Group Benefit Utilization

Sep 24, 2012

Historically, employers have often managed the unfortunate trend of increasing group insurance costs by  following one or many of the actions below:

1) Reducing or cutting the quality of the plan. For example, changing the co-insurance from 100% to 80% or removing long-term disability coverage.

2) “Asking” the employees to pay more by increasing their share of the overall cost or lowering coinsurance. For example, moving coverage from 100% to 90% .

3) “Shopping” the plan and move it to a new provider who is offering lower rates and premiums…often resulting in a large increase at the first year renewal.

I suggest that all 3 of the above fall into negative approaches to benefits plan management.

Between 60-80% of group insurance costs come from the “user” benefits – the extended health, dental and vision. To effectively manage the overall costs, the greatest potential for savings comes from managing the utilization of these benefits. The challenge each employer faces is  how to offer their employees an excellent plan and yet at the same time, have the costs be manageable?

Creativity in the benefits plan is the answer to this challenge.

Offer comprehensive coverage and at the same time build in containment provisions so claims are reasonable. It may seem counterintuitive but the thinking is similar to the real estate maxim…location, location, location. For benefit plans it’s claims, claims, claims…manage them effectively or risk the outcome of an unsustainable benefits plan.

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