Why Have Normal Benefits When Times Aren’t Normal?

This past year our lives have undergone extraordinary change, thanks to the COVID-19 pandemic that has shaken the globe. As a result, the world of healthcare has changed drastically, with this global health crisis flooding emergency rooms and standard medical consultations taking place virtually rather than in-office. These changes have affected how people use their benefit plans.

An employee benefit plan is essentially a promise between an employer and a group of employees. Considering the unprecedented state of the world in this past year, how have benefits been adapted? Has the COVID-19 pandemic affected the world of employee benefit plans? Should it? What can you do as an advisor to look out for your clients and your prospects, and capitalize on this unusual situation?

What’s Happened So Far?

Since March 16, 2020, the province of Ontario has been in and out of various levels of restrictions that have affected our businesses, personal lives, healthcare practices, and finances. With much of the past year having been spent in a state of province-wide shut down, insurance claims have been significantly reduced.

The majority of large businesses follow an Administrative Services Only (ASO) plan. Under these restrictions people have been unable to visit their doctors, dentists, physiotherapists, and any other non-essential healthcare service. By extension, insurance companies have been receiving significantly fewer claims, approximately 50% of the standard pre-covid reports. This means that corporations have been able to contribute 50% less to their employee benefits plans, without breaking their original promise.

For small and mid-sized employers, however, traditional benefit plans have not been working well in these extenuating circumstances. The plan sponsor often has little to no control over the costs, and many small businesses have experienced a reduced cash flow. This has created a great deal of strain amidst a period of uncertainty, as employers have still had to pay full premiums for employee benefits plans. Sure, insurance companies have provided premium credits for small businesses, but these credits came too late and left too soon, leaving small business owners struggling. Despite claim levels having decreased significantly, clients are still paying their full premiums.

What Can You Do as an Advisor to Help Your Clients?

It’s important to understand how human behaviours are shifting and what this means for your clients. For example, with the limitation of in-person healthcare services telehealth usage has increased by 5600%. Take the time to have conversations with your clients and prospects about these changes. Start by asking two questions to gauge how they’re feeling about the situation, and what their goals are:

  1. How do you feel about how your insurance company treated you during the pandemic?
  2. If we were meeting here three years from today, what has to have happened for you to say that this has been the best three years of your life?

These questions will help you to understand your clients’ and prospects’ wants and needs, both now and in the future. The first question brings to light the drastic changes that we’ve undergone in the past year and puts these changes at the forefront of your client’s minds. It works to create eye-opening conversations about why costs have remained high while claims have reduced, and it steers the conversation toward addressing these problems.

The second question provides you with a road map of where your client or prospect is headed with their business. With this information you have all you need to ensure that you’re adding value to their plan and helping to find the right funding model that will work for them.

The ASO Funding Model

An employee benefit promise consists of two aspects: insurance, and bill paying. Insurance is there to protect against catastrophic, sudden, and unexpected events. This is the high cost, low frequency part of the promise. The bill payments, however, are low cost and high frequency. We’re talking about standard health care, medication, dental claims, and the like – and these claims require administrative services.

At The Benefits Trust, we recommend an ASO funding model in which the employer assumes the cost of predictable claims while being protected by pooled stop-loss insurance. Catastrophic risk elements of the benefits plans (like life insurance, A.D. & D., and long-term disability) remain insured in a traditional, fully insured pool.

We believe an ASO model is better for employee benefits since we still don’t know where we’ll be when this pandemic is all said and done, nor how human behaviour will continue to change. ASO plans have historically only been accessible to large businesses due to the administrative and computing resources required. However, with the emergence of third-party administrators like The Benefits Trust, ASO plans are now feasible options for smaller employers.

An ASO plan allows clients to take responsibility for the claims they do have, while minimizing risk. It’s a way to deliver a high cost, low frequency promise, while also providing the administration services for low cost, high frequency claims.

Now’s the Time

A time of substantial change is the ideal time to speak to businesses about their employee benefits. In speaking with many businesses over the past year, we’ve noticed that a significant amount have had little to no communication with their advisors, despite the drastic changes that have taken place. Clients and prospects are looking through a new lens, and this creates opportunities for motivated advisors.

Contact your prospects and have a frank discussion about where they are, what they’re lacking, and the direction that they’d like to go in moving forward so that you can add true value. By having these discussions before anyone else, you’re putting yourself in a phenomenal position and capitalizing on the changes prompted by this complex situation.

Tune into a recording of a webinar in which Rob Crowder, founder and President of The Benefits Trust, discusses why benefits should change in these times of uncertainty.

Contact The Benefits Trust today to learn more about how you can approach these value-rich conversations with your clients and prospects, and about how you can utilize this time of change to improve service and customer satisfaction.

Robert Crowder
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