This week, we sat down with Mike Fortner at Gravie, to discuss why evaluating your health insurance plan more than once a year is a smart business decision – and the right thing to do for your employees. Here’s what he had to share.
A long time ago in a galaxy far, far away companies could get away with reviewing their health insurance benefits once a year. Those days are over. These programs are far too important and expensive now. It’s time to step up your game. And if you do, you’ll have lower costs and more satisfied employees.
Nowadays, the best performing benefits programs – those with the lowest costs and highest employee satisfaction – are run by organizations that approach insurance thoughtfully and often. The elite performers don’t limit their discussions to an annual review. Instead, these companies implement best practices around regular (often quarterly) insurance reviews. They commit to ongoing leadership discussions around how the plan impacts employee attraction and retention, short and long-term financial plans, and overall compensation strategy.
To determine if midyear insurance evaluations makes sense for your organization, ask yourself this simple question: Does our group health insurance plan deserve more attention than we’re currently giving it?
Even if you answered “no,” it’s likely that you could make better use of your time. Small changes can create big improvements for your company and your employees.
Strategic Decision Making
The insurance industry is one of rapid change and high stakes. Putting your arms around it only once a year at renewal is usually too much for anyone to tackle. Failing to make time to get in front of this monster can produce costly mistakes. I like to give people high-impact, practical steps they can start taking immediately. Let’s look at ways to avoid getting stuck in a bad program or missing a chance to move to a better one.
“Kicking the tires” on your plan a few times a year is a first step towards avoiding problems and finding improvement. If you’re not in the game, you won’t even be in position to consider your options. A consistent schedule of review does more than put time on your side. It allows:
- Leadership to dig into the long-term viability of the plan
- Examination of what’s currently working and what’s not, and the remedies available to best serve the company and its employees
- Forward-thinking about the role the plan plays in overall benefits and compensation, and if the right benefits are in place to attract and retain quality employees
- Real world budget forecasting for maximum coverage and employee satisfaction
- Equal prioritization of group health insurance with other business needs
- Avoiding problems before they happen
- Staying one step ahead of your competition
Best Practices in Action
Once you assume the practice of scheduling mid-year meetings with key team members, you can start to delve into the good stuff. Don’t get overwhelmed by all the things you could – or should – be doing. Take baby steps.
Here are some things to consider:
- What percentage of the overall compensation package is being spent on benefits; and how is that percentage broken down into medical, dental, life, disability, etc.? Do these percentages work for your overall compensation & benefits strategy and philosophy? If yes, are they sustainable if the benefit costs (particularly the medical) rise at a rate that is faster than the company’s overall financial growth? If no, how do you make the changes that are needed over the long term?
- What is the current overall hard-dollar cost of insurance to the company and the employees? Are they consistent compared to the benchmarks; how do they compare to your peers? Ask the same questions of the benefit levels (the deductibles, out of pocket maximums, and related policy coverage).
- Assuming you consistently cost shift when premiums increase significantly (you either reduce benefits, or you increase the employees’ share of the premiums…or both), what combination of these options make sense for you? Most employers tend towards one end of this spectrum (they either have great insurance but it’s really expensive for employees, or the employer subsidizes almost all the premium but the coverage is not so hot). Are you one of these, where are you trending, and does it deserve a second look?
- Is your broker still the best advisor for you? Or are they no longer the best fit – maybe you’ve outgrown them, or maybe they’ve gotten too big to give you the attention you need.
- Perform employee surveys and identify the top 3 things that are working, and the top 3 things that need improvement. Pick at least one issue to tackle at the next renewal. Consider surveying the employees twice a year – typically after the open enrollment period ends and mid-year – surveys are valuable indicators of employee perceptions about cost, coverage, service, and related topics.
- Be honest with each other about your philosophy on benefits. Are you mainly focused on cost – secretly liking it when employees waive your coverage by enrolling in a spouse’s or parent’s plan? Or are you genuinely looking to get 100% of eligible employees enrolled in your plan? Once you know, discuss and execute on closing the gap.
- What are the newest solutions entering the market for you to consider? At a high level, how do they work? Should they be on your radar, or are they fundamentally not a fit for your organization? Knowing what you don’t want is as important as having a few options in your back pocket. So whether you are the kind of company that makes proactive change to stay ahead of the storm, or whether you’re typically just reactive to problems after they pop up, there’s immense value in being informed.
- What effect has ACA had on your business? Are painful changes in your face? Have you missed a valuable solution to them?
- Have a running list of tactical strategies. Items on this list might include copays vs. high deductibles? Account based plans (HRAs or HSAs) or not? Best in class vendor selection (lots of different insurance companies) or one-stop-shop (buy multiple policies from the same insurance company)? Wellness program? Fully insured or self funded? The list goes on and on.
Now for some good news. Rarely will your discussions call for serious change. And even if they do, changes are usually implemented only once a year at renewal. Don’t walk into this with the expectation that you’ll be making constant or sweeping changes to the program.
Over the past several years, insurance benefits have taken on increased importance in the employer/employee relationship. And they’ve definitely taken up more of everybody’s time and bottom lines. Transitioning from annual reviews to strategic evaluations throughout the year is a vital first-step in getting what you want. A mentor of mine always used to say, “Practice doesn’t make perfect. Perfect practice makes perfect.” And it starts by having the discipline to schedule the conversation before and after the moment that renewal increase hits your inbox.