How Does your Benefits Plan Measure Up?
Employers, did you know that plan design features can be a strategic way to control cost for the future? Possible ROIs include increase in employee productivity and engagement, as well attracting and retaining talent for small businesses (employers with less than 50 employees). A recent report published by Sun Life Financial revealed valuable insight into the Canadian group benefits space, claiming that customizing a benefits plan to best suit the workforce can reinforce and accomplish an organization’s goals. The 54 page report offers a comprehensive overview of some of the most common plan designs which can assist small businesses in making the best decisions to meet the health needs and benefit preferences of their employees. To save you some time, we have extracted the five most common plan design options to consider when designing your benefits package.
Co-insurance
Described as an effective cost containment tool, co-insurance requires that employees absorb a percentage of the cost of treatment required. The employee’s paid portion then becomes reasonable enough to encourage use of the benefits, but also costly enough to discourage misuse. At a rate of 84% of employers utilizing co-insurance, the most common level of employer coverage for drug plans is 80%.
Deductibles
Typically applied at the beginning of the plan year, deductibles require the employee to pay a fixed dollar amount prior to being reimbursed of eligible expenses. Individual deductibles commonly sit at $25, while family plans cost $50. Seemingly the less popular option compared with the cost-controlling method of co-insurance, only 25% of plan designs include deductibles for employers with fewer than 50 employees.
Maximums
Benefit year maximums are applied to most benefits plans as they provide a cap to the amount reimbursed to each person covered within the benefit year. This is an important tool used to control cost measure, prevent fraud, and assist in the sustainability of your plan. Individual practitioner maximums can have varying percentages depending on the service, while combined maximums apply to two or more related paramedical practitioner types. An average of 56% of employers offer plans with individual practitioner maximums of $500.
Drug Plan Design options
The growing inflation of drug plan costs are attributed to the increased demands of an aging population, as well as the development of expensive specialty drugs. To offset rising costs, employers might want to consider the following plan features:
- Formularies – a preset list of medication covered under a benefits plan
- Generic substitution – same quality drugs without the brand name at a lower cost
- Dispensing fee caps – setting a maximum reimbursement limit on dispensing fees to encourage smart shopping
- Coinsurance and maximums – controlling benefits usage by encouraging a “consumer-mindset” through reimbursement caps
Dental
Ranked as the most important workplace benefit are dental plans. Routine services such as diagnostic, preventative and surgical are included in all benefits packages. Major restorative expenses are included in 38% of plans with coverage, while orthodontics only exist in 9%. For these two expenses, 77% of plans utilize co-insurance to minimize cost, while deductibles are only found in 23% of plan designs.
This summary references plan design data taken from: Designed for Health (Employers with less than 50 Employees) by Sun Life Financial, 2018. For more information, read the entire report here: http://www.sunlife.ca/static/slf/Designed%2.pdf
