With a shrinking market, look for personal relationships, detailed reports
Not so long ago, disenchanted plan sponsors looking for a new benefit plan provider had a dozen organizations to choose from. Today, given the rationalization and demutualization of the insurance industry, and depending on the size of the company and plan specifics, you might be lucky to have five carriers to choose from.
Less choice among providers, combined with demutualization, means less market competition. Carriers are legitimately more profit-oriented. There is less product and price differentiation among the insurers. For the plan sponsor, this means that the differences between providers will likely not relate to substantially lower prices or significantly different product offerings.
So in today’s terms what would typically drive the decision to change carriers?
There are three broad categories for considering a change in carrier today: value for the money, service quality and personal relationship.
Value for the money
Generally, carriers of comparable stature will not price their products that differently — particularly if the plan is underwritten on administrative services only or fully experience-rated basis, as opposed to some sort of pooling arrangement.
The question is what do you get for your money? In today’s market, it is no longer who is cheaper but what is the value add. What extra services would a plan sponsor need? How would this differentiate one insurer over another.
Some insurers have focused energy on differentiating themselves via special offerings related to disability management, others via Web-enabled tools and support. Still others are willing to take over some of the benefit plan administration in an outsourcing arrangement including, for example, premium and claim premium administration, employee communication and tax reporting details.
Service quality
It used to be you had to ask carriers to disclose their turnaround time and provide samples of their explanation of benefit statements as part of the selection criteria. Today, if a provider is not volunteering this information and offering competitive services on these basics, it should not even be considered.
But employers should also be looking for more than these basics. Providers distinguish themselves by the quality of service. For example, is it providing clear, well presented, relevant data with renewal and annual financial reports?
What kind of claims experience analysis is the carrier providing? Is it tracking claims to the health spending account adequately so that the employer can use that data to make informed decisions regarding future plan design changes? Does the account executive include any analysis of the data or are the data sent to the plan sponsor with no interpretive commentary? How flexible is the carrier and how responsive to special requests? These are examples of service quality.
Personal relationship
The account executive is the plan sponsor’s connection to the inner workings of the insurance company. Good account executive will promote and support the carriers they represent, while seeking to understand the plan sponsor’s needs. When conflict or questions arise, a good account executive will, within reason, go to bat for the plan sponsor. For example, imagine the carrier concludes that a higher premium load is required given the high number of claims anticipated for the upcoming plan year. The account executive could negotiate with the underwriters so that the higher load can be waived upfront but with the understanding that if claims experience is as poor as anticipated at year-end, the plan sponsor will repay the deficit up to what the upfront premium load would have been. In this example, the account executive has understood the plan sponsor’s needs to keep costs low but at the same time respected the fiscal requirements of the insurance company.
Gone are the days of sending out benefit plan specifications to just “test the market” or save a buck. Today, a plan sponsor will mainly change carriers only if there is an opportunity to realize added value, better service or an improved relationship with that carrier via the account executive.
Daphne Woolf is a freelance writer and benefits expert who can be reached at (416) 469-1300.
Less choice among providers, combined with demutualization, means less market competition. Carriers are legitimately more profit-oriented. There is less product and price differentiation among the insurers. For the plan sponsor, this means that the differences between providers will likely not relate to substantially lower prices or significantly different product offerings.
So in today’s terms what would typically drive the decision to change carriers?
There are three broad categories for considering a change in carrier today: value for the money, service quality and personal relationship.
Value for the money
Generally, carriers of comparable stature will not price their products that differently — particularly if the plan is underwritten on administrative services only or fully experience-rated basis, as opposed to some sort of pooling arrangement.
The question is what do you get for your money? In today’s market, it is no longer who is cheaper but what is the value add. What extra services would a plan sponsor need? How would this differentiate one insurer over another.
Some insurers have focused energy on differentiating themselves via special offerings related to disability management, others via Web-enabled tools and support. Still others are willing to take over some of the benefit plan administration in an outsourcing arrangement including, for example, premium and claim premium administration, employee communication and tax reporting details.
Service quality
It used to be you had to ask carriers to disclose their turnaround time and provide samples of their explanation of benefit statements as part of the selection criteria. Today, if a provider is not volunteering this information and offering competitive services on these basics, it should not even be considered.
But employers should also be looking for more than these basics. Providers distinguish themselves by the quality of service. For example, is it providing clear, well presented, relevant data with renewal and annual financial reports?
What kind of claims experience analysis is the carrier providing? Is it tracking claims to the health spending account adequately so that the employer can use that data to make informed decisions regarding future plan design changes? Does the account executive include any analysis of the data or are the data sent to the plan sponsor with no interpretive commentary? How flexible is the carrier and how responsive to special requests? These are examples of service quality.
Personal relationship
The account executive is the plan sponsor’s connection to the inner workings of the insurance company. Good account executive will promote and support the carriers they represent, while seeking to understand the plan sponsor’s needs. When conflict or questions arise, a good account executive will, within reason, go to bat for the plan sponsor. For example, imagine the carrier concludes that a higher premium load is required given the high number of claims anticipated for the upcoming plan year. The account executive could negotiate with the underwriters so that the higher load can be waived upfront but with the understanding that if claims experience is as poor as anticipated at year-end, the plan sponsor will repay the deficit up to what the upfront premium load would have been. In this example, the account executive has understood the plan sponsor’s needs to keep costs low but at the same time respected the fiscal requirements of the insurance company.
Gone are the days of sending out benefit plan specifications to just “test the market” or save a buck. Today, a plan sponsor will mainly change carriers only if there is an opportunity to realize added value, better service or an improved relationship with that carrier via the account executive.
Daphne Woolf is a freelance writer and benefits expert who can be reached at (416) 469-1300.
