Group Insurance

Group Insurance

Continuation of Coverage Managing the Cost

Group Insurance is the general term used for a variety of benefits that are offered through the workplace. There are several advantages for both the employer who sponsors group benefits and the employees who participate in the plans:

As an employer, offering a comprehensive package of group benefits will help you attract and retain quality employees. It is just as important to offer a competitive array of benefits as it is to be sure your salary offerings are in line with your competitors. Employee turnover is costly to your business, both in terms of lost productivity and the cost of hiring and training replacement employees. By offering a comprehensive array of benefits and by subsidizing the cost of those benefits, you are telling your employees in a very tangible way that they are appreciated. Being appreciated leads to higher employee morale; this in turn leads to higher productivity and less employee turnover -- a win-win situation for everyone!

Whether it is term life, disability, health insurance or other benefit, most employers pay a portion of the cost of the employer/employee plans they sponsor. Some employers may even pay all of the cost for some lines of coverage, but an employee contribution is generally required through a payroll deduction. Group plans generally also have the pricing advantage that comes with covering a large number of people on one contract. Because employers usually subsidize some of the cost of benefits and the law of large numbers helps to keep costs down, the benefits you receive at work are generally less expensive than anything you could purchase on your own.

In addition to the obvious premium benefits, most corporations can offer their employees the ability to pay their share of the expense on a “pre-tax” basis, which means your taxable income is reduced, thus lowering your income taxes. Many larger employers also offer their employees the opportunity to set aside additional “pre-tax” dollars to help pay for qualified child care and out-of-pocket un-reimbursed medical, dental and vision care expenses. These additional pre-tax dollars are called “spending accounts”. Corporate employers also benefit with these pre-tax programs by saving certain payroll taxes. “Pre-taxing” benefits and spending accounts is good for employers and employees alike.

Employees who have health problems (or who have family members with health problems) will generally find it easier to obtain insurance at affordable prices when purchased through their employer. Insurability is not always guaranteed and will vary based on several factors including: whether you and your family have been continuously covered by health insurance, the type of benefit offered, the employer’s size, the employer’s main location and, sometimes, the employee’s state of residence, etc. In all cases, your best opportunity to secure coverage is to apply when coverage is first offered to you. This time is called your “enrollment period”.

Benefits & Options

There is a wide array of group benefits that may offered through the workplace. Most insurance companies have minimum requirements that must be met for these benefits to be offered, including employer size, employer contribution to premium, participation, full-time employee status, etc. Requirements vary by insurance company, state of situs (where group is located), employer size and company structure (corporation, partnership, etc.). Most popular among the employer/employee group offerings are:

-- Employee Term Life Insurance

-- Dependent Term Life Insurance

-- Health Insurance

-- Dental Insurance

-- Vision Insurance

-- Short-term Disability Insurance

-- Long-term Disability Insurance

-- Long-term Care Insurance

Some employers choose to offer non-medical benefits on a group “voluntary” basis, that is, they make the benefits available but the employee pays the premium 100% through payroll deduction. Voluntary benefits allow a smaller employer the opportunity to make big-company benefits available, without bearing the cost of covering everyone in a true employer/employee sponsored group plan. Insurance companies generally offer discounts to employees who enroll in their workplace voluntary benefits, and, depending on participation, may offer some amount of guaranteed benefit. Qualification requirements vary by benefit, insurance company and the number of enrolled employees. Some voluntary benefits are also “portable”, meaning they can be continued if employment terminates by paying the premium directly to the insurance company. Popular voluntary group plans include:

-- Optional Employee Life Insurance

-- Optional Dependent Life Insurance

-- Dental Insurance

-- Vision Insurance

-- Short-term Disability Insurance

-- Long-term Disability Insurance

-- Long-term Care Insurance

Continuation of Coverage

When you terminate employment (or lose group coverage for another reason), you should always explore any rights you may have to continue or convert your coverage. There are many reasons you may lose your group insurance: a job change, reduction in work hours, retirement, a legal separation or divorce, disability, lay off, your child is too old to be covered as a dependent any more, etc. Knowing your rights to continue or convert coverage is especially important if you have medical conditions that may make it hard or impossible for you to obtain life or health coverage on your own. Consult your human resource department, insurance company and/or your plan booklet certificate for instructions and follow them very carefully. All continuation rights have certain procedures, applications and time frames that must be strictly followed. Be sure you understand your rights and follow the instructions carefully and in a timely manner.

Group term life insurance is often “convertible” to an individual whole life or universal life policy. Expect premiums for these “permanent” policies to be considerably higher than the term rates you had while covered by the group plan.

Medical (and sometimes dental and vision) continuation rights will vary by type of benefit, insurer contract, the employer’s size and location. Continuing health insurance from the time your coverage ceases until you become eligible for benefits at a new job or Medicare is very important for two reasons. First, you never know when an illness or injury may strike. You don’t want to find yourself without coverage, which could result hundreds or even thousands of dollars in uncovered medical bills. Secondly, continuation of medical coverage will help you secure coverage when you become eligible to participate in a new employer’s medical plan. Continuation of medical coverage is offered in different ways, generally based on your old employer’s size and state. If your old employer had 20 or more employees, continuation rights are generally available through COBRA, a federal program that assures portability of your old employer’s medical, dental and vision plan until you become eligible for a new group plan or Medicare. COBRA allows you to keep your coverage by paying for up to 102% of the premium for 18 – 36 months, depending upon the reason you “lost” coverage. If your old employer has less than 20 employees, continuation may be offered through a state-sponsored continuation program or a conversion plan offered by your employer’s insurance company.

Some “voluntary” benefits are “portable”, that is, they may be continued after termination of employment. This feature is an added benefit to participating in your employer sponsored voluntary group benefits.

Managing the Cost

There is no getting around it. Next to the cost of salaries, a comprehensive company group insurance package is often the second most costly item on most business balance sheets. And, with the ever-increasing cost of medical care and prescription drugs, the spiral seems out of control for many employers who find double digit premium increases hard to balance with single digit or even $0 increase in revenues. And, of course, employees still want raises, too. What options do employers have to help hold down the cost of group benefits? Here are some ideas:

Educate, Educate, Educate:

Making sure your employees know how to access the most cost effective in-network benefits whenever possible doesn’t happen by accident. It requires work on the part of the employer to make sure that benefit education is a priority with new hires and old-timers alike. Most employees want to get the most out of their plan so they can keep their out-of-pocket costs to a minimum. In addition, employees frequently don’t understand that rate increases are often a direct result of utilization. This is especially true for larger employers that are “experience” rated. By educating your employees to make wise choices for themselves and their families, the employee can make an immediate impact on their personal bottom line and help the group have a more attractive renewal down the line. It’s not hard for employees to understand that if employer rate increases can be held down to a minimum, future increases in payroll deductions and/or benefit cuts will be less likely.

There are also some intangible side effects of benefit education. When employees know how much their employer is investing in their health insurance, they are more likely to consider their group benefits as a key component of their entire compensation package. Healthy employees who rarely use their benefits will typically not know how good they have it. Helping to educate all employees about the important safety net you are providing will increase their appreciation, even if they don’t ever need to use the benefits.

Review Benefits Annually:

It is important to look carefully, line-by-line, at the coverage you offer. Sometimes a few strategic benefit “tweaks” can really add up to savings. This is especially true of medical, prescription drug and dental plans, where most of the increases in premium are being felt. Consider raising co-pays, deductibles and out-of-pocket maximums to keep pace with inflation. As more employers offer HSA’s (Health Savings Accounts or Consumer Driven Health Care) in the future, you may find this to be right option for your group.

Reviewing benefits every year does not necessarily mean you need to get competitive quotes each year. Small groups (under 50 employees) may in fact find annual shopping worthwhile, as their rates are not generally based on their groups own experience and tend to be more volatile due to age-band increases and claims losses overall in their communal “pool”. Larger groups, however, should limit their “market” searches to when the renewal is not “fair”, service is poor, desired benefits are not offered by your current carrier, etc. The internal cost of changing plans (such as time lost from work due to enrollment and educational meetings, morale issues caused by uneasiness of “change”, disenfranchisement of provider network changes) need to be carefully weighed against the actual premium cost savings. If service is good and benefits serve your employees well, it is always better to negotiate with your current carrier and change only as a last resort.

Know the Current Trends:

It is important to know what is happening in the marketplace, to know what other employers are doing to manage their plans and how future trends may affect your rates and benefits. There are many sources available on-line and in the print media that will give you food for thought as you begin to strategize for the future, but we know this is a big task and easier said than done. At Tidewater Benefits we strive to stay on top of the curve by offering you links to helpful sites, articles in the media and interesting tidbits that keep you informed. Feel free to check back with our site often for new updates or call to arrange an appointment to discuss your situation in more specific detail.

Know your In-Network Utilization Percentage:

If your medical, dental and vision plans have both an in-network and out-of-network benefit level, ask your insurance company what % of paid claims were in-network. If you find that less than 70% of paid claims were incurred out-of-network, that means your employees are not maximizing the network discounts available through your plan. Consider lowering your out-of-network benefits to encourage higher in-network usage and invest in re-educating your employees on how to get the highest level of plan benefit. Larger companies (those over 50 employees) are more likely to be able to get this information from their carrier.

Review Utilization Reports:

If your group is over 100 employees, insurance companies will generally make claim reports available to you and your broker. If possible, get reports on a month-to-month basis, with the following information included: total paid premium by line of coverage, total paid claims by line of coverage, total number of covered employee and dependents. By reviewing this information on a quarterly basis with your agent/broker, you will be able to better anticipate renewal rate actions and plan for them accordingly.

Consider “Alternate Funding”:

If you have more than 50 employees, there are alternative ways for you to pay for your health, dental and vision benefits. Please contact us if you are interested in learning more about whether alternative funding options are right for your company.

“Hire” a Knowledgeable Agent/Broker Who Works for You:

An independent agent/broker is someone who can shop your plan and place you business with almost any insurance carrier. Some employers will invite two, three or even more agents to quote on their group package at the same time, thinking this is the way to get the best rates possible. In fact, this is not true. In most states, “small group” rates, benefit options and agent commissions for groups of less than 50 employees are “filed” with the state where the business is located, and are not a negotiable items. If true apples-to-apples proposals are requested for a “small group” company with the same effective date by two or more brokers, the rates will be the same. If the rates vary, it will be because the information provided to the carrier varied (maybe an error in employee census data, for example) or different benefits or effective dates were requested.

If a group has more than 50 or 100 employees (depending on the state and insurance company portfolio), then there is a lot more flexibility in the product offerings, rates and commissions. Some insurance companies will only issue a quote to the first broker who requests one, while some insurance companies will only issue a quote to a broker who has a letter from the employer requesting he/she be the “broker of record” for the shopping process. In any case, the larger the employer, the more negotiating will be done on your behalf by your chosen agent/broker.

It is our opinion at Tidewater Benefits that the employer should interview and select one independent agent/broker of high integrity with whom they can build a comfortable working relationship, who understands your corporate climate, who knows which “markets” best suit the needs of your employees, who knows how to negotiate a fair renewal, who knows how to help educate you and your employees, who knows how to shop for and evaluate the validity of quotations, who is there to help solve service issues when they arise and, most importantly, someone in whom you are willing to place a high degree of trust. It is our experience that the best rates can be negotiated when carriers know unequivocally who represents the interests of the employer. We believe that the agent/broker, employer and insurance company triangle should be a three-way partnership—a partnership where all parties perspectives are respected and the best possible outcome is the one that benefits the long-term goals of the client.

Our agency began in 1983 by specializing in group insurance; our other lines grew from there. Our slogan “Small by Design to Serve One Client at a Time” is an outgrowth of our commitment to serve our clients, both group and individual, with the same care and concern with which we wish to be treated. If you would like to discuss how we can help your business manage your group insurance package, please feel free to contact us.