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Cost Effective Insurance Is More Attainable through Flexible Benefits

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One aspect of your business you may be rethinking right now is the benefits package you offer your employees. You want to continue offering them great benefits, especially right now. Yet you also need to trim the business’s expenses.

That’s been the struggle for many business leaders and HR managers over the last decade or so, especially as the costs of insurance and prescription medications push the cost of benefits higher. Add in that your employees are likely requesting different benefits. The last few months have only amplified this trend and accelerated change.

Enter flex benefits. Not only can they give your employees more freedom and more of what they want, they can also help you achieve more affordable insurance.

The Traditional Benefits Package

Most traditional benefits packages were constructed as “group benefits.” You enrolled all your employees as a “group.” Since there were multiple people signing up together, the insurance provider would offer a discounted, or group, rate.

Group rates are almost always lower because the risk of someone making a claim can be spread out over the entirety of the group. A “high risk” person could make lots of claims while another person hardly makes any.

The group rate is supposed to be a great deal for everyone involved. Your employees get access to benefits they need and want. You pay a much lower rate than you would if you enrolled everyone as individuals. The insurance company gets maybe 100 new customers and can spread their risk around.

The Breakdown of Traditional Benefits

If traditional benefits are supposed to be such a good deal, why aren’t they working any longer?

One issue is often the structure. The insurance company puts together a package, defining benefits for every employee. In your package, everyone gets $700 worth of dental a year, no exceptions.

This doesn’t work for your employees, because they’re individuals with unique needs. One person may need much more than $700 worth of annual dental care. Another employee might not even use their dental benefit. Now they’re both unhappy with their benefits.

The other issue is the cost. Health insurance rates have been steadily climbing, pushed especially by prescription medication prices. If you offer this benefit, your costs have likely increased annually.

This crunches your budget, so you might slash benefits to control costs. That means your employees get even less from a package they’re already dissatisfied with.

Flex Benefits Bring Affordability Back to Benefits

Some people believe flexible benefits plans are more expensive, because they often require more administration. Employees have more freedom in their choices of benefits, changing parts of the plan as needed. It takes more to keep track of what each employee is entitled to.

Flexible benefits may also avoid the “bulk buying” model intended to lower traditional benefits costs.

Flexible benefits are often a more affordable solution. One reason is that you’re offering benefits your employees will use. Why paying for private hospital rooms in a traditional plan if none of your employees ever use that benefit?

Next, flexible benefits let you define the level of funding for the plan. You tell the provider what your budget is and they design the plan from there. You still receive some benefit from having multiple people enrolled as well.

Finally, depending on the model, you could ask employees to help fund their benefits through a co-pay. You may, for example, offer core benefits, and employees choose add-ons for an additional cost. Flexible benefits plans also encourage employees to use their benefits more strategically, such as filling a prescription. They’re more likely to choose a pharmacy with a lower dispensing fee, stretching their benefits dollars further.

Affordable Insurance Is within Reach

As you can see, flex benefits plans bring plenty of advantages for both employees and employers. As you explore ways to retool your benefits plan to better fit your employees’ needs, consider something more flexible.

 

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Darwyne Lang

Darwyne Lang

Darwyne is the president and CEO of Apri Insurance Services Inc. Having worked in the industry for over 30 years, he lives the benefits business every day. He is a Chartered Life Underwriter (CLU). He understand the needs, costs, misconceptions, and effects on brand and culture, and the importance of benefits for employees. No matter what he’s doing, whether for work or pleasure, Darwyne competes at a very high level. He loves to lead and innovate in everything he does.

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