BENEFITS MANAGEMENT
Are You Losing Out on Potential Funding?
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By Trevor Chew
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TOTAL FINANCE
as your organization ever received a refund from its group benefits plan? If not, then you may be losing out on potential funding. If you only claimed 75 percent of what was paid towards group health benefits and the benefits provider kept 25 percent, would this represent significant funding to your organization? Now times that amount by the number of years your organization has had a traditional group benefits plan. What if they also asked you to pay more into the group benefits plan even though you only claimed 75 percent of what was paid into it? It is very rare for an organization to claim more that it pays in group benefits, and if they do, they will likely experience a cost increase to their group benefits plan upon renewal. Group benefit providers, have a target loss ratio, that helps them determine if the plan needs to increase in cost upon renewal and whether the plan is profitable for them to administer. Typically target loss ratios can range anywhere from 68 percent and up, depending on the size of the organization. If you claim more than the target loss ratio, you will likely experience in
increase in cost at renewal. Risk factor fees, non-pooled charges, commissions and profit, experience-related pooling fees, and card fees can all be imbedded into a traditional health benefits plan. This can make traditional group health benefits, expensive and costly. Should the organization claim less than the loss ratio, then there may be opportunity to lower the cost at renewal, but the benefits provider keeps what you didn’t spend that year as their profit. Most health benefits are under used, especially during the pandemic, but a traditional plan would still keep premiums you didn’t spend, forfeiting them to the insurance company. Most traditional health insurance plans are mostly just administrating claims. Annual costs to the employer are usually the sum of the claims plus about 30 percent-40 percent, with costs often increasing each year. What if there was an easier way to stop the yearly group benefits from increasing without the administrative burdens and constant change in providers? What if you got a refund for money your plan didn’t spend? Administrative Services Only (ASO) plans, have been available to large organizations
FALL 2021
