Benefits are often times more critical and of greater importance to employees than wages and salaries. It doesn’t really matter how many benefits you offer; it’s the value of the benefits you offer your employees that makes all the difference.
To offer really outstanding benefits, you need an advisor, agent or insurance consultant that not only understands group insurance, but also understands the needs of employees and takes the time to ensure the benefits you offer are in line with your employee demographic and budget. All too often, agents are driven by one insurer and the products they offer, or by the commission structure of product they’re pitching, not in the best interest of their client.
Dental insurance can be of considerable value to employees. A good plan will be utilized and appreciated. This past week I met with a business who, in a previous plan year had a great dental plan that employees were satisfied with. At renewal, another agent stepped in and offered a lower priced plan that he assured the company was comparable in benefits. The old plan covered cleanings two times per year at 100%, paid for other services at 60% and had an annual cap on ortho at $2000. This plan had no deductible and was voluntary, meaning the employees paid 100% of the $18.90 weekly premium. At renewal, the weekly premium increased to $22.68, or 23%. This increase was substantial. But this is a case of where doing the math and having the right agent or insurance consultant is critically important.
The plan that the new agent proposed was still an increase over the previous plan, coming in at $19.25 per week in employee premium for a family plan. However, the agent skimmed over that this plan didn’t offer any area network so all services were covered at the out of network pricing, which also meant the if dentist did accept the insurance he or she could also balance bill. Balance billing is when the insurance pays at usual and customary rates, but it doesn’t cover the entire charge by the provider so he or she bills the difference to the insured.
The HR Manager felt $19.25 per week for the family dental plan would go over much smoother than staying with the same benefits at the increased price of $22.68. When told the plan was comparable, the employees were happy not to have such a big increase but the same coverage. But with a trip the dentist, employees learned the plan didn’t offer the same coverage. With the new plan routine cleanings were limited to once per year only paid at 50% and subject to balance billing. Ortho was limited to $1000 per calendar year, and all services other than cleanings carried $100 deductible and then paid at 50% The HR Manager not only lost credibility but also had angry employees at his door constantly…not a good situation for anyone.
The Math looks like this:
No Dental Insurance:
Cost of 2 cleanings per year for 4 family members with average cleaning cost of $164 = $1312
Cost of child needing ortho $4000 (average cost of treatment)
Annual Dental Cost for Employee (No Insurance) $5312 annually or $102.15 per week
Plan A (Original Plan)
New Weekly Premium: $22.68 x 52 (pay periods) = $1179.36
Cost of 2 cleanings per year x4 (typical family) = $0
Cost of child needing Ortho = $2000 (Insurance paid flat $2000)
Plan A Dental Out of Pocket costs for a family plan: $3179.36 or $61.14 per week
Plan B (New Plan)
New Weekly Premium: $19.25 = $1001
Cost of 1 cleaning per year x 4 (family) paid at 50% $328
Cost of additional cleaning (not covered by insurance) $656
Cost of Child needing Ortho = $2900 (insurance paid flat $1000)
Plan B Dental Out of Pocket costs for a family Plan: $4885or $93.43 per week
When working out the math, it’s easy to see the new plan is cheaper in weekly premium, but overall much more expense due to the limited benefits. It is cheaper for an employee to not carry dental than to take the new plan if they don’t need the ortho benefits. When offering benefits it is important that the benefit is of value. Offering benefits with minimal or no value does more damage to management credibility and employee morale then offering none.
When selecting benefits, do your homework. Understand how your agent/broker/ or consultant is being paid. Be wary of an insurance company you haven’t heard of; ask who else they insure in the area and speak with those companies. Ask for provider directories before enrolling your group. And most importantly ensure that your agent or consultant is thoroughly knowledgeable about the ins and outs of employee benefits and plan design and if you don’t understand the coverage, get further clarification, or move on to another agent or consultant that will take the time to do the math and ensure you understand the benefits you are offering or propose to offer your employees.