Are You Paying Too Much for Group Benefits?
Group insurance premiums in Canada continue to rise thanks to increasing pressures on the current health care system and a growing demand for expanded coverage.
It can be shocking when renewal time comes around and premiums are increasing by 10% or more when inflation is running at less than 2%. Dealing with the rising cost of group benefit plans can be very challenging for employers and employees.
The bottom line is the bottom line and everyone will be happier if group insurance costs are kept down. Here’s a few tips to help manage the rising costs of a benefit plan.
- Shop the market. Sometimes sharp increases in premiums are justified by the reality that employees are using the plan and high usage can in turn increase costs. Regardless, it is good practice to review group plans and/or shop benefit plans at least once every two or three years. Even if you don’t switch carriers, you might be able to negotiate a substantial cost savings with your existing carrier.
- Benchmark your plan to your industry? As premiere brokers, we have access to excellent data so we can benchmark plans against competing companies within any industry.
- Review your list of paramedical practitioners. Paramedical practitioners like chiropractors, physiotherapists and massage therapists can be some of the most utilized component of a plan. Unfortunately, these practitioners can also be the most abused component of a group plan. It is so important to review of these costs. It can help you keep your company group plan premiums in check. In some examples, we have seen employers remove certain components of a plan and then add them again at a later date.
- Incorporate a wellness program. Encouraging healthy living (exercise, nutrition, not smoking, etc) can have a dramatic impact on the amount of claims with the benefit program.
- Implement a Health Care Spending Account for particular components of your plan. Health care spending accounts put a cap on how much can be spent by each employee. Some group plans are better off combining traditional group insurance components such as life, disability, drug and dental insurance and then using an expense account for remaining services under the plan. This structure can help make sure cost increases are minimized.
- Incorporate more voluntary benefits. Voluntary benefits are typically paid 100% by the employee but more cost effective because of the buying power of a group. Most plans already include some voluntary components, such as optional coverage for life insurance, accidental death and dismemberment, critical illness, even certain retirement products. Voluntary benefits are becoming more acceptable even with employees.
- Implement a group retirement plan. If the issue is solely about the rising cost of health care costs, one of the benefits that has a more controlled inflation rate is group retirement savings. This might include a Group RRSP or a Defined Contribution plan. In both cases, the future costs of these benefits are not affected by the rising cost of health care. Instead retirement savings is driven by wage inflation, which is generally lower and more consistent. Employers have greater control over the cost by simply setting the matching benefit.