Creating a Win-Win Group Benefit Plan for Both Employer and Employee

Splitting the cost is one way
group benefits can be
a win-win arrangement.

Group benefit plans can be a win-win arrangement for both employer and employee, and Joel Cadesky, a senior account executive specializing in group benefit insurance, spends his days making sure employers see that.

“It’s very simple,” he says. “You have a plan and you say to the employer, ‘This is a very good situation for your employees. The benefits are going to help you because they’re going to be happier and healthier people who are more productive. The employee is going to be very happy because now if they’re on some medication, some of it is going to be paid for, maybe all of it, depending on the plan design.’ But the key is both people win because the employee will get his or her family covered for health and dental when they didn’t before, the employer will have a happier, healthier employment situation, and productivity always goes up. Study after study shows that with the plan or without the plan, productivity always goes up for the business with the plan.”

But part of that win-win situation means that it’s better for both parties if they split the costs equally, and Cadesky says it’s easy to see where problems arise if they don’t.

“If the owner pays 100 per cent, it’s going to become free insurance for the employee and as a result, they’ll use the plan more than normal, and on renewal the rates are going to be higher, so then you’ll have a problem with the plan where you’ll have to change and dilute the coverage offered,” says Cadesky. “If there is a sharing of costs, every time an employee files a claim, they are taking an ownership in that because they realize that claim is going to have some effect on their rates next year.”

The employer will see a number of positive results if they require their employees to share in costs.

“So, there may be heavy use because it’s necessary, but there won’t be any abuse and that’s really what you’re doing with a 50/50 split of the costs,” says Cadesky. “When you’re paying 100 per cent as an employer, you’ve basically boxed yourself in because next year you’ll have nothing to offer your employee except maybe increases in salary because you won’t be able to afford anything else.”

For his clients, Cadesky usually advises a sliding scale in which employees are splitting the cost 50/50 in the first year and then, in the second year, the split goes to 60/40 with the employer paying 60 per cent. Then in the third year the employee is only paying 30 per cent, and it continues to go down year after year until the most loyal and longest lasting employees receive the reward of a 100-per-cent-paid-for plan.

Creating a win-win benefit plan for both parties also means customizing the plan according to the needs of your employees. Every insurance company has its basic, boilerplate plan, but it’s an employer’s ability to meet the needs of its employees that really creates a mutually beneficial environment.

“For example, if you’ve got a very young group, say 24 or 25 is the average age, then dental isn’t going to be the huge factor and prescriptions may be a factor, but what will be really big is paramedicals, so you’ll top up the paramedicals because those are the people who will use the chiropractors, the acupuncturists, and the message therapists,” says Cadesky.

“If you get an older group whose average age is 45 to 50, all of a sudden prescription drugs become extremely important because most people have them, and periodontal services become an extremely important part of their lifestyle. It’s not just fillings anymore; they’ve done that and now they’ve got to keep the gums going and that’s what you get with old age.”

So Cadesky recommends that employees get to know their group. You need to know the average age and needs of the group. Have a discussion with your employees and get a feel for what they want and need.

“It makes no sense to take a group where the average age is 24 and throw on a plan where you have a combined $500 paramedical coverage allowance, but you’ve blown out the dental by giving them 100 per cent unlimited and the whole bit. They don’t need it, that’s not what they’re looking for, and you’ve changed the plan design to one that hurts your employees because they’re not getting the full value out of it. Not only that, but the employer is wasting money on services hardly used.”

If you’re an employer and the above scenario sounds eerily close to the group benefits plan your company provides, one of the key questions Cadesky insists you ask your broker is the following:

Have you had a review of the plan based on the actual needs of your employees, or is your plan the same as every other company’s basic plan?

“In other words, no thought goes into it and the broker just comes in and says, ‘Oh, here you go, $25,000 flat, 80 per cent coverage, and this is what you need,’ with no reason or rhyme as to why the benefits are there and what benefits are there,” says Cadesky.

Another component in creating a win-win situation with your group benefits plan is your ability to keep renewal costs down, and Cadesky will tell you that the key to doing just that lies in one word: negotiation.

“If you don’t have a broker who is able to negotiate those renewals with you, get rid of him and fire him immediately,” he says. “Your broker should be able to negotiate for lower rates and better packages, but I’ve gone into so many companies where I’ve seen no negotiations whatsoever and they simply accept everything without even looking at it properly.”

Cadesky knows how to hold the insurance company’s feet to the fire, saying that if an insurance company wants a 20 per cent increase and her client wants 12 per cent, the insurance company will either meet their figure or Cadesky and his client will test what they can get as a rate on the open market and leave their group plan provider behind.

“Has your broker negotiated your rates every year and has he shown you what were the negotiations?” asks Cadesky. “There shouldn’t be any surprises for the employer at renewal, because if the broker is doing a good job, he has met with the client four times during the year for quarterly reviews in which he goes over your premiums, claims, and just generally how things are developing.”

Is your broker meeting with you every quarter to review how things are going?

If the answer is no, maybe it’s time to talk to Joel.