“Why my Employee Benefits rates are going up every year”
It is a common question from employers that “why our Employee Benefits rates are going up every year”.
Like every business, insurance companies are in business to make money. Every year they look at the premium paid and benefits used and adjust the rates accordingly. Theoretically if the usage is higher than their Target Loss ratios then they will increase rates and vice versa.
Target Loss Ratios are the insurance companies projected profit point of the extended health and dental benefits of your employee benefits plan. Any amount in excess of the TLR will result in the insurance company losing money and you can expect another premium increase at your annual renewal
It is not as simple as just looking at the TLR and adjusts the rates. There is a complex formula that includes Credibility and Trend factor. In nutshell even if your company TLR, let’s say, is 70%, it doesn’t necessarily means that you rates will go down if you use less than 70%. It can and most likely will go up even if your employees used less than 70% of paid premium
SO WHAT DO I DO TO KEEP MY RATES STABLE
There are few ways to manage your rates.
- Offer pooled plans for smaller companies – less than 10 employees
- Start with 80% coverage initially instead of 100% and check the claims experience at renewal.
- Some insurance companies can lock in rates for more than 2 years. It helps stabilize rates and usage.
- Negotiate with the insurance company at renewal. Don’t accept the increase as it is.
Please call us if you like us to review your plan
SAYS Benefits Consulting Ltd