There was a time as benefits consultants where we mostly dealt with management from the Human Resources area of a company. This has changed. We are now often seeing CFOs at the table. Benefits costs are becoming a bigger slice of the pie, bigger line item in the budget, part of the strategic discussions of an organization at the C-level. There are also significant risk management issues that should be addressed. My top 5 tips today speaks to these risk management issues.
- Conduct a full review, with your consultant and insurer, of the stop loss protection under your benefits plan. Stop loss protection, also known as pooling, is protection against high, unexpected claims. Claims above a predetermined pooling limit do not impact your experience (read: your costs) of your plan. The most common example of stop loss is under health plans. Claims up to, let’s say, $25,000 per person per year, would be charged against your plan. Anything above $25,000 would be charged against the insurer’s pool. Other examples of stop loss include durational pooling on long term disability and aggregate stop loss.
- The highest cost areas of most benefit plan are disability claims and drug claims. A full review of what you are offering to your employees and the risks associated with these offerings should be done every 3 to 5 years. We are now seeing drug claims per person per year, for maintenance drugs, in the amount of $25,000, $50,000 and even $200,000. Most employees claim less than $5,000 on average.
- Review the funding mechanism of your plans regularly. How is your plan funded? Are you fully insured, refund accounted, self-insured? How healthy are the financials under your plan? What is your risk exposure? What is your risk tolerance?
- Consider the risk exposure when administering an employee benefits plan. Is the person responsible for this in-house trained well? Are there peer review policies in place to ensure proper administration? Are your processes defined? Insurance companies have very tight contracts that protect them against errors made in administration at the employer level. There are ways to minimize this exposure.
- Review if your organization’s practices and plans are in-line with the Human Rights Code, Employment Standards Acts and the Income Tax Act.