In this article, I wanted to share some thoughts and suggestions on the six most common mistakes employers make in the employee benefits arena. Most of these can be easily avoided and can help a great deal in the overall effort to recruit and retain talent. Right now, it’s very hard to do that, so the more tips and tricks you can put into play, the better for you, your staff, and your organization.
1) NOT talking to your staff about the benefits when starting a program
Unlike most agencies and benefit providers, we actually help businesses start programs for the first time. I personally would rather engage and have meaningful discussions about goals and objectives with a business owner before starting their program than after the fact when you’re trying to fix a problem. I wish more people did that as well. One of the simplest things you can do as an employer is to talk to your employees, send out a survey, or something along those lines. The last thing you want to do with your staff, time, and potential benefits provider’s time is to go down a rabbit hole thinking you know what benefits your people want. If you do this and implement something, you risk finding out that they don’t want what you’re making available. That can turn into a huge waste of time for everyone. You’d be surprised by the kind of feedback you get. We see it all the time, but in many cases, employees working for small businesses have a spouse working for a giant company, and more often than not, the benefits and costs provided by that spouse’s plan are greater than what a SMB benefit plan can offer.
What information can be gained here?
Well, if all employees are covered elsewhere, maybe you don’t need health or dental insurance on day 1, maybe you’d be better off putting some financial protections in place like life or disability coverage that they can’t get from their spouse’s employer. Finding that information out can be invaluable as you put something in place that truly adds value for your staff. By not going down the health insurance path, you saved your company thousands of dollars plus a ton of time and energy.
2) Only contributing the minimum amounts towards your programs
We did an article that went into great detail on this specifically for health insurance, but the same holds true for other types of benefits. There’s a happy medium, whereas, in a business, you can help cover more of your insurance and benefits costs for your employees and not have to pay them as much. It is cheaper to cover benefits than give pay raises for your entire staff, and studies show that most employees will take benefits being covered more over a pay raise even though financially, they would be better off with a pay raise. Employees have a negative connotation when they have to cover the benefits themselves. This also looks really good on paper when you are trying to recruit.
3) NOT considering doing underwriting if you are a small business with less than 51 employees
The naming of the legislation that governs individual and small group fully insured plans, the Affordable Care Act, is very misleading. It should not have the word Affordable included in its name, but the politicians who passed this needed to disguise what they were actually doing. Nowadays, the individual and small group fully insured market is more expensive and has fewer options than those two markets before January 1, 2014, when this legislation went into effect.
While it sounds good on paper to treat everyone the same when it comes to the cost of health insurance, what it did, in reality, was raise premiums on individuals and groups who do not spend a lot on claims. Those premiums can be used to subsidize and offset the losses the insurance companies are experiencing on groups with a lot of claim utilization.
No other form of “insurance” exists where everyone is treated equally. If you buy auto insurance, it’s based on your vehicle and your driving history. If you buy a home, your insurance costs are based on the home itself, the home’s location, whether it’s in a flood zone or not, etc. Life insurance looks at your health and family history. I could go on and on. The point is (and most people fail to realize this) that the market for group insurance that existed prior to the “Affordable” Care Act is still there. If it makes sense, small businesses can still be priced based on claims and expected risk. There are many vendors who have the ACA fully insured plans and underwritten plans on two different platforms (like UHC and BCBS, for example), so you can get two quotes from these insurance companies for the same employer population. In many cases, there will be a 25 – 30% pricing difference between the two offers. Insanity, I know.
The underwriting process could do wonders for you if you have an employee population that tends to be younger or a healthier workforce. Yes, it does require a little bit of elbow grease from the business and the employees, but if you can cut your business’s health insurance costs by 20 -30% potentially, wouldn’t it be fiscally irresponsible, not at least to consider this option? If it works out, you can cut costs and improve your benefits program, plus you get a lot more vendors to look at. Most of our clients in the 50 employees and under market are in the underwritten space, or they at least look at it from time to time because it, in most cases, it is a better market for you to purchase your insurance from as you have a lot more room for plan customization. Also, there are usually twice as many vendors to look at.
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Thank you for reading, and stay tuned for next month’s newsletter for part two of this article, where we dive into the final three items on the list. If you’d like a sneak peek now and can’t wait to see the rest, we’ve actually loaded it onto our site here, so go ahead and check it out.
If you have any burning questions about group insurance you can find several FAQs here. As always, if we can help with anything at all, please do not hesitate to reach out to us.
