Employee benefits are an important topic for many small business owners and managers. In the first installment of an ongoing series, I speak with benefits specialist Rachel von Sturmer, Principal at True Benefits Financial, about employee benefits best practices, trends and challenges.
Challenges.
Q: What are some of the challenges small businesses face when it comes to providing benefits to their employees?
A: "The most common challenges are in setting up the plan, cost, and administration. It’s best to work with a broker who can provide a comparison of quotes from several insurers; that way a small business owner can see where they can get the best plan possible for their budget.
Employers also have questions about what their obligations are after their plan has been set up. I’d recommend using the online management portals now provided by most carriers. This will help save time in managing the monthly invoices, downloading forms, and updating employee enrollment information.
Benefit plans renew each year, at which time the insurer has the opportunity to adjust their rates. This can be a challenge for employers if the plan utilization has been very high, and rates are raised. It’s their advisor’s job to negotiate rates on their behalf, and also to design the plan in a way that will help prevent large rate increases."
Strategies.
Q: What are some benefit strategies small businesses can use to compete with larger companies?
A: "Small businesses don’t always have the deep pockets that large companies do, but they are often able to be more flexible and offer employees a greater variety of hands-on experience.
Some suggestions for becoming more attractive to employees:
* Offer flexible work hours, such as 9-5/10-6, or a 4 day X 10 schedule.
* Covering a portion of work related education.
* A good benefits plan, which is often more affordable than expected.
* Health Spending Accounts that allow employees to cover medical and dental expenses at their discretion".
Trends.
Q: What are some new trends within the benefit industry?
A: "Critical Illness insurance, where if an employee is diagnosed with a covered condition they receive a tax-free lump sum benefit. This is newly available as a group benefit and many small employers are able to offer $10,000 or more at a very reasonable rate.
Health Spending Accounts are becoming incredibly popular, especially as a management benefit or recruiting tool. This benefit is like a bank account for medical and dental expenses for employees. For example, an employer may offer $1,000 a year for each employee to use at their discretion.
Health and wellness has become a major focus also. Insurers have built some very sophisticated online tools for employees. They can perform a health test, or check medication information at a secure personal site.
Employee Assistance Plans (EAPs) are often bundled into benefits plans, and are great for small employers who don’t have a dedicated HR department. EAPs provide confidential 24 hour access for employees who need help with everything from financial counseling to finding a babysitter."
Selecting a Benefits Provider.
Q: What should small business owners look for in a benefit provider? Are there any pitfalls to watch out for?
A: "Most employers are very interested in the initial rates that they’re quoted and will want to make a decision based on the cost. This is only one aspect of choosing an insurance carrier. I’d be wary of switching carriers only to save 5%, when it’s likely that this cost will be recouped by the insurer at the next renewal.
Business owners should be comfortable that the insurer is reputable, can adjudicate claims quickly, and offer solid administration.
Small business owners should be aware of the Target Loss Ratio. TLR is the break-even point set by the insurer for your plan, and at your renewal time they will be important in determining next year’s rates. The TLR is a ratio of premiums paid to claims paid, and for a small plan different insurers’ TLRs can range from approximately 67-75%.
Also important to look at is the plan design. Although the general description of coverage may look the same from one plan to the next, each insurer has specific clauses that will impact what can be claimed. For example, some carriers will require a minimum of five employees before they offer coverage for dental crowns. Be very clear with your advisor about what you want to cover before setting up your plan, or switching carriers!"
Advisor Services and Fees.
Q: How are benefits brokers compensated?
A: "There are two models: fee-based and commission-based. The majority of advisors are commission-based, in which they’re paid a small percentage of premiums by the insurer; this cost is built into a client’s costs. Fee-based advisors are usually consulting firms that deal with larger client accounts."
What services should you expect from your benefits advisor?
"Your small business should expect the following primary services:
* Marketing your plan to a variety of carriers and comparing the quotes for you.
* Assisting with setting up the plan and online administration.
* Negotiating the plan’s renewal rates on your behalf each year, and presenting a report 30 days before the renewal date.
Some “above and beyond” services to look for are:
* Training your plan administrator.
* Offering assistance with any difficulties that may arise during the year.
* Being in touch to let you know how the plan is running.
* Setting up employee satisfaction surveys.
* Benchmarking your plan against competitors’.
* Providing customized benefits promotion materials.
* Employee seminars and learning sessions".
Small Business Interview Series Employee Benefits - To learn more about this author, visit Mark Smiciklas's Website.
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