Managing an SME group insurance plan so that it meets employees’ needs without incurring excessive costs is not an easy exercise. Group Insurance Traps to Avoid as an SME is a series of articles to help you master this process.
Trap to avoid: Not educating employees
When implementing a group insurance program in your company, communication with employees is paramount. Both the employer and employees have a shared interest in keeping premiums low. Raising awareness and educating employees can be beneficial to your program’s health.
Knowing how to do it is the challenge.
Jean Paul Albert, author and lecturer at Université Laval
Audrey Girard-Lachapelle, Group Insurance Advisor
Sébastien Lussier, Director of Créations Jade
Nathalie Marcoux, Benefits Advisor
Why is it important to inform employees?
JPA: One of the challenges for group insurance program managers is to convey both the overview and the details of the group insurance plan to the staff. The collective interest in controlling costs, especially in the context of an SME, is a salient point.
SL: When we recently switched insurers, our brokers from the Chambers of Commerce Group Insurance Plan made a presentation to employees. Among other things, they brought to our attention that we all have a role to play in managing our premiums and that our individual behaviour has an impact on the group.
The increase in drug costs in the last two decades is a major social issue. Individually, we can feel powerless against this phenomenon. How can employees contribute to cost reduction?
AGL: When we influence the cost of drugs, we influence the overall cost of the company's premium. In general, 75% of total medical claims are related to drug costs.
NM: When we meet employees to present the Chambers of Commerce Group Insurance Plan, they are often surprised to learn that drugs are not sold at the same price everywhere. The difference from one pharmacy to another can be surprising, due in part to pharmacist fees.
So we recommend that they:
- Compare drug prices between pharmacies. Prices can also vary within the same chain.
- Ask for the generic equivalent to the brand name drug when it is available. Some pharmacists will suggest it right away to offer the best possible price. Otherwise, do not hesitate to ask for it.
Did you know?
The act on prescription drugs stipulates that the cost of generics may not represent more than 25% of the cost of the brand name drug, therefore this can generate significant savings for both the insured employees and the company.
Let’s take as an example a brand name drug costing $100 and its generic equivalent at $25.
If it is reimbursed at 80%, that’s a direct savings of $60 for a single prescription:
Brand name drug $100 = $80 for insurer + 20$ for employee
Generic drug $25 = $20 for insurer + 5$ for employee
Savings = $60 for insurer + 15$ for employee
The employee pays less out of pocket.
The company adds a $20, rather than $80, claim to its history, which will positively influence its renewal.
Imagine thirty employees taking medication monthly. All together, it adds up to thousands of dollars in annual savings.
AGL: There are also postal pharmacies to consider. Drugs are delivered to the home directly by post and result in savings. The employee wins since there are fewer out of pocket expenses at the pharmacy, and as a result, the insurer pays less for these drugs, so there are fewer claims. These savings help to reduce group insurance costs.
What about the use of services covered?
AGL: One aspect that is sometimes overlooked but can contribute to lowering the premium is the real needs of employees. When analyzing the claims report, it may come as a surprise to see that you are paying for services that are rarely or never used. For example, the amount allocated for paramedical care (massage therapy, osteopathy, chiropractic, etc.) may be reduced or modified for flexible plans, such as a health management account.
SL: We found that once employees became aware of their use of this care, they made fewer claims during the year, which even contributed to lowering our premiums when we renewed.