This site explains how to avoid three common dangers small business owners face that keep them wasting time, energy and money on benefits that are irrelevant to employees.
The outcome will be an affordable employee benefit plan at a lower sustainable cost while improving the health, dental and insurance coverage for your staff.
The first common danger that most small business owners face is wasting time, energy and money on benefits that are irrelevant to employees.
A benefit that an employee neither wants nor appreciates it is irrelevant.
For example, an employee without dependents would not need dependent life insurance and few people appreciate the value of long-term disability insurance until someone they know needs it.
It’s important to understand what employee think and feel about benefits so that you can detect miscommunication and gaps in coverage.
For example, feedback indicating resentment over employee contributions to your retirement plan would signal a problem.
Benefits that employees appreciate can be protected, promoted and enhanced while those that employees don’t appreciate could be clarified, redesigned or discontinued.
The second mistake that small business owners make is wasting time, energy and money by not sharing the risk of claims to an optimum degree.
Sharing the risk of claims is structuring your benefit plan in such a way that other stakeholders reduce the amount that would otherwise be paid from your plan.
For example, with a Supplemental Unemployment Benefit (SUB) plan you can simply top-up the government’s payment (55% of earnings up to $501 per week) to disabled employees which would dramatically reduce the amount of your short-term disability insurance claim payments.
Sharing the risk of claims allows you to maximize the impact of your benefit plan by first utilizing other resources.
For example, drug claims can be shared with multiple parties. Employees can share the cost of an excessive dispensing fee when they shop at a pharmacy that charges a fee that is higher than what is customary for that geographical area. Ontario’s Special Drugs Program can cover the cost of certain outpatient drugs used to treat a number of serious conditions.
The goal is to strike the right balance of risk sharing to maximize value. Too much risk sharing undermines the perceived value of your benefit plan. Too little risk sharing increases benefit costs.
The third common danger that most small business owners face is wasting time, energy and money by not managing their benefit suppliers.
Managing benefit suppliers means arranging contracts for exactly what you want at the lowest sustainable cost.
Insurance companies often bundle their most profitable products with their most popular ones.
For example, if you want to buy disability insurance for your employees, some insurance companies make you buy life insurance. Or when you buy life insurance you also end up with accidental death and dismemberment without even wanting it.
Another tactic that insurance companies do is provide a low price for the first year and then increase rates in the second and third year beyond what you would have paid if you had not switched suppliers. This is known as The Benefit Shopping Trap™.
Letting your benefit supplier force you to buy products you don’t want is a waste of your employee benefit budget and changing benefit suppliers undermines the stability of your benefit plan in the eyes of your employees.