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News & Resources ​employee benefits​​​

​Why Now is the Time to Focus on Your Benefits Renewal
By Matthew Roberts, Director of Raffa Group Benefits, Raffa Financial Services, Inc.​​

Ten years ago I wrote an article with this title.  In commemoration of its 10-year anniversary, I thought I would revisit many of the questions I posed back then and to determine if they still hold up after garnering years more experience in our marketplace.  Afterwards, I will touch upon a few new ideas that should be considered in our ever-changing insurance landscape.​

The overarching theme back then was if you fail to plan, plan to fail. In other words, do you have a strategic plan when it comes to your employee benefits program?  And if not, why?  I suppose if you’re a very small employer, you *may* not need one. Under the Affordable Care Act (ACA), rates have been socialized by geographic location, which wasn’t the case back in 2008.  Most states had medical underwriting and the insurance market was slightly less of an oligopoly than it is today.  Additionally, there is little an employer with less than 25 lives can do to dramatically alter its medical insurance costs – the largest component of employee benefit expenses.  If you’re a small employer, you should be fully embracing a high deductible health plan (HDHP) that is health savings account (HSA) eligible.
 
In any event, back to the old article and the main questions I advanced, all of which still holds up today:

  • What problems did you have with last year’s renewal? As with any process, if you want to improve upon it, make a list of the things that went right and wrong while they’re still fresh in your mind.  Did you have enough time to fully explore alternatives?  There’s a reason why carriers wait as long as possible to provide the renewal to you.  Did you explore alternative funding arrangements?  There are many forms of self-insurance that are available to smaller employers.
  • Is your renewal date conducive to your business plan? Back then, I recommended employers do everything possible to get off the 1/1 renewal cycle and I still do today.  The main reason is that insurance carriers are swamped in the 4th quarter.  If you’re a large enough employer that your claims experience factors into your medical renewal, underwriters have less time to listen to arguments as to why your renewal should be lower.  Would it be more beneficial for your renewal to be on the same cycle as your fiscal year?  Does your business have a “busy” time?  If so, is your open enrollment period far enough away from this “busy” time so that you and your employees can focus on benefits’ decisions with less distraction?
  • How is your broker helping you manage your benefits program, reducing costs and/or preventing medical claims? If you wait for carrier-specific solutions, you are going to be waiting a long time.  The insurance industry moves slooooowly.  While some carriers are better than others about implementing employee engagement and cost reduction tools, others are not. Individual employers and their benefits advisors have the greatest ability to make a difference here (see below).
  • How do your retention/turnover figures compare to your goals?  To your peers? Do you conduct exit interviews?  If so, has your benefits program been a reason why employees have left?  Have you tried to communicate the value of your employee benefits program? I frequently bring up the example of Kodak. Back in the 2000s, the company spent millions of dollars communicating its employee benefits program. They had employees convinced its benefits package was the best in the market. The reality was that it was usually at or less than the benchmarks in many key categories. It’s amazing what impact an effectively communicated employee benefits package can do on this front.

What’s New?

Here are some additional items I would include today in furthering some of those questions:

  • Technology.  How paperless are you?  Do you have an online benefits enrollment system that is completely integrated with your payroll vendor?  While the online enrollment discussion has been out there for 15 to 20 years, there are still way too many employers dealing with paper and non-integrated enrollment systems.  This is not something you try and tackle right before open enrollment!
  • HSAs.  In 2008, 4% of employees were enrolled in an HSA according to the most recent Kaiser Family Foundation Employer Health Benefits survey. Today that number is up to 19% and will continue to rise. If you are planning on rolling out an HSA-compatible plan, have you done an internal assessment on your readiness to do so?  Have you gauged your employees’ health care literacy?
  • Managing benefits costs. As previously stated, carrier solutions are not radically lowering health care costs as they continue to escalate at an unsustainable pace.  Outside of the box tools employers should be discussing include direct primary care, high-performance networks, and carving out prescription drugs, amongst others, in advance of next year’s renewal.  In order for any of these to be successful, employers need…
  • Employee engagement.  The average employer has 4 different generations to which they are communicating now: Baby Boomers, Generation X, Generation Y and now Generation Z.  All of these groups have different preferred communication styles.  What are you doing to encompass all of these?   Are you working with communication experts in building an education campaign that will take place throughout the year?
  • Employee Turnover.  If you haven’t tried to measure the soft costs on this front, Raffa Financial has new tools that can help.  While we’re not endorsing that you stick to a $0 deductible plan for fear of losing employees to other firms, it is important to understand the opportunity cost if you’re planning on making dramatic changes to your employee benefits program.
  • Voluntary Benefits.  While offering these to close or mitigate some of the gaps in coverage has been out there for a while, these benefits continue to evolve quickly.  Back then, AFLAC, Colonial, UNUM or All State sold predominantly expensive individual products to employees.  Today, many “standard” carriers are in on this business offering much less expensive products sold via group chassis.  Some of our clients are even paying for these premiums due to their relative affordability, especially if it helps accelerate the migration to a high-deductible health plan (HDHP).

In closing, many employers are facing the same challenges today that they were ten years ago.  While there have been many changes to the employee benefits backdrop, the underlying fundamentals that drive high costs and undermine the successful delivery of employee benefit packages are still prevalent.  Employers need to work with their benefits consultants to develop a strategic plan that will address the above items sooner rather than later and there’s no time like the present.

If you have any questions or would like to learn how Raffa can help with your benefits renewal, please contact me at 240.403.2574​ or email matthew@raffafinancial.com