You Get What You Pay For

As consumers, we’re faced with countless purchasing decisions on a regular basis.  We all strive to make the best financial decisions for ourselves, our businesses and our families.  At some point in our lives, we’ve all learned the hard way that the decision to purchase the cheapest solution can often end in frustration and disappointment. 

Let’s take, for example, the decision to buy a car.  It’s a situation we’ve all been in before.  There are countless options out there.  Do I buy new or used?  Which brand is most reliable?  Who has the best warranty?  If you were to buy a car with low cost as your first priority, it is likely that this car won’t be the most reliable, won’t have all the bells and whistles you want and is likely to cause you problems down the road. 

The same can be true in the employee benefits market.  There are numerous plans out there for you to choose from and they’re all a little bit different from one another.  It’s also important to note that a common practice for group insurance providers involves applying marketing discounts in order to attract new business.  Remember, when considering your options for a health and dental benefits provider, the cheapest solution is not always the best. 

Here are a few tips to keep in mind that you may find helpful when deciding on the plan that’s right for you:

1) Compare your options:   Before you make your decision, make sure that the advisor you are working with walks you through a comparison of the options on the table and helps you understand any contractual coverage differences.  There may be differences that are hard to identify or that are not outlined in the quotations.  This should help you avoid disappointment at claim time.   

2) Understand the renewal process:  The price of most group insurance plans will change at renewal time.  You need to know how the renewal rates are decided upon and how your claims behavior can affect your rates in the future.

There are 2 common approaches to calculating renewal rates:

Pooled plans– businesses are group together and rates are determined based on the claims of all participants.  Under this type of arrangement, an individual business would never be singled out and penalized for a high claims year.  If you value rate stability, this may be the type of plan for you.   

Experience rated plans– the majority of plans available in the small business market operate this way.  Under an experience rated plan, your rates for health and dental benefits are directly tied to the claims that you and your employees submit in relation to the premiums that you pay.  So in a high claims year, you could be looking at a potentially significant rate increase. 

3) Ease of claims and administration:  What good is a benefits plan where you have to jump through hoops every time you want to submit a claim?  Find out the various ways that claims can be submitted (paper based, electronic, online, mobile apps. etc).  The more automated the processes, the easier your life will be.  As for administration support, you’ll want to make sure you have dedicated support personnel to help you with things like employee changes and claims questions.

The bottom line is that you get what you pay for.  Make sure you have a clear understanding of the plans you are considering in order to avoid surprises at claim time or renewal time.  


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