What's key to creating balanced benefit plans?

What's key to creating balanced benefit plans? | Insurance Business Canada

What's key to creating balanced benefit plans?

Much like people, every company has a different personality and - whether it’s a plan design issue or from a cost perspective - one solution is not the answer for all when it comes to creating employee benefit plans, said John Cochrane, president at JDIMI Consulting Navacord.

“When consulting for clients, there’s a significant variety of cultural differences and objectives between companies,” Cochrane said. “Most brokers understand the plan design and funding alternatives available, however, they fail to truly understand the client.”

To differentiate themselves, brokers should go above and beyond cookie cutter questions and take a deep dive into the culture of each company, which starts by determining how benefits are viewed. Many brokers are price-driven and automatically treat it as an expense, although a great number of companies see their benefit plan as an investment in their employees - but it’s not all one or the other, Cochrane noted. The most complicated component is educating clients “so they understand what they have, from an HR department to an executive committee, in order to determine what percentage is expense, what percentage is investment and what is even affordable.”

The budget topic is more challenging than a straight answer, and brokers should be asking their clients key questions before making any recommendations. Is their ideal plan financially driven or ROI driven? Does it need to be competitive, and if so, how competitive? What role does the company want to play in providing benefits — are they just a facilitator or do they want to be the provider? Is the culture of employees that of entitlement, or is it seen as a benefit for employees? Do they need to be innovating? Leading or following? Does that align with their own mission statement for their particular clientele?

“Without having a cultural assessment or a client objectives research component to identify the client’s mentality towards benefits, brokers won’t know what the budget is going to entail and they’re certainly not going to come to the right result,” Cochrane said. “Plan design inclusions and exclusions drive cost, and the next step is developing a hierarchy of benefits in line with which are most important to the organization.”

When looking at funding options — ASO, retention, or a fully insured contract — brokers tend to focus on historical risk assessments rather than projected risk assessments from a financial perspective, and the same goes for claims experience. When determining whether or not to go from a fully insured product to an ASO or a refund arrangement, they “are generally reactive after claims experience in programs, rather than preparing clients for what that increase will be before they make the decision to change their financial arrangement,” Cochrane said.

The impact of the COVID-19 pandemic has provided another opportunity for brokers to be proactive by working with clients to prepare for what many in the industry are calling the second pandemic: a mental health crisis. While there’s been an overall increase in mental health issues over the past few years, COVID served as an accelerant that’s prompted the rapid rise of anxiety and social disorders.

Just as employers were scrambling in March 2020 to get everybody working from home as quickly as possible, “we’ve seen significant investment from the majority of our clients in addressing the difficulty that employees have with obtaining mental health support,” Cochrane said. They’re working to get ahead of the second pandemic by rebalancing historical plan designs that are heavily weighted in physical health, and addressing what he calls “the three pillars” of support: maximizing access, minimizing cost and limiting exposure to stigma. Brokers are playing a key role in helping clients increase this segment of their plans and prepare for the corresponding cost over the next three to five years.  

“Gaps in terms of coverage for mental health have been highlighted over the last year and a half,” Cochrane said. “If there’s a positive from the pandemic, it’s that it identified weaknesses - whether it be in company processes, in technology or in the employee benefits world.”