Originally from our sister publication, SmallBizAdvisor.ca.
The lure of better rates, better service, streamlined administration, faster claims reimbursement and a more client-focused service platform are the focal points used by carriers to attract employee benefits plan business.
In reality, though, a transition from one carrier to another—while meaningful in some ways—can be time consuming, disruptive and costly. In the end, it’s a package deal where employers must be prepared to take the rough with the smooth.
Employers always want to make sure they’ve got the best deal available, says Tina Tehranchian, financial advisor, Assante Capital Management, in Toronto.
She concedes, though, that the most suitable plan may not necessarily mean paying the lowest premium.
“Sometimes there’s service issues where they’ve had problems making a claim from the insurance company,” says Tehranchian. “They are very frustrated and are willing to pay more just not to deal with that insurance company anymore.”
There are times when it does make sense to change providers, says Brian Ganden, associate, Granville West Group, in Vancouver.
“Online platforms and plan administrator look-up tools have come a long way,” he says. “Some providers offer tools that are very appealing to some plan administrators.”
Tehranchian agrees it all depends on the unique needs of the company, which may be more what the current carrier is able to meet.
“Some companies are very interested in the chiropractic limit or how much massage therapy they can get,” she says while asserting that “by far the number one motivator is the bottom line.”
Both Ganden and Tehranchian warn employers not to take short-term marketing discounts at face value.
“By the time all the associated costs and time are factored in the actual savings from discounted premiums can be negligible,” says Ganden.
Tehranchian says too much focus on the bottom line can have long-term implications.
“One of the caveats to watch out for is that some carriers really lowball when they want to get new business,” she says. “If the quote is considerably lower than the going market rate, there’s a good chance you’ll see a big jump in premiums the following year.”
Unusually low quotes, she adds, are often too good to be true.
One of the biggest barriers to changing carriers is the cumbersome process of doing it. There’s copious amount of paperwork to be done and if there’s medical underwriting involved, some of the employees may not qualify for portions of the coverage.
“The bigger the company, the more difficult it is to get everybody onboard and get the paperwork done,” says Tehranchian. “Depending on the structure of the plan, some underwriting might be needed, and that could cause some problems.”
Brian Ganden, associate, Granville West Group, in Vancouver, says the process can be quite time consuming. “Especially, when there are possible changes to the coverage, there’s increased time spent on administration, reenrolling members and on communication around the change.”
Then there’s always the potential for errors in the enrollment; gaps in information or transferring benefits improperly can cause disruption.
“Errors often occur when [employers] don’t disclose certain facts inadvertently or there’s error in paperwork that could cause a lot of back and forth,” says Tehranchian.
Another reason why companies consider changing carriers is because renewals get skewed when large claims are made by one or two people in the group.
“They think by going to a new carrier they can solve that problem,” says Tehranchian. “But it’s not that easy; every new carrier will want to look at their claims experience, they will assess the situation and use the same criteria to decide on the rates that the existing company would have.”
Some benefit plans offer extended rate guarantees for a period of two years. This provides some cost certainty, but these guarantees are typically offered only on the less rate-sensitive benefits such as life insurance and long-term disability, says Ganden.
Finally, changing carrier means forming a new relationship with the provider.
“The value of good relationships [becomes even more] evident while handling a difficult administration situation or a challenging claim need,” says Ganden.