Running a small business can come with plenty of challenges, especially when it comes to attracting and retaining key people to help your business flourish. However, these challenges can be reduced by setting up a robust but cost-effective Group Benefits Plan. Some business owners might ask why a Group Benefits plan is important to have, and what could it do to directly help your business?
From providing your employees with quality dental care, to lessening administrative burden, a well thought-out group benefits plan can be a boon that businesses need. Implementing one might seem like a tall task, but you may be surprised at how simple it can be!
The Target Loss Ratio and Why it’s Important
The Target Loss Ratio (sometimes referred to as TLR), is the percentage of the premium collected for the extended health and dental benefits that the insurance company expects to spend providing benefits to your employees. For example, if your TLR is 75% the benefits company is expecting to spend $0.75 of every $1.00 of premium on benefits. Many Advisors completely skip reviewing the TLR but it is important to know how much money your plan has for claims each year or if your plan is funded properly. Higher TLRs are always more desirable.
In our experience a high TLR would be in the 80% to 85% range and a low TLR would be in the 65% to 70% range.
Factors that can affect the Target Loss Ratio are the total premiums collected, the number of members on said benefits plan, the amount of commission your advisor is charging, and the type of industry your business is in.
The Rate Guarantee and Why it’s Important
When we talk group benefits, we’re also talking about rates. The “rate guarantee” is a specific period of time that an insurance company guarantees your rates for. Most group benefits plans renew every 12 months which means your rate guarantee would be for 12 months however, when switching benefits companies you usually get a 16 month rate guarantee or longer if your advisor asks for it, and you are willing to pay an extra 3% to 5% for the longer guarantee period.
Next Topic, the Renewal Rate Cap
Also known as Coverage Rate Capping, a renewal rate cap refers to the percentage the insurance company can increase your rates to if you have poor claims experience. A common rate cap would be called “10 and 10”, this refers to the insurance company not being able to increase the rates more than 10% at your first and second renewal.
These kinds of caps differ depending on the plan and insurance provider you choose. Be sure to read the fine print early on as every rate cap has terms and conditions.
Wait, which is Better, a Longer Rate Guarantee or Renewal Cap?
This depends on the business owner. If the business owner values level premiums for longer periods of time, the longer rate guarantee is the right choice. If the business owner wants to limit potential renewal increases, then renewal caps for multiple years any be the right option.
Adding a longer rate guarantee or a renewal cap to your plan will slightly increase the cost, but in the long run can be very beneficial in the form of stable rates.
Plans vary greatly in cost and typically start around $80.00 per month for a single employee for a basic plan and increases as you add benefits, the industry you are in can also change the price, especially if the work done by your employees is considered risky.
Is a group benefits plan affordable? The answer is yes, they can be very affordable. You can choose to have your company pay the entire premium or you can split up to 50% of the premium with your employees to share the cost of a plan.
The Right Advisor for the Right Plan
Choosing a benefits advisor for your business needs can be tricky. To make it less so look for an advisor that:
- Asks about why you want a group benefits plan
- Actually explores the benefits you are interested in
- Takes time to fully explain the details of the proposed plan
- Is punctual with appointments and communication (emails, texts, phone calls)
- Focuses on other things like your budget rather than just the cost of the plan
- Cares about your employees and business goals
Commission, Commission, Commission
Commission should always be disclosed to you as the amount of commission an advisor is charging effects the price of your plan. At Advantage Pacific Benefits Consultants, our commission is normally between 5% and 10%. In our opinion, if your advisor is hesitant to disclose the commission they are charging, they are probably charging you too much.
Call today for a No Fee No Obligation Quote
All the quotes provided by Advantage Pacific Benefits Consultants are no fee and no obligation, if you don’t like what we are offering you have no obligation to buy our products. Call us today at 778-349-8774 or send an email to [email protected] for your request for quote form.