Why Now Is The Time To Focus On Your Benefits Renewal

(Published April 1, 2008)

 

For the majority of employers in this country, open enrollment came and went on January 1st. And for most, the bad taste in their mouths lingers. The majority of increases are still in the double digits. Employers have little time to consider out-of-the-box solutions to rising health insurance costs because carriers do not typically release renewal rates until 30 to 60 days before the renewal date.

 

So what can employers do to ensure they don’t wind up in the same position next year? Look at your most recent renewal. While it may be as much fun as pouring salt in an open wound, failing to be proactive increases the likelihood of ugly renewals in the future.

 

In order for an employer to be creative when it comes to combating health insurance costs, it needs to have a well-thought-out strategic plan (which is not to wait and see what the health renewal looks like next year and perhaps choose an alternative plan based on the carrier’s recommendations).

 

If Your Fail To Plan, Plan To Fail

 

An employer should have a two- to five-year strategic plan for their employee benefits program. The length of the plan depends on where the company currently is and where it wants to end up. The plan should also be modified as each future renewal passes. These are some of the items to focus on:

 

What problems did you have with last year’s renewal? It is imperative to make a list while it’s still fresh in your mind. Did you have enough time to fully explore alternative plan designs? Alternative funding arrangements? Alternative carriers? If you wait until the fall to focus on these issues, you’re increasing the likelihood of the exact same problems cropping up.

 

Is your renewal date conducive to your business plan? While the rates you signed off on are guaranteed for 12 months, you can make changes to your plan, change your renewal date, or switch carriers, as long as you give your current carrier 30 days’ notice. Perhaps it would be easier for budgeting or scheduling to have your renewal on your fiscal year. I had a client that was on a January renewal cycle. It had trade shows throughout November, December, and January, so it was apprehensive about making changes to its health plan since trying to communicate the changes to all employees would be next to impossible.

 

About the worst time to have open enrollment is January 1st. If more than half the employers in the country are having their open enrollment at the exact same time, what level of service do you think you’re getting from your broker and insurance carrier?

 

How is your broker helping you manage your benefits program and reduce costs and/or prevent medical claims? Managed care has pretty much run its course, so if you’re waiting for the insurance carrier to bring you a plan that is going to improve the health of your workforce and cut costs, you’re going to be waiting a while.

 

What were the rates of the alternative plans presented the past two renewals? At each renewal, most carriers provide several alternative plans in addition to your current plan. By referring back to your old renewals, you should be able to estimate the cost of migrating your workforce to a desired alternative. If you are fortunate enough to have had the same alternatives presented in the past, you can see how these plans are trending compared to yours.

 

What is being done in regards to preventing employees from developing chronic diseases? Disease management programs can help prevent a catastrophic claim from developing, but what about preventing chronic conditions from manifesting in the first place? Waiting until an employee or a dependent becomes a diabetic and then figuring out how to manage those claims seems a little backward.

 

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 listed as a reason for leaving? Are total compensation statements being prepared to educate employees on the costs of company-provided benefits?

 

How much of the increases for future renewals can the company pick up and still remain profitable? A company will need to decide whether it is going to pick up a certain percentage of the increase or cap it at flat dollar amounts.

 

Can voluntary benefits be offered? They can help mitigate or close potential gaps.

 

Related Topic(s): Benefits