Your SME has purchased a group insurance plan. Every time you renew it, do you wonder if it is the most cost-effective option for your company? Here are the main financial aspects you need to understand to make an informed decision. These aspects have been identified with the help of Yann Ahouansou, Agent, Chambers of Commerce Group Insurance Plan at the Chamber, and Audrey Girard-Lachapelle, group insurance consultant.
Understanding the key terms in your group insurance contract
If the expression “financial factors” means nothing to you, you should definitely take a few moments to find out what they are because these factors will partly determine your annual costs. Financial factors are divided into two categories:
- Everything related to “premiums”, which means what you pay your insurance provider for the plan. This amount is shared between the employer and the employee (it is up to you to determine the percentage paid by each party). This includes administration, out-of-country, and mutualization fees
Administration fees. Do you know what percentage these amount to? These fees are calculated in line with the number of employees and the premium volume of your plan as well as the consultant’s commission. For instance, did you know that with the Chambers of Commerce Group Insurance Plan (CCGIP) the administration fees amount to 17.8% starting at 10 employees (versus 28-30% for other insurance providers)?
Out-of-country fee. This fee is to provide protection against high claims that occur in travel insurance. It deducts the full amount of the claim for travel insurance at renewal. Your renewal will not be affected by this claim. In fact, at your renewal, the out-of-country fee represents about 3.5% to 6% of the health care premium. With the CCGIP, you will not be charged for this protection at renewal.
Mutualization fee. The Act respecting prescription drug insurance makes it mandatory for insurance providers to integrate stop loss into every contract. The Quebec Drug Insurance Pooling Corporation (QDIPC) is in charge of managing this aspect. The prescription drug mutualization fee exists to protect your plan against costly drug claims that could occur. The cost associated with the mutualization depends on the number of insured individuals in your plan and could represent as much as 13% of your premium. The CCGIP is exempt from this mutualization fee because it has its own mutualization coverage, with no extra cost to you at renewal.
- Everything related to “claims”, including paid claims, the amount of reserves, and inflation.
Claims paid. These are your employees’ requests for reimbursement of medical and dental fees. This has a direct impact on the premiums you will have to pay.
Reserves. This is an amount that provides a contingency fund for the insurance provider. The reserve usually represents about 1.25 times the monthly premium and is determined during the first year. It is adjusted with each subsequent renewal and is the amount used by the insurance provider to pay claims made by insured individuals before the end of the plan and paid out in the three months following the end of the contract. The CCGIP does not charge reserve fees at renewal.
Inflation. This is the fee incurred during renewal to adjust the claims to the insurance provider’s inflation factor. In health care, the annual inflation factor can vary from 9.8% to 14.1% depending on the insurance provider. The CCGIP does not charge inflation at renewal.
Your goal? To find a plan that will guarantee a stability of premiums.
Find these terms in your contract
All this information can obviously be found in your renewal… but do you understand its significance and the impact it can have on your costs? If the financial factors are high, less money will be available for claims and the higher the increase will be at renewal. Furthermore, these factors are not always easily identified in the analysis of your renewal. For instance, when you see “target loss ratio of 70%” you need to understand that the administration fees will represent 30%.
Thankfully, when it comes to group insurance, you always deal with a consultant. You’ll be able to ask them to specify the amounts you will need to pay for each financial factor.
Adjust your plan to your employees’ needs
Do the benefits of your plan always meet your employees’ needs? It is a good idea to analyze your history and determine the claims paid over a period of at least two years. For instance, if your plan includes an amount that covers paramedical care (osteopathy, chiropractic treatments…), do you know if your employees really use these amounts? If they do not, you could modify this coverage to lower the amounts paid by your teams. In the same vein, does your plan cover 80%, 75%, 70% of expenses? If you adjust your plan in line with your employees’ real needs, you could offer more coverage, coverages that are requested by your staff, or you could offer a narrower range of coverages, but coverages that truly meet their needs.
Compare your options and make an informed decision… at any time!
Unsure about your coverage? Don’t hesitate to get a second opinion – it’s free. You’ll then be sure that you have everything you need to choose the coverage that is best for your company.
In brief, traditional plans (“fully covered”) rely on five financial factors at renewal. If you are an SME with ten employees or more, keep in mind that four of these factors (out-of-country, mutualization, reserve, inflation fees) – are not charged by the CCGIP, allowing you to ensure the financial stability of your group insurance.
Finally, you don’t need to wait until your contract is up for renewal to weigh your options. Even if most organizations adhere to this timetable, know that you can change your insurance provider at any time, without any penalty. The renewal date is simply used to determine which rates will apply during the contract, usually over the next 12 months.