If you want benefits to be exactly the same and have the easiest administration, then a one-plan solution is the best choice for your company. However, if you want the best plan for your employees at the best price, then you should go with the best regional solutions. Typically, the savings to unbundle a national plan into regions can be as much as 30 percent, and you may be providing better benefits.
Here are a few factors you should review when you consider unbundling your benefits.
* The only benefit worth unbundling is medical.
Life, disability and vision insurance gain no distinct advantage when you unbundle them by state. A case can be made for dental coverage only if you have a dental HMO as an option, but even then, the advantages are limited.
* The magic number of eligible employees is 50.
The requirement for individual underwriting typically stops at 50 eligible employees. Having your rates increase after open enrollment because an unknown health condition was discovered can be a big problem.
Although you can conduct prescreening with your employees, enrollment can still change at the formal open enrollment, potentially picking up a new member with health conditions. Although 50 is the best number, you can have as few as five employees and still make it work.
* National carriers or administrators are seldom the best player in each market.
The greater the number of markets, the greater the odds that one plan is not the best solution. If you look at enrollment by state or region, national carriers are seldom the dominant plan in any location.
* Regional HMO plans can be priced 20 percent to 30 percent lower than PPO plans.
When you factor in HMO plans, the regional-plan solution starts to gain momentum. Even the best national HMO carriers have limits to their HMO networks. Some national HMOs closed markets because they simply could not get enough market share to justify sticking around.
* Different parts of the country can look at medical benefits differently
Employers who are concerned with offering market-competitive benefits should look at each region to discover what other employers offer. Employers are often surprised how different markets can be on what is considered competitive in recruiting employees.
* Different plans result in different rates.
Your rates will vary from plan to plan due to many factors. As medical plans can vary from state to state, so can employee contributions for those plans.
Always look at the overall cost for all regions combined. Some regions, such as the Northeast, may have substantially higher rates than the one-plan approach.
* Isolating health conditions can be a hidden advantage.
A large, ongoing claim can pollute any group, regardless of the population of the group. Unbundling a group can isolate the negative impact of an ongoing claim.
Many employers lose sight of this fact when an unbundled region is battling a large increase. Although you have multiple plans, you are still one company. It's important to consolidate your funding methodology. If one location receives a higher-than-normal increase, the effects are offset by the other locations.
* Don't wait for your broker to recommend this approach.
This approach is substantially more work for the broker. Each location requires the same review as the one-plan review. If you have three locations, it becomes three times the work for the broker.
If you want the best benefits for your employees at the best cost, you are going to work harder to manage them, but doing so can substantially improve your benefits and your bottom line.
Bruce Bishop (firstname.lastname@example.org) is director of marketing and managing partner of KYBA Benefits. KYBA Benefits provides consulting and administrative services to more than 400 corporate accounts, ranging in size from 20 employees to more than 7,000. Reach him at (770) 425-6700 or (800) 874-2244, ext. 205.