In an effort to ease the burden of COVID-19, benefits insurance carriers are offering the option to defer this year’s benefits renewals by up to two months. Additionally, many carriers are offering discounts on Health and Dental rates because they are seeing less usage of these benefits during the coronavirus pandemic. When it comes to renewal deferral, it is important for employers to be well informed before making their decision. Most carriers have not made deferrals mandatory, but the client must let the carrier know of their choice. Questions for employers to consider include issues such as:
Are we receiving a renewal increase, decrease or no change to our monthly premiums?
If the answer is a decrease, then it would be wise to not defer the renewal.
If the answer is an increase, then client may consider deferring their renewal. However, be aware of the following:
What is the increase on pooled benefits vs experience rated benefits?
For small to mid sized employers, pooled benefits consist of life insurance, accidental death & dismemberment, critical illness insurance, long term disability, and employee assistance programs.
Pooled benefit lines’ rates are impacted by factors such as group demographics, and other outside factors. Demographics include age distribution throughout the group, and number of males vs females in your employee population. Outside factors consist of insurers’ performance of their “pool” of business, and economic factors such as, for example, interest rates. Generally, when interest rates go up, insurers’ profits tend to go up. When interest rates decline, insurers’ profits would decline as well.
Experience rated benefits include coverages such as extended health and dental. Your group’s claims experience directly impacts these benefits’ rates. Basically, insurers look at the amount of claims paid over the last period (usually 12 months) and compare that number to the amount of premium collected.
A review of your health claims over the last 3 years will give us an idea where claims have trended, and what we can expect in terms of claims pattern for next year. Our analysis will show which claims are recurring and will thereforecontinue, vs claims that are a one-time occurrence. For example, medications used to treat long term health conditions tend to be recur from year to year. On the other hand, claiming crutches due to a broken bone is probably a one-time event. These trends will give us an idea about what to expect on your next year’s renewal.
While it is possible to see patterns on paid dental claims, these claims tend to be much more unpredictable.
What are the possible implications of deferring our benefits renewal? Do we have to defer, or can we choose to not defer our renewal?
Perhaps the most important question to consider is this: if we chose to defer our renewal, will the carrier still collect enough premium to be able to pay our claims? When deferring the renewal, most carriers are not changing the renewal date for the next year. Deferring a renewal can result in the carrier collecting less premium over the next period . This may impact next year’ renewal rates, and/or cause another increase next year.
However, during COVID-19 we are seeing less claims due to effects of isolation, so less premium paid over the 12 month period may not have a negative effect on next years renewal.
This choice will be a business decision that each client will make given the situation of their business at this time.
Our recent blog on common misconceptions about benefits includes more information about common renewal and benefit pricing questions.
If your benefits renewal is approaching and you need to figure out whether deferring your renewal makes sense, feel free to get in touch with us! We could help by conducting an independent analysis of your claims and explain possible implications of deferring your benefits renewal. This would absolutely be a no obligation consultation.