How much do (or should) benefits cost? Whether you’re an employer with an existing benefits plan, or if you’re looking to set up a new one, this is one question that we often hear from our clients and friends.
Yet, this is a challenging question to answer simply. Employee benefits rates can vary greatly based on a number of factors such as your industry and employee occupations, your group demographics, plan design, and prior claims history (if available). In our block of business, the average group pays about $3000 per year per employee in premiums. The range can vary significantly from as low as $2000 all the way to $6000. Let’s examine some of the factors that will influence just how much benefits cost for small to mid sized businesses in Saskatchewan.
Industry and occupations
The industry that the employer is in, as well as employees’ occupations play an important role in determining the cost of your benefits plan. Some industries bear a higher risk than others due to higher average employee turnover and other factors such as non standard work hours, exposure to work hazards, and overall stress levels.
Demographics
Your employee demographics include factors like age and gender distribution. The number of single and family coverage requirements also play a large role in your employee benefits cost. For example, family rates are typically 2 to 3 times more expensive than single rates. Single and Family rates apply to extended health and dental ratings. Some plans may include Couple rates as well. Life and disability insurance are largely based on group demographics. The rates will change every year as your group’s average age and gender changes.
Plan Design
Plan design will have the most influence on your premium costs. First, what benefits does your company have as part of the package? A basic plan would typically include benefits such as life insurance, long term disability insurance, extended health and dental. A more comprehensive plan would add benefits like critical illness coverage, short-term disability, an employee assistance program, a virtual health program, and possibly a healthcare and wellness spending accounts to top up the insured benefits. There are a multitude of different benefits to choose from in today’s marketplace.
Next, consider the fine details of each benefit line. What co-insurance level does your plan have when it comes to extended health and dental? Is your plan covering 100% of everything, or perhaps 80 or 90%? Are there deductibles and/or maximums in place? What level of coverage does your program cover for life insurance and disability? The way each benefit line is structured will play a large role in setting and controlling your premiums each year.
Claims history
Finally, if you already have an existing benefits plan in place, your insurer will review your claims history in the last 3 years when it’s time to renew the benefits plan. Extended health, drugs, and dental benefits are driven by overall usage of the plan. Your group’s claims experience plays a large role in how your insurer will price both renewals and new business.
Conclusion
A robust benefits plan will have the level of coverage that’s desired by the company, with effective cost containment measures built in. The good news is that employee benefit plans are flexible and can be tweaked at any time by the employer. Clients don’t have to wait until renewal time to make changes. Even small changes to your benefits plan can make a big change on your premium payable. For example, changing your co-insurance level or adding a dispensing fee deductible on your prescription drug coverage can make a world of difference in premiums and even help influence plan member spending behaviour. Yes, a well structured plan can help your team to be better healthcare consumers which will help keep your benefits plan affordable and sustainable over the long run .
Are you curious how much benefits should cost for your company? Get in touch with us and let’s chat about your benefits!
