When meeting small business employers for the first time, Benefit Sculptor founder Erick Kuhni often asks the same question: “Will this year’s employee benefits renewal be like every other year?”
Often, it seems that many small businesses have grown accustomed to a process Kuhni describes as “going through the motions.” The advisor arrives for a scheduled meeting, talks through the benefits and shares complex information compiled on spreadsheets. The conversation centers around how much insurance is going up, at which point the advisor shares the updated costs as well as strategies for lowering those costs – by reducing benefits. After several stressful rounds of meetings, the business owner decides on the insurance plan and moves forward for another year.
“This process doesn’t work because it fails to account for concrete business objectives,” Kuhni explains. “If the only thing a small business employer wanted was cheap benefits, they could find the least expensive product – or offer no coverage at all. But they want to do what is best for their employees.”
The objective of employer-sponsored benefits is to recruit and retain employees by offering them something they value. Employees want wages and benefits that allow them to meet their own needs as well as their family’s needs. Employer-sponsored benefits provide employees with three main advantages that they cannot get outside of an employer-sponsored benefit arrangement:
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Employer-sponsored insurance packages can provide superior coverage options such as lower deductibles, broader access to doctors and facilities, lower-cost options, reduced or eliminated waiting periods for dental, affordable disability coverage, and guaranteed issue life insurance.
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Businesses can offer lower-cost insurance through employer cost-sharing arrangements where employers pay some portion of the cost.
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Tax benefits are available to employees that are otherwise unavailable to people who purchase their own insurance for health care-related expenses and employee premium payments.
The employer-sponsored benefit strategy is always about finding the products that meet employees’ needs in the most cost-effective way, so that they will be incentivized to continue with the company. When looking at the health plan, there are three things that will determine whether a health plan strategy is successful. These criteria gives employers an algorithm for evaluating products and important questions to consider with their broker.
Networks
What doctors and hospitals are necessary for my employees?
There is no need to survey employees in order to answer this question. If you are currently offering coverage to your employees, you simply ask whether you are getting complaints. If your broker has been helping employees manage medical claims, they may have some insight. You can ask what other companies in your area prefer. Then you isolate your search to only those products that cover these providers.
Budgets
This one seems straightforward – you want your broker to limit their search to products that are under a certain threshold of cost. However, this is not just about the total cost of the insurance, but how much of that cost will be passed on to the employees. It is important to never assume that employees want to spend much more than they did in the previous year. If you must choose between passing on more cost, reducing network access, or reducing a benefit (such as increasing a deductible), always consider small benefit reductions first. Network reductions should be approached very cautiously.
Plan design
Employees seem to be less sensitive to small benefit adjustments, and for this category you generally want to consider products that are either similar to their current experience, offer better coverage at no additional cost, or offer reduced coverage where the cost savings are substantial and shared with the employee through substantial premium withholding reductions. If a drastic reduction in benefits must occur, then employees need some incentive to appreciate the decision.
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While small business employers often see annual benefit renewals as a routine effort with their broker, in reality each year they are holding a salary negotiation with their employees. Offering a strong benefits package is a critical part of recruiting and retaining the best talent. In addition to the financial implications of choosing the best benefits program, it also impacts workplace culture – showing employees that they are valued. For these reasons, small business owners are encouraged to not “go through the motions” this year, but to carefully consider how they can invest in their employees.
To learn more about Erick Kuhni and Benefit Sculptor, visit BenefitSculptor.com.
The news and editorial staffs of the baiduhai had no role in this post’s preparation