Have you ever wondered why rates for traditional experience-based benefits plans can fluctuate so significantly each year? Is there a way to de-risk your benefits program?
It’s because you are sharing changes in risk with the insurance company through annual rate adjustments. If you have a traditional, experience-based benefits plan, you have no way of predicting what the effect will be on your rates next year.
What Affects Rates?
As a business owner, you know that life happens. (i.e. staff turnover, sick days, health challenges, illness, accidents, dental work, prescriptions, glasses, etc.) Here is a summary of the main factors that can affect your rates from year-to-year. For example:
- Current and past claims (even for staff that no longer work for you)
- Changes in the number of staff on your plan
- Changes in the average age of your staff
- A mix of males and females
- and more…
An effective method of stabilizing rates is to transfer risk to a pool.
Further, pooling is where there is a widespread risk among many member companies, with annual rate adjustments based on averages of the entire pool.
Most pooled plans include part of your claims experience, bundling your business with others that had similar claims from the previous year, determining your rate increase for the next year. Typically, you will be moved between 3 – 6 pools based on versions of 3 main categories
- Low claims pool
- Average claims pool
- High claims pool
In a word, we believe this is not a true pooled approach, as it can create unexpected volatility.
What makes Clear Benefits pooled programs different is that we utilize a “true-insurance approach” with 1 Pool and 1 Renewal for groups of 3 – 50+.
In the end, each member company receives the same annual rate adjustment, making us one of the most stable benefits programs, with an 8 year combined average annual rate adjustment for Extended Health & Dental is 5.88%.
Contact us to find out more about de-risking your benefits program.