FUNDING REVIEWS

Another way to potentially reduce the expense of your benefits program without simply eliminating services is to review how your plan is funded. Most insurance contracts are ‘non-refund accounting’ which means the insurer does not refund any premium surpluses and the employer is not responsible for any shortages incurred. Non-refund accounting also binds you to the expense factors applied by the insurer, in particular the risk charges inherent in every insured product.

Administrative Services Only (ASO) contracts reduce the administrative expenses paid to the insurer, resulting in more money for the employees to spend on benefits before negatively impacting your loss ratios. The employees will claim the same amount they would normally; you simply pay less to the insurer for administering the transactions on your company’s behalf.
Part of the reduced expense of no longer have an insured product is eliminating the risk charge. If the plan usage were to exceed the Target Loss Ratio (Breakeven point) the plan sponsor would be responsible for that shortage. There are measures and unique plan designs you can implement to reduce this risk.
Contact Gowan Consulting to discuss how we can reduce your benefits costs today.