Today, many public sector organizations such as schools, cities, and counties offer voluntary worksite benefits like accident, hospital indemnity, critical illness, cancer, etc. Employees highly value these benefits, especially given most employers have transitioned to high deductible health plans.
We urge you to be careful when changing carriers – there are situations where a change may cause unintended effects on your employees or your organization. Here are a few things to consider before changing worksite carriers:
Your Employees May Lose Coverage
What to look for: When a new worksite carrier is brought into an organization, it is customary to offer your employees the option to keep their current coverage if they so choose. If they recommend terminating all coverage with prior carriers - beware!
Example: Let’s say your employee, Abby, elected cancer coverage under the current carrier. Odds are that Abby has some cancer risk factors such as a family history of the disease. If you terminate coverage with all prior carriers, Abby may have to submit to medical questions and risk being denied coverage with the new carrier.
What to do: The safest thing to do is ask that employees have the choice to continue their coverage with prior carriers. If the carrier refuses, you may want to reconsider moving to that carrier. If you still choose to move forward, at least check eligibility requirements. Will employees currently enrolled need to go through medical underwriting again? What if an employee doesn’t meet the new eligibility requirements?
Your Employees May Be Paying More
What to look for: Some carriers, such as American Fidelity and Madison National Life, base their rates on pools of similar organizations. Pooling with similar low-risk groups spreads the risk and keeps rates low and stable. If your carrier is not pooling rates with other organizations like yours, that means risks may be higher and rates may not be as stable.
Example: If your rates are pooled with employees from other industries such as the beauty industry, mining, or other higher-health-risk groups, the rates will be higher.
What to do: Ask the carrier if they pool your rate with other groups in your education, governmental or public sector. If they don’t, it may not be worth the risk.
Your Employees May Buy Coverage They Don’t Need
What to look for: The whole point of worksite benefits is to provide supplemental coverage for employees that may need it. However, many worksite benefit carriers sell one-size-fits-all plans that are not customized to your particular benefit plan. If the plans cannot be modified, your employees could be pressured to buy insurance products they simply don’t need.
Example: Your long-term disability plan has a 30-day elimination period (time period after an injury or illness occurs but before benefits begin). It would make sense to offer a 30-day short-term disability plan to cover employees during the elimination period. However, if all the carrier offers is a 90-day short term plan, then the employee is purchasing coverage that they do not need.
What to do: Make sure your carrier has experience working with public sector plan designs. Schools, cities, and counties tend to have non-standard benefit designs and almost always require some level of customization. Here’s a good way of looking at it: If you were in the market for a wedding cake, would you contact a baker who specializes in wedding cakes or would you gamble with the baker who specializes in breads and sometimes makes wedding cakes? Odds are, the wedding cake baker will be easier to work with and will have a deep understanding of your goals and desired outcome. Knowledge and experience always matter.
Your Organization May Lose Free or Low-Cost Services
What to look for: It is common for insurance carriers to bundle products to help employers save. They may offer a free service or product just for working with them.
Example: Some voluntary worksite benefits carriers, such as American Fidelity, will manage your Section 125 Plan and FSA Administration for free, including debit cards, plan amendments, and funding initial balances. American Fidelity also offers risk insurance. Your organization could be at financial risk if employees leave before the plan year ends. To mitigate this risk, they offer protection to cover the risk associated with required upfront reimbursement.
What to do: If you are considering a carrier change, find out if your current carrier is offering any valuable incentives that will complicate the move. Will the new carrier also provide these services free of charge? What are you currently paying and what do you receive for these services? It may be helpful to make a list of the services offered from each carrier and put a dollar figure on them.
Your Employees May Feel Pressured
What to look for: No one likes high sales pressure to get you to buy something you don’t need or something you can’t quite afford. And you certainly don’t want to inflict this upon your employees. You want to work with a company that cares about you. It shouldn’t be all about making commissions, meeting quotas, or making sales.
What to do: Are the representatives who will be sitting down with your employees commissioned sales people with no base income? Are they contracted employees or company employees? Do they need to meet certain quotas? How much training do they receive? Do they drive their own cars or company cars? Answers to these questions will help you determine if you are sending your employees into a high-pressure environment or not. The bottom line is you should avoid reps who are contractors being paid straight commission. Look for those that are employees who have a base salary and don’t have strict quotas.
National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.
