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Employee Retention Depends on Your Benefit Renewal

Most employers look forward to the annual process of benefit renewal with a mixture of anticipation and dread. Anticipation about what might be – both positive and negative, and dread about the level of complexity that comes with understanding the terminology and the many metrics used during the process. The best way to deal with these emotions is to be prepared for the beginning of your renewal cycle. Preparation should involve ensuring that you have thought through certain key decision possibilities that will drive the renewal process before the process begins. Preparing in this way does not mean that you have established a firm position on any one area. Instead, it enables you to consider a wide variety of options if the proposed renewal rates do not go as hoped.

There are three key areas of preparation that require focus as you begin meetings with your benefit broker and/or your individual carriers.

1) Complete an assessment of your current benefit offerings

Renewal is a time for reflection and assessment. The benefit programs that are offered by the organization represent a major expense – often times second only to payroll – and are critical to employee satisfaction and retention. Accordingly, it is important to have a thorough understanding of the individual benefit programs the organization currently offers. Are they meeting the needs of your employees and is the administration aspect of the benefits efficient and convenient for those employees who utilize the benefit?

Collecting feedback on the quality and scope of the benefit programs offered should be an ongoing part of the assessment process. If your organization utilizes an employee survey at any time during the year, it should include questions about the satisfaction levels employees have for their benefits. Individual feedback should also be solicited as employees access their benefits and as the HR team assists employees in navigating the application process. Lastly, do not forget to ask your HR team about their impressions of your benefits and the types of challenges they are encountering and the unsolicited feedback they may be hearing. Outside of formal feedback collection efforts, HR should always have their ear to the ground to learn as much as possible about how employees feel about their benefits. All of these data points are important in assessing the state of your programs. After all, a benefit is only a benefit if it meets a need and is valued by those who rely on it.

Your assessment efforts should – to the extent possible – also involve an understanding and review of the factors that will be utilized and considered by your carriers as they prepare their renewal rate proposal. Understanding what is important to them and having an awareness of how your plans have performed, allows you to be prepared to be an active negotiator. In short, there are four main areas that carriers will consider in setting new rates. Unless your plans are part of a multi-employer plan, individual rates are likely to be impacted by:

  • The size of the group and the number of lives being insured
  • The demographics of your workforce
  • Your experience rating (i.e. plan utilization), and
  • The carrier’s target loss ratio for the plans they offer

Most ancillary benefit plans (benefits other than health insurance) are normally fully insured plans. The challenge with fully insured plans is that, under such plans, the carrier retains all of the risk. Accordingly, you as the client may not have full access to plan data, such as your individual utilization rates, and the carrier’s targeted loss ratios. This should not stop you from trying to learn as much as you can by inquiring about the availability of this information, to evaluate how your plans have performed. If you work with a benefit broker, they may be a valuable source of this information, and can assist you in establishing a basis for beginning your rate renewal negotiations.

The bottom line here is not to enter your renewal in a position of weakness. Demonstrate to your carriers that you are invested in a fair and equitable renewal that protects the interest of both the organization and its employees.

2) Determine your openness to market your benefit plans

Releasing your various benefit plans to an open market, competitive bid process may or may not be appropriate for the upcoming renewal period. The decision to take this step depends on whether you currently enjoy a rate guarantee for one or more of your benefit plans, or if it’s been several years since the market has been tested to ensure plan design and rates are competitive. This decision should be made well in advance of the beginning of your renewal period, and if applicable, in coordination with your benefit broker. Opening your plans to competitive bids, will require you to prepare and provide information needed by perspective carriers, such as complete workforce census/demographic information.

Along with costs, the driving consideration when determining whether to market benefit plans is the type of relationship that exists with your current benefit carriers. A strong, respectful, and honest relationship with carriers is an important aspect of delivering an effective benefit plan. Developing such a relationship is not only good for business, it enables both sides to take a more personal approach to the administration and renewal of the plans they are involved with. If you feel that the relationship with individual carriers is strong and helps deliver a great benefit to employees, small rate differences may not be a sufficient reason to request competitive bids from the market. On the other hand, if you have had little if any contact with carriers and you are receiving negative feedback from employees about the ease of accessing their benefits, it may be time to check what alternatives the market might offer. If nothing else, a competitive bid may raise the awareness of your carriers and potentially improve their performance.

Take the time to think through the variables that are involved with making this decision and balance your current carrier relationship with the responsibility to deliver the best possible plans and rates for your employees.

3) CONSIDER THE CHALLENGES ASSOCIATED WITH MAKING CHANGES TO BENEFITS CARRIERS

As mentioned above, sometimes it is simply necessary to check the market to ensure that you are getting the best possible plans, services, and rates for employees. Further, it is equally important to be aware of the evolving trends in employee benefits and make sure that you are filling the “gaps” that may exist in you benefit platform. Should it become necessary to consider moving from one benefit carrier to another, it is important to evaluate the challenges that will be associated with such changes. Carrier relationships are a critically important factor in the delivery of benefit programs. Often times great plan designs are undermined by poor execution, resulting in employee dissatisfaction.

If the decision to change carriers is based exclusively on price, you may overlook the disruption that may be caused by this change. Employees who may be utilizing one of your benefit programs at the time of the change will be understandably concerned about how their benefit will be transitioned from one carrier to the next. Changes to carriers for key benefits such as healthcare, will create more of these types of concerns, in addition to concerns about whether the employee’s personal health providers are in the new carrier’s network. If popular healthcare providers are not in the new network, it is important to determine how the organization will communicate the change and respond to employees who are being treated for ongoing medical conditions. Organizations should consider providing information to all of its employees regarding the factors that led the company to make the decision to change carriers. Justifying the change may not settle all concerns regarding the loss of a key provider, however employees are more likely to accept the change if they understand the reasons for the change.

It is important to consider more than just price when making decisions regarding changing benefit carriers. This is the type of decision that should be made with the consultation of your benefit broker or a consultant that is experienced in understanding the many related implications that result from such a change. The decision is made much easier if your current carrier has not been performing well, if their network of approved provers has proven insufficient, or if their rate increases are so extreme as to make the benefit unaffordable without significant increases to the company and the employees.

Do not feel you are hostage to existing carriers, and do not allow this to prevent you from making a decision that must be made. However, it is equally important to ensure that you do not make an emotional decision without first considering all the related factors.

Conclusion

The dread associated with the renewal of benefit programs can sometimes be well deserved. Getting the proper guidance in preparing for and evaluating the results of your renewal are critical in reaching the right decisions. The sooner you can start with preparation, the more time you will have to think through and discuss the many decisions that will need to be made. In the end, employees are relying on you to make the best possible decisions on their behalf. Their reliance on you and the faith they have in you is well worth the extra effort.

MEET the Author

Nathan Duet brings expertise in building sustainable human resources functions within rapidly growing organizations and making strategic adjustments to policies and practices to accommodate an organization’s strategy and development. With nearly 40 years of experience, Nathan collaborates with clients to build a balanced approach to human resources management that facilitates the growth of team members while achieving, and exceeding, organizational objectives. He is skilled in all areas of human resources management including employee relations, compensation, benefits, communications, performance management, and compliance with state and federal labor laws.  Watch the video below to see how to reach Nathan and learn how he can help your company with your specific HR needs.

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