The value of employee benefits inside a broker-managed benefits pool, especially during times of uncertainty

By Lindsay Byrka | BA, BEd, CFP
Vice President, Immix Group: An Employee Benefits Company

If you are considering ‘taking your plan to market’ we want you to consider why our current climate is the time to join a benefits pool, transparently priced by a broker, rather than marketing direct with an insurance carrier.  

The COVID pandemic has altered the claiming patterns we are seeing.  This is the case right now and is what we anticipate continuing in the months to come. The impact on long term disability claims is a huge unknown, but the feeling is that there will be an increase in claims related to mental health. For reimbursement benefits such as dental and paramedical practitioners, it is difficult to predict if plan members will ‘make up’ the claims for services they could not obtain during the business closure period.

What we do know as benefits consultants is that our clients will not be at the mercy of the insurance carriers when it comes to pricing of their benefit program when they reach their first post-COVID renewal.

To back up and explain a bit further, employers enlist the services of group benefits advisors to recommend and assist in managing their benefits programs. There are exceptional benefits advisors in this city and country however there are unfortunately also benefits advisors who do not place the best interests of their clients first and foremost.

As group benefits consultants, one area of frustration is seeing the negative impact plan sponsors are exposed to when they were not properly educated on the pricing they were agreeing to when selecting an insurance provider. The ‘lowest bottom line’, without an explanation as to the discount level and future impact, is a misleading sales strategy that often leads plan sponsors to angrily look to ‘shop’ their plan after the first year. Many simply believed they were getting a ‘cheaper price’ because of the carrier.

The reality is the true cost of a benefits plan is extremely similar from carrier to carrier. A meaningful, and sustainable, differentiating factor comes with the unique arrangements the group benefits advisor has organized with the insurance carrier, on behalf of their clients.

Plan sponsors can often be lured by the promise of lower premiums, but oftentimes, they lack the understanding as to the true mechanics of the pricing, and in particular to the ‘investment’ the insurance carrier is willing to provide in order to obtain business.

We wanted to solve this problem, and we did

When it comes to group benefits programs, our approach at the Immix Group is focused on implementing broker-managed and priced benefit pools. We do not ‘shop the market’ and accept the highly discounted pricing that insurance carriers will put forth in order to obtain business. These prices are, in many cases, obviously unsustainable (for example, premiums 20% below the historical claims for a group). Unless you have compelling reasons to believe your claims will drop, when the plan renews, you will find that your claims were higher than your premiums, and a rate increase is in order.  

From the insurer perspective, they are willing to take an up-front loss, as they expect to recoup these losses over the next two-three years. When a plan sponsor has accepted pricing that was discounted, and therefore unsustainable, a rate hike at the first or second year renewal is a standard occurrence.

We decided as a firm to exit this game a very long time ago.

We have a deep understanding of the products and services available in the marketplace, and we have created strategic alliances with preferred carriers in order provide best-in-class benefits for our clients. The carriers we recommend are the carriers that offer the systems, services and products that best meet our clients needs. The pricing will be accurate and fair; we know this because the admin costs have been negotiated by our firm to be competitive, sustainable, and available to clients of all sizes.

Our Immix pools have been in place for over 15 years, and the strategy we have used has a proven record of sustainable and transparent pricing. This is a strategy that works for businesses of both small and medium size, and in some instances, even for larger companies.

I mention transparency because this is a key value for our firm. We strongly believe that you, as our client, have the right to see the (anonymous) claims details for your business. If you cannot measure and calculate year over year if your pricing is fair (as it relates to your health and dental benefits primarily), then how do you know if you are benefiting from the pool you are in?

One thing to beware of is that many “pools” will not provide you with the details of the claims experience for your group. How is this any better than the inaccurate/ unsustainable pricing offered from an insurer to obtain your business? How are you as a firm able to make reasonable and data-based decisions on plan design parameters if you cannot see the composition of your claims?

There are many advantages of being part of a Immix Group pool. Here are four key advantages to consider:

•  Buying Power. Joining one of our pools provides buying power, as you can leverage economies of scale when it comes to plan design offerings, attentive service support, and most importantly, pricing. Even if you are a group of just 3-4 employees, you can gain access to the administrative costs usually reserved for a group with hundreds or even thousands of employees. This is quite simply not attainable on your own.

•  Diversity. For our pools, we like to mix all sorts of industries and demographic profiles. The reason? Different types of groups have different claiming trends and are impacted in different ways from an economic standpoint. Over time, the patterns of one are offset by the patterns of another. We are not fans of industry-specific pools; from our perspective, they do not make sense. A diverse pool helps spread your risk and aids in keeping costs low.

•  Transparency. As we said above, this is key. Knowledge is power and knowing the details of your claims experience empowers you to make the right decisions when it comes to your benefits. It also lets you know that you are getting the best value for your pricing. A key question for consideration is: “Why don’t the other pools out there disclose the dollar amount and composition of your claims?” To us, transparency matters.

•  We handle everything. Service, service, service. At the Immix Group we handle everything from the initial set-up details to the daily administration that it takes to run your plan. For you, this means not using up in-house resources or using an additional party to handle the day-to-day. Plus, you have access to our knowledgeable benefits experts, who can help when unusual or problematic situations arise.

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2020 has been a wild ride, but we were prepared

Given the current state of the world, if we were handling hundreds of benefits programs that were directly priced by insurers, we would be feeling very uncertain about the renewals that would be coming down the line. In contrast, we are feeling confident and exceptionally well-positioned to face the post-COVID benefit renewal.  This confidence is due to our well established, healthy and successful partnerships with insurance providers.

As always, we have been monitoring our clients claims on both an aggregate and individual level. We know the administrative margins, and in short, the ‘math’ that will be applied to this data. When it comes to benefits pricing, the strategy of your broker matters. In a world of uncertainty, it just makes sense to know all the details.  

If you’d like a review of your benefits plan, we’re always happy to help.