Rising drug plan costs, tighter restrictions on government-paid medical coverage, more employees working past age 65—all of these factors will play a role in driving up benefits plan costs in the next few years.
And with that knowledge comes increasing demands on group benefits providers to offer cost containment solutions, along with growing pressure to manage or even reduce fees to help with benefits plan affordability.
The challenge, according to insurers, is to convince plan sponsors to consider long-term solutions rather than quick fixes. As a result, insurers see 2012 as a year of education, discussion and research to ensure the ongoing viability of employee benefits programs.
Price checking
Greater focus on managing benefits plan costs opens insurers to scrutiny, and employers are asking carriers to justify their fees.
“[Employers] used to go [to market] every five to seven years. Now we see some going more frequently and many willing to change providers for [fewer] cost savings than in the past,” says Jamie Johnson, a senior consultant with Morneau Shepell.
Alain Parent, director of sales, group insurance, with Assumption Life, agrees, noting it’s a buyer’s market, with “some employers going to market on every piece of business every year. Such a strategy simply delays the problem for a year.”
David Willows, vice-president, strategic market solutions, with Green Shield Canada, notes that group benefits are “no longer a purchase only of interest to HR. We definitely see more procurement department-led marketing exercises.”
There is also growing demand for third-party insurance audits, primarily from employers with at least 1,000 plan members.
“An insurance audit looks at three things,” explains Gord Burke, principal with Burke & Company. “It tests the claims adjudication system for payment accuracy; ensures contractual compliance, aligning source documents with the system; and examines a statistically significant sample of actual claims across all parts of the plan (drugs, dental, medical, eligibility, etc.) to make sure they’ve been administered properly.”
Insurer feedback suggests most are open to review. “A process that has been in place for quite some time should be looked at to see if it could be improved,” states Parent.
Marilee Mark, Manulife Financial’s vice-president, marketing, group benefits, agrees. “We have to find more ways to be efficient in how we deliver our services, effective in claims management, and leverage our size and buying power to negotiate better prices with other vendors to allow us to pass on any savings in our pricing.”
However, while fees and processes are important, Willows believes plan sponsors are looking beyond them in order to truly address benefits plan sustainability.
“While clients are clearly cost-conscious, they are willing to consider a value proposition that provides long-term program savings in exchange for marginally higher administration costs,” he says. “Employers are increasingly aware that the vast majority of their benefits program costs are related to claims, not carrier expense charges.”