What is the absolute cheapest way to run a benefits plan?

1) You need to be big. Rates improve dramatically when you get to above 50+ lives. Size also opens up additional funding methods such as Refund or Self Insurance.

2) Break out lines of benefits. The carrier that provides the best Life Insurance rate, may not have the best rate for Health Care. Some carriers have sharper pencils or specialize in certain areas. RBC provides really good LTD rates and coverage, but has no health or dental. Green Shield has good rates with health and dental but no pooled benefits such as life insurance. If you want the best rates the market has to offer you need to place the benefits with the carrier that can offer the best rate. This usually results in 2 carriers at least, one for pooled lines and one for health and dental.

3) Manage it yourself as much as possible: With more than one carrier this can get complex. Sure there are Third Party Administrators (TPA) which will help organize and manage the complexity but they will want a slice of the pie. Also, If you advisor doesn’t have to renegotiate renewals or fight over getting claims paid, why pay full price? Negotiate a flat annual fee, or a dollar per hour rate.

4) Embrace volatility. Pooled rates might be slightly lower if you take a shorter guaranteed of 12 months over 24 or 36 months.

5) Self Insure. Health and Dental benefits have big margins in premiums for risk premiums. By self insuring you take the risk and save the charges. You will want a stop loss policy for big health care claims however

6) Fee for service or percent of paid claims. Self insured plans are usually priced as a percentage of claims paid. IE: if a health care claim of $100 was paid, the administrator charges 10% or $10 to process the claim. Most plans use a percent of paid claims. Bare bones paper pushing can get as low as 6-8% before advisor compensation. Health care is usually more expensive than dental care. A less popular but equally valid approach is a flat fee per claim. With this method it doesn’t matter if the claim is $5 or $500 the administrator charges a flat cost to process each claim. Dental claims are usually a buck or two, pay direct drug claims are a few cents. Something more time consuming like a paper paramedical claim might be $5-$10 each.

TL;DR

• Be big
• Shop each line of benefit individually (Pooled lines: RBC Insurance, SSQ, IAP. Health and Dental: Green Shield, Blue Cross, Claim Secure)
• Take some risk.

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Robert Reynolds, GBA
Certified Group Benefits Advisor
Hendry McKenzie Reynolds Employee Benefits Ltd.

Toll Free: 1-888-592-4614
rob@hmrinsurance.ca
www.hmrinsurance.ca

E.O. E.