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Insurance Costs Will Rise – A Good Consultant Can Help

The insurance industry has incurred no shortage of obstacles over the past three years, especially concerning the employee benefits market. COVID-19 and inflation have exerted significant strains on employers’ financial and operational functions while also threatening to accelerate cost increases from the carrier side of the insurance market. In addition to these economic challenges is the evolving role that employee benefits insurance plays for employers; benefits – traditional and new emerging types of benefits – have become an even more significant part of employers’ recruitment and retention efforts. Are benefits consultants and brokers continuing to provide the solutions that employers need?

Rising Costs All-Around

Employee benefits premiums continue to rise at a significant rate. Some employers have multi-year rate guarantees with health insurance carriers which delayed increases during the past few years; however, as carrier contracts renew, that could result in a steeper increase in costs as health insurance carriers look to rebalance premiums based on their financial conditions.
While employers’ insurance costs are rising, so too is employee compensation. To address these financial strains, employee benefits consultants must continue identifying cost-saving methods without removing value from the benefits programs.

Additional Payroll Taxes

Nationally, many states have passed or are looking to pass payroll regulations requiring a payroll tax to cover state-funded long term care (LTC) benefits. Employers have rushed to implement group LTC options to protect their employees from further taxes related to LTC. In light of national economic inflationary pressure, employers are now seeking voluntary benefit LTC solutions to mitigate further payroll taxes for their employees who are already burdened by inflation and for employers who are equally challenged with salary pressures.

The New Enhanced Role of Employee Benefits Insurance

Employee benefits have always included consideration of supporting the recruitment and retention of a qualified, motivated, and productive workforce. However, recent conditions such as “The Great Resignation,” a renewed focus on mental health and self-care, and the compensation desires of the employees have shined a spotlight on the role that employee benefits insurance, and overall benefits programs, play in that recruitment and retention efforts.
Simplified, employees just cost more. Employee pay must stay competitive, and employee benefits must be rich enough to attract new and retain existing employees. Cost savings must come from somewhere for all of this to be sustainable for employers.

Employee Benefits Practice Leader

Strategy and Cost Saving Insurance Solutions

There is no way around the fact that insurance costs are going to continue to rise for the foreseeable future. Historically, insurance consultants have leveraged several solutions to control benefit costs for their clients, such as establishing narrow networks, modifying plan design, or offering high deductible health plans (HDHP). All of these could address the cost control aspect of insurance but risked placing an undue burden on the employee. Benefits programs must ease the overall financial obligations for these employees; by reducing day-to-day expenses for employees related to their health plans, the value of the pay component of their compensation increases.
While those traditional cost control approaches are still valid, other options have a greater return on investment for employees and employers. Once thought of as a solution for only large employers, self-insured programs are now flexible enough to be a viable solution for mid-sized employers. Self-insured programs can also be applied to only part of the overall benefits program through carve-out dental, vision, or prescription programs.

Benefits Insurance Consultants Are Key

The solution for controlling overall employee benefits insurance costs is partnering with an insurance consultant that has access to all available solutions and who is creating a program that addresses the specific needs of the employer and their employees. From network, plan design and alternative funding strategies to identifying valuable discounted new voluntary coverages (e.g., LTC, pet, legal, and commuter coverages, etc.), a professional benefits consultant can help mitigate the fiscal impact that rising insurance costs will have on employers.

Ju Anderson is the Employee Benefits Practice Leader at AP Keenan, with more than 20 years of benefits and management consulting experience. Ju works with clients to create an effective strategy to address the health and welfare benefit needs, including alternative funding strategies, implementation, efficacy, and performance management of benefits programs. Learn more at Keenan.com.

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