While the group benefits renewal process may seem like simply a box to tick each year, it’s important to approach the process holistically.
“There are many factors that go into a renewal, the biggest of which are claims experience, insurer trend and utilization, as well as claims reserve, admin expenses, demographics and credibility,” says Adrianna Stuart-Hagge, an associate vice-president at Accompass Inc.
But it’s important to avoid treating each of these factors as its own silo, even if each insurer has a different way of setting renewal rates, she adds. “For example, one insurer might have a lower admin expense than another, but a higher trend factor, which may lead to a higher overall position.”
Alaina MacKenzie, regional vice-president of business development and corporate sales at Medavie Blue Cross in Ontario, says the renewal process is also a good time for reflection. “It’s a good opportunity for a full, well-rounded review for not only the financial aspect, but the softer aspects, the less tangible aspects of whether the benefits plan is actually meeting the objectives.”
As well, it’s important to take a long-term view, even when it’s a buyer’s market, says MacKenzie. “While you could make major decisions because there’s massive cost savings to be had, eventually those cost savings will come to an end and you could be looking at significant premium hikes. So you just want to be thoughtful that your claim spend will drive your costs.”
Back to basics
Generally, the annual process begins with an insurer sending the plan sponsor’s group advisor or consultant, or the plan sponsor itself if it’s acting alone, a renewal package indicating an increase or decrease in the current rates, says Stuart-Hagge.
“We review the carrier’s request . . . and then we make financial and plan design recommendations that align with the client’s strategy,” she says. “With each renewal, essentially what we’re doing is viewing the appropriateness of the renewal rating to see if it aligns with the experience.”
The goal is to ensure plan sponsors achieve the maximum return on investment for their benefits program.
The process continues with the advisor or consultant negotiating with the insurer, coming up with a fair position for both the insurer and the plan sponsor, and ensuring the rate is sustainable for the future. Next, the advisor creates a renewal report and meets with the plan sponsor to discuss the findings. If the renewal includes any plan design changes, the advisor will help the employer with plan member communications, says Stuart-Hagge.
For Penelope Sisk, director of organizational development at Miovision Technologies Inc. in Kitchener, Ont., the key word for employers during the renewal process is ‘negotiate.’
“You’re always in a position to negotiate, don’t ever think that you’re not,” she says. “If it’s a new process for you or one that you haven’t done often, it’s important to remember that.”
Fees are one reason an employer may look to negotiate, particularly where a third party is facilitating its relationship with an insurer. “The thing to remember in that scenario is that those partners, unless they’re giving you an invoice and billing you directly, are getting paid on the back end by the carrier via the premium,” says Sisk. “So they aren’t always working towards your best interests either. You have to be super careful with that relationship as well, and do make sure that you’re partnered with the right organization to facilitate that.”
In terms of what Sisk wishes she knew at the beginning of a renewal process, it comes down to leverage and bargaining, she adds.
“The thing to learn early on in the game is that you shouldn’t be intimidated by the fact that they’re big business and you’re not. Or even if you are big business, it’s important to remember that you do have the power to leverage because you can always walk away from them as a carrier, and they want to keep your business, ultimately.”
But it’s also important to consider more than just the bottom line, according to Stuart-Hagge. “I think it’s really important to make sure that the claims and renewal are sustainable, and to arrive at the right price, which doesn’t always necessarily mean it’s the lowest price.”
Ryan Murphy is an associate editor at Benefits Canada.