In part one of our conversation with Rob Galati, Group Benefits Consultant at League, he shared the first three questions you should ask your broker during benefits renewal. There the focus was on commission and assessing the ROI of your relationship with your broker.
Today Rob shares the next three questions you need to discuss with your broker before you commit your organization to another benefits renewal for next year:
1. How much of your business is with our carrier(s)?
What you’re really asking for here is a breakdown of how your broker’s clients are spread out across competing carriers. Are most of their clients all using your carrier or is there a variety? The followup question of course is – why?
There isn’t necessarily a wrong answer, but as a client it’s valuable for you to be able to see where they are putting most of their business. Different benefit carriers will specialize in different areas (such as disability or wellness), so you want to make sure your broker has a good reason for placing you with your current carrier.
For example, at League we try to focus on providing employers with the flexibility to work with a variety of carriers to ensure their unique needs are met. Also when we are selecting benefit carriers to partner with and to suggest to our clients we look for:
- Carriers who are able to help us provide a better service relationship with our clients through integrations that make the member experience seamless and easy
- Carriers who are best-in-class and specialize in certain benefit types
In addition to learning more about the different carriers available to you, you’ll also want to ask your broker to explain which accelerators are available to you.
Rob’s Pro Tips: “There’s no definitive red flags even if your broker is using the same carrier for the vast majority of their clients. But make sure you find out why. Is it a personal relationship? Preferred pricing? Find out what their relationship is with your carrier.”
2. What is our carrier’s target loss ratio?
Each benefits carrier will have their own “target loss ratio”. A target loss ratio is the number of claims divided by the premiums paid. It’s also the loss ratio your carrier wants to have. So for example, as a client if you paid $100,000 in claims and your staff received $120,000 in service that means you got a deal this year. You want to be at least breaking even.
The target loss ratio is important for determining if the expenses your carrier is charging to administer your plan are justified given the size and complexity of your company. How can you figure out if this is case? Ask your broker to provide examples of comparable organizations and their target loss ratios, along with historical data from your organization.
Rob’s Pro Tips: “Where this gets really interesting is if the size of your company has increased significantly over the past year. If so you’d want to see your administration expense percentage decreasing. If you were paying 20% in expenses last year for 100 employees, you should be paying less than 20% this year if you now have 200 employees.
3. When should we think about going ASO?
To go ASO (administrative services only) means that your organization would opt to self-fund some of the benefits you offer your staff – such as dental or vision care. While the ASO approach can create cost savings if you have the right funding, it will also likely increase your risk.
Nevertheless, it’s still a question worth asking your broker during renewal time – especially if your organization has experienced significant changes over the past year.
What you want to see is that your broker has taken the time to model this option to show you the potential financial impact. So even if ASO isn’t the right move for your organization, it’s important to have the numbers to support that decision.
Rob’s Pro Tips: “Your broker should be modelling ASO options for you at renewal time. Some brokers may just provide generic explanations about your group size not being a good candidate for ASO, but there should be more to it than that.”
Since it’s probably unfair to expect your broker to know all of this information off the top of their head, you should give them the heads-up that you’ll be expecting it in your benefits renewal meeting this year.
Remember, there’s no reason to feel uncomfortable making these requests! Answering these benefits renewal questions is part of your broker’s job and they’re used to fielding them every day.