The pandemic has forced a change in conversations come renewal time for employee health group benefit plans, which means it’s more important than ever to have the right benefits advisor in your corner.
“We are spending an inordinate amount of time negotiating renewals to get them to where they need to be for our clients,” says Tony Fairfield, founding partner of Fairfield Watson in Calgary, Alberta.
In some cases, further action is required. “The marketing activity around renewals for some providers is more than I’ve ever seen in the 23 years that I’ve being doing this,” he says.
The challenge is that carriers have to predict utilization for the coming 12 months based on data for the previous 12 months that is a highly anomalous, particularly during the three months (from mid-March to mid-June) when physicians, dentists and paramedical providers had to close their doors. Some carriers have opted to remove the data for those three months from their calculations, despite the fact that employers with insured plans continued to pay their premium (albeit likely at a discounted rate). Others have brought in new factors to offset the unusual impact of a period of time when there were virtually no claims for dental and paramedical services (since pharmacies remained open, claims for drug benefits were generally consistent compared to previous years).
“The lack of consistency between providers alone is an issue that requires close attention by advisors,” says Rob Green, president and CEO of Green Benefits Group in Burlington, Ontario.
The new approaches for renewals raise more questions than answers—and too often result in rate increases that are much higher than anticipated. “We’re fighting those cases, starting with a month-by-month utilization breakdown for the client,” says Green, adding that the crux of the problem is that “some carriers are applying a one-size-fits-all approach at a time when the opposite is required.”
The advantages of your benefits advisor’s membership in the BENEFITS ALLIANCE GROUP, a coalition of like-minded advisor firms from across Canada, come to the forefront at a time like this. “The Benefits Alliance Group brings the collective expertise and influence of its members to the table. It adds credibility through access to leading products and tools for decision making. We can negotiate from a position of strength,” says Fairfield.
Here are the three main guiding principles for successful renewals employed by members of the Benefits Alliance Group, including your own advisor. These tenets prove to be especially relevant during these unusual times.
There should be no surprises when it comes to renewals. “We are in touch with our clients at a minimum quarterly to review the financial results and have conversations about their renewal position. This year we also talk about the expected impact of the COVID months and their provider’s approach to the claims experience,” says Fairfield. By the time the insurer kicks off the renewal process, both plan sponsor and advisor are ready to hit the ground running.
“With the new economic pressures due to COVID-19, proactive management of benefit programs has never been more important,” agrees Green.
Beyond renewals, Green recommends greater attention to benefits and programs related to mental health. “Mental health will be the next pandemic we will face as a society. Now is the time to proactively think of options and strategies. It’s not just about paying for more; it’s about corporate culture and new programs and approaches, including virtual care.”
He adds that plan sponsors can lean on their benefits advisor to source those solutions and take on more of employee communications, including video clips. “Through the Benefits Alliance Group we have access to very cost-effective programs and tools with great results,” says Green.
Proactive management includes a deeper dive by advisors into reporting from insurers, especially come renewal time. With that in mind, the Benefits Alliance Group has developed a renewal calculation tool to analyze insurers’ numbers. “The tool removes the guessing game from negotiations,” says Green.
Adds Fairfield, whose firm has underwriters on staff: “Our analysis helps keep insurers accountable so we can get our clients to that fair, sustainable price point.”
Both Green and Fairfield are pushing back on insurers who have dropped the three months of claims experience during COVID-19 closures by requesting monthly reporting on claims-versus-premium utilization. The difference in renewal rates can be especially meaningful for plan sponsors with traditionally high utilization levels of paramedical services.
Renewals for long-term disability are generating the most controversy. Increased mental health claims and all-time low interest rates (resulting in the need for larger funding reserves) are the two main reasons why “plan sponsors across the board will see an extra charge for disability at their next renewal,” says Green.
However, double-digit increases, including some that are “north of 50%,” must be reviewed on a case-by-case basis, stresses Fairfield. “Internally we apply our own renewal pricing philosophy, include those COVID months, then go back to negotiate to get pricing to where we believe it should be.”
Green agrees, adding that “changes to disability pricing should not be that drastic unless there was a large demographic change for the plan sponsor. This is why it’s so important to have the proper analytics as an advisor.”
Strong provider relationships
A tough conversation is not necessarily adversarial. “The importance of having the right relationship between the advisor and insurance provider is more critical than ever,” says Green.
A long-term, collegial relationship, backed by solid financial analysis, opens the door wider to solutions that are sensitive to the situation of the plan sponsor. “You need a real partnership to determine the right pricing as we come out of the pandemic. We try to work well with our key suppliers because we recognize the value of win-win relationships,” emphasizes Green.
The Benefits Alliance Group has two committees dedicated to supplier relations: one for existing suppliers, one for new ones. “We meet to share objectives and opportunities. We also communicate our collective buying power, which is crucial to our role as advocates for small to mid-size businesses and organizations in Canada,” summarizes Green.