, etc. Examine the key provisions of each benefit that are important to your employees.
* Devote a section to a health topic each quarter. There is a tremendous amount of health information on the Web on such topics as flu shots, the West Nile virus, the value of preventive care, etc.
* Solicit healthy recipes from your employee base to include in the newsletter.
Employee Out of Pocket Cost as a Percentage of Total Health Expenditures 1970 34% 1980 24% 1990 20% 2000 15% Source: Employee Benefits Research Institute Table is made from bar graph
This information was supplied by Bill Wentworth, a principal at McGraw Wenfworth, a member of the Detroit Regional Chamber.
This page is brought to you by the Detroit Regional Chamber's Health Care Central--the hub for all business related health-care issues.
To learn more about this exciting new initiative, visit www.detroitchamber.com or call (866) MBR-LINE
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|Title Annotation:||Health Care Central|
|Date:||Nov 1, 2003|
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