For example, let’s look at light bulbs.  You can buy an incandescent 75-kilowatt light bulb (old style, traditional globe light bulb) for $1.00 at most home improvement retailers.  You can also buy a 23-kilowatt compact florescent light bulb (new style) for $6.00 at the same home improvement retailers.  When you consider all the factors that go into the true cost of each light bulb, such as the cost of energy and how long each bulb lasts, the more expensive compact florescent light bulb will actually save you money after about 1.37 years or 17 months.  (See Link)

The least expensive product isn’t always the most affordable one when you consider the big picture; and the same can be said about group benefits.

Same Old Script

Anyone who is responsible for managing a group benefits plan likely receives calls on a weekly, if not daily, basis from group benefits brokers, asking them if they can shop their benefits plan.  The promise is that if you allow them to conduct this service, they will provide savings.

In this process of “Shopping the Market”, a group benefits consultant, broker, or advisor will go out to the insurance market and find a program that provides similar coverage for a lower price.  After a few weeks of work, the group benefits advisor will come back to the company with a spreadsheet full of insurer benefit packages, detailing the coverage and overall prices.  The prices provided are often unsustainable. While the advisor may offer anywhere between 4.5% to 11.5% savings (depending on how much each insurer is willing to discount for new business) the company would see the savings wiped away over time as they are stuck with substantial increases to the benefits costs over the next 2-3 renewals.

The reason for this claw-back is that the insurer not only has to make up its losses from the discounted rate from year one, but also get the company back up to the “right rate” – the rate they should have offered the entire time.  Completing a “Market Shop” is not the best way to buy group benefits, as it has nothing to do with controlling your costs and everything to do with unsustainably lowering your initial price.

The real solution for lowering costs is to review and manage the true factors behind cost increases.  But before I can deliver some potential options, we must look at the factors that contribute towards the cost of a group benefits plan.

What Drives Costs on Group Benefits?

There are numerous aspects that are considered and calculated into each line of benefits in group insurance.  Understanding each item is important if we are going to look for ways to lower costs in a sustainable way.  Here are some of the cost factors that carry the most weight:

• Number of Employees – The number of employees covered by a benefits plan greatly impacts the risk an insurer is taking on.  Let’s pretend we are talking about a company with 100 or more employees.  Insurers know that a group this size will have x% of employees who are very healthy, y% of employees who are really unhealthy, and z% of employees who are somewhere in the middle, based on statistics they carry nationally.  This is optimum for an insurer, as it spreads the risk and premium collection across all employees knowing that the healthy staff help offset the cost of the unhealthy staff.  Claims become very predictable. In a group that is smaller, such as 15 employees, it becomes more difficult for an insurer to forecast future claims.  Therefore, the insurer is forced to charge more based on the higher amount of risk.
• Employment Type – Full-time employees are the safest group for insurers to cover.  Part-time workers, contractors, owner-operators (trucking sector), and other employment situations can be more difficult.  The rationale is that insurers can reasonably predict what a full-time employee will be doing for 40+ hours per week – and after factoring in commute times and other essential activities for daily living, there isn’t a lot of time left for activities that negatively impact one’s health in an unpredictable way.  The other categories of employment have the potential to fill their time with less predictable activities.  Since insurers are risk adverse, they rate non full-time employees as having a higher risk and therefore a higher cost.
• Demographics – Within each population of employees, there are several details an insurer must consider in order to assess the risk.  These considerations include male/female ratios, family sizes, communities in which people live, etc.  This is important because each factor carries its own risks to the insurer.  An example is that men are more likely to become injured from their hobbies than women; and women are statistically more likely to utilize their sick days than men.
• Work Environment – The type of work done by employees is another consideration. Blue-collar workers are more likely to experience injury, while white-collar workers typically experience more stress-related illnesses.  Also, if a job is hazardous with a high incident of illness or injury, rates will be higher compared to a less risky industry.
• Claims Experience – Claims experience is the demonstration of the actual amount of money that the insurer paid out to employees participating in a group benefits plan.  Like I mentioned above, the number of staff covered by the benefits plan will deem how “credible” this claims experience is for predicting future costs.  However, no matter how big the company is, claims experience is always a factor.
• Health and Dental Trends – The trends for health and dental costs are considered so that insurers can predict the level of claims throughout the year, based on the natural increased costs from service providers.  Health and dental care costs are increasing each year, due to a variety of reasons.  Click here for a summary of Canadian health care trends
• Reserve Requirements – Typically, during your first renewal an insurer needs to build in an average of 8% of Extended Healthcare & Dental premium (16% on Extended Healthcare if you utilize paper reimbursement) in order to cover off claims in the event you terminate their services at some future point. This pool of money helps fund any potential claims run off for expenses that were incurred prior to the termination date.  This is an area where a company needs to weigh moving carefully as it can immediately wipe out any of those marketing discounts during the first year with a new carrier. We have developed some unique solutions in reserving that provide a great way of unlocking funds and lowering costs.
• Level of Coverage – If a benefit plan is fairly “rich” – with no deductibles, 100% coverage, and high maximums – the costs of benefits will be high compared to a group that provides less coverage.
• Administration – Included within any group benefit cost will be a charge for administration.  This includes producing and updating booklets, paying claims, writing the contract, managing employee eligibility, producing the billing statements, and other activities.  Depending on the amount of premium paid on an annual basis, a percentage will be applied to cover the cost for the insurer.  A group with a lot of employees will pay less administration than a smaller group, as there are efficiencies developed for larger groups.

How are sustainable cost savings achieved?

The reason I defined the main factors within the cost of a group benefits plan is quite simple: if a broker, consultant, agent, or advisor is saying they can offer you a better price without changing any of the above factors, they are simply offering a temporary discount to land a new client.  This discount won’t last; they know they will have to bring their new client to a potential day of reckoning at the first, second, and third renewals so they can reach the “Right Rate” at later date.  In the big picture, they are providing the new client with a disservice.

My rule of thumb is this: at the end of any given five-year period, all major Canadian group benefit insurers will end up at roughly the same cost.  How they get there may vary, but they will get there. If you’re looking to lower your costs, changing insurers or shopping the market isn’t usually the right solution.

What other options are available for lowering costs?

The real savings magic is done through lowering the cost factors listed above.  This can be done by lowering the actual administration fees (not just a temporary discount) or by setting up systems and tools to help a company lower claims without reducing coverage.  Unless you are changing the factors, the results will always be the same.

It is important to partner up with the right advisor who has experience helping others lower their costs in a sustainable way.  The advisor should have a proven track record of bringing innovative solutions and not running through the same old script.  Some of the following questions may be useful as you search for the right partner:

How many clients do you have?
What is the total of billed premium you manage?
These questions are important.  The more clients and premium one manages, the more influence they will have in customizing a right-fit benefit plan, plus they will be able to negotiate lower admin fees with insurers.  Insurers are always willing to bend a little for advisors who do large volumes with them.

What are your solutions for positively affecting claims without reducing coverage? 
There are a lot of additional services that can be included within a benefit plan for no additional cost to the organization.  Some of these services and programs help lower claims.  Examples include, but are not limited to: third-party disability management services, second-opinion resources, employee and family assistance programs, and complex case management.

What sectors do you specialize in? 
Some industries are more difficult than others when it comes to managing costs, such as health care, transportation, social services, manufacturing, long-term care, municipal, and others.  These sectors are highly commoditized and don’t have a lot of room in their budgets for increases to the benefits plan.  If an advisor has a history of success in some of these tough sectors for a sustained period of time (at least five years), then he or she likely has experience in putting together successful programs that cut costs.

Too many people make the fatal mistake of ignoring the physical symptoms of a heart attack. Stuck in the “it can’t be happening to me” mentality, heart attack victims waste valuable time getting help.

When it comes to the heart, minutes count and regardless of the reason, delaying getting to medical help can have serious consequences. The best advice for surviving a heart attack is to:

1. Recognize the symptoms
2. Call 911
3. Chew an aspirin while waiting for emergency personnel to arrive

Click here to read a very informative article from the Wall Street Journal about heart attacks and the surprising statistics on those who don’t get help in time.

It’s nothing new that obese employees cost employers a lot more than non-obese employees; these costs arise from higher health premiums along with increased absenteeism and presenteeism. Obesity related absenteeism in the USA costs employers $6.4 billion per year!

Non-obese citizens are bearing the costs as well. There are significant costs involved in physically accommodating an obese population, and it’s not possible to recoup these costs from obese people alone. Everyone ends up paying more when buses, trains and airplanes have to increase the size of their seats, and hospitals must replace wall mounted toilets for floor mounted toilets that can bear the weight of obese patients. More fuel is being consumed in cars as well; if passengers weighed what they did in 1960 (instead of what they weigh now), nearly 1 billion gallons of gasoline would be saved every year in the USA!

The implications of an obese population are far-reaching and the costs are overwhelming.

Click here to read more in an eye-opening article on Reuters.com

The results of this study reinforce the importance of providing employees with resources to deal with difficult situations that may be impeding their happiness. Most Employee and Family Assistance programs (EFAPs) offer resources to help employees deal with difficult situations, maintain a positive outlook and reduce stress.

The next time negative thoughts invade your mind, think of your health, and be positive!

Click here to read the full article in The Province.

Researchers believe those who work at least 11 hours a day experience significant stress, which likely contributes to their increased risk of depression. So if overtime becomes a habit for you, think of your mental health (not your pocketbook) and make some changes.

Click here to read an article on Overtime and Depression in the Calgary Herald.

Because of this event, he later asked our organization to help him look into providing an executive level of benefits to support him and other members of the executive team in case they should ever face a similar life event. His goal was simple: he wanted to offer the maximum resources for these members and their families, so they could receive every support mechanism needed for their situation as well as the peace of mind that comes with knowing that everything is being taken care of in a timely manner. Each of the executive members had significant responsibilities and hundreds of people depended on them, so minimizing their stress levels during a potential difficulty was a priority that would enable them to continue to do their jobs effectively.

With these goals in mind we developed a suite of executive level benefits, which I will outline in this article.

First Considerations

The first step in exploring the possibilities around implementing an executive plan is to see what is already in place. Start by reviewing the booklet(s) pertaining to your entire group benefits package. See whether or not the coverage is adequate to protect your executive team against any significant life event. Look for areas where you could top coverage up to 100% (if it isn’t already) and/or where you can reduce deductibles and increase maximums.

The next step is to poll the executive members on where they see the gaps in the coverage. Are the coverages currently meeting their personal protection goals for themselves and their family?

Options for Executive Benefits

Once you have reviewed and improved your existing benefits plan, you are now ready to look at additional options. As you review the following list you may want to consult your executives to see what they think would be the most valuable additions. Keep in mind that the following information is only intended to be a high-level overview of some of the options available; it is not meant to be a comprehensive guide.

1. Health Spending Account (HSA): This group benefits tool allows participants/employers to set aside pre-tax funds to pay the health and dental expenses for owners and staff. With these funds, members can submit any CRA-approved medical expenses to the insurer’s claims adjudicators in order to be paid and reimbursed, converting the costs to a tax-free expense.
2. A Group Registered Retirement Savings Plan (RRSP): A Group Registered Retirement Savings Plan (RRSP) is an employer-sponsored retirement savings plan, similar to an individual RRSP, but administered on a group basis by the employer. Contributions are made by pay-roll deduction, on a pre-tax basis, through a Group RRSP administrator. Executive contributions are often matched by the organization (typically to a maximum of 3-5% of earnings), though contributions by the employer are not mandatory.
   Investment decisions are made by each executive member individually and the options are similar to those available for an individual RRSP.
3. Executive Medicals: A comprehensive Executive Medical & Lifestyle Assessment is a preventive service which includes an examination by a specialized physician, as well as a range of procedures to evaluate cancer and cardiac risk, assess vision, hearing and lung functions, and evaluate lifestyle factors such as exercise, diet, stress, and smoking.
   A multidisciplinary team of healthcare professionals carries out this intensive health analysis over the course of a few hours, while emphasizing courtesy, care, and efficiency.
4. Priority Medical Access: This coverage compliments your current benefits plan with expedited services to get your medical inquiry addressed in a timely manner. Utilizing a vast network of facilities and doctors throughout the United States and Canada, this benefit ensures you are not stuck in a medical wait list. Nothing is worse than waiting for a service you know is available.
5. Disability Top Up Plans: The amount of disability insurance within a typical group benefits plan may not be enough to cover the full income of you or your executive team. Additional coverage may be added to provide a full income replacement benefit.
6. Spousal Disability Benefits: Some executive members may have a stay-at-home spouse who tends to children and runs the day-to-day operation of a family. Benefits can provide an income if the stay-at-home adult is not be able to perform their duties due to disability. Amounts are typically moderate, but help finance the potential services of a nanny or other service provider.
7. Complex Case Management: In time, your executives may face a serious medical condition where they are not satisfied with how the Canadian medical system is handling their case. Complex case management provides a second opinion service by reviewing medical records and treatment plans to ensure all options have been considered. An alternate course of action is sometimes suggested. This benefit supports the executive member in a way that not only provides superior medical advice, but also helps them remain a contributing member of the team.
8. Group Critical Illness (CI): This benefit provides a lump-sum, tax-free, cash payment should the executive member and/or their dependants come down with a serious medical condition such as a life threatening cancer, heart attack, stroke, kidney failure or many other illnesses and diseases. Benefit amounts can vary. The value of implementing this on a group of executives is that current medical evidence and medical family history may not be required as part of the application.
9. Long Term Care (LTC) Insurance: There is a chance that at some point, you and your executive members may need to enter a long term care facility or receive special medical care in your home. This type of care is not inexpensive – and depending on the level of care you may need, the cost most likely won’t be paid by a government health plan. This benefit provides income to pay for such services, and ensures that your executive members will be taken care of long into their retirement.

If I had to pick one option…

If I had to pick the one option that would provide the most value to the most people, it would be a Health Spending Account. A Health Spending Account gives executives the option to spend the funds on whatever medical support services and products they deem to be the most important – and they can even use the money to purchase services for most of the other options available to them. The only restriction is that the expense has to be an eligible expense based on Canada Revenue Agency guidelines.

Implementing the Right Solution

Once you have selected the options that are right for you and your executive team, the final step is to implement coverage with the appropriate insurance carriers or service providers. Your agent, broker, or consultant should be able to source the best programs for you.

If you don’t have a knowledgeable consultant to guide you through this process, or to assist you with your other benefits needs – please connect with me at your convenience. You can email me at michael.kettner@kettnerbenefits.com or visit my website at http://www.kettnerbenefits.com/. I would be honoured to help you work through your options.

The vaccine, which would be delivered as an injection or nasal spray, targets the underlying cause of heart disease: fatty deposits in arteries. It stimulates the body’s immune system to produce antibodies that stop fat build-up in the arteries. A drug trial is currently underway.

Doctors caution that the vaccine would have to be administered long-term in order to be effective. Due to its high cost, only those with an increased risk of heart attack will likely receive it. The best prevention is still to eat healthy and exercise regularly.

Source: Vancouver Sun

New research shows that there may be another reason to limit a common dental service: X-rays. Researchers found that people who have yearly “bitewing” mouth X-rays are between 1.4 and 1.9 times more likely to develop brain tumors, than those who don’t.

Although the instances of brain tumors in people who have yearly X-rays is still low, it may be a good idea to have x-rays taken less often than yearly unless symptoms suggest an X-ray may be beneficial.

Source: Yahoo Canada News 

1. Be a non-smoker.
2. Get regular brisk exercise.
3. Maintain a healthy weight and work to reduce harmful belly fat.
4. Eat a high-fibre, low-fat diet with reduced-fat dairy, lean meat, fatty cold-water fish, legumes, high-quality vegetable oils, whole grains and fresh fruits and vegetables.
5. If you drink alcohol, drink moderately.
6. Keep your blood pressure under control.
7. Make sure your blood cholesterol profile stays in the healthy range.
8. Maintain a healthy blood sugar level.
9. Get plenty of sleep.
10. Learn to manage anger.
11. Reduce chronic stress in your life.
12. Get help for depression.

Keep in mind that this new evidence does not give you license to eat unlimited chocolate. As with most things, moderation is key. When you do decide to indulge in a chocolaty delight, make sure to choose dark chocolate which has higher levels of cocoa and accompanying flavanols.

Click here to read the full article in the Wall Street Journal