Many people think that group benefits are insurance. This is a common mistake.
Does this scenario sound familiar?
Your business has grown. You decide to look into getting benefits. You contact an insurance agent and they get you some quotes. One of the quotes stood out because it offered more coverage at a lower price. After clarifying a few points, you decided this was an affordable option. The feedback from your staff was positive. So, you move ahead with the plan, confident you made a good decision. You and your staff were happy to have benefits. Then went out and used the plan, catching up on long over-due dental work, glasses, prescriptions, and a few trips to the chiropractor.
Later that year
12 – 15 months later your insurance agent calls and says the plan was used far more than expected, and that your rate increase will be substantial. You are told the increase is for a variety of reasons; claims were higher than expected, the average age of your staff increased, the number of staff decreased, inflation, etc… (you learn more about benefits than you ever expected) Your next comment is, yes, we used the plan, but I thought this was insurance!?
I would suspect your claims were not too high, but most likely your quoted rates were discounted, and artificially too low. This creates an unrealistic expectation of what that level of benefits should cost.
Here are 2 better approaches
- If you prefer a traditional, experience-based Group Benefits plan, then demand properly funded, non-discounted rates. It is your best opportunity for any type of rate stability with experience-based plans. This will be surprisingly hard to get, but I recommend you persist and get a confirmation in writing from the insurer.
- A Pooled Group Benefits plan is a spread of risk among member clients. If rate stability is important to you in order to be able to budget going forward, then a pooled plan may be right for you.