Why accepting a rate hold could be bad for your business

A rate hold may sound like the best option available to your business, but you may just be settling.

Your benefits plan is one of your company’s largest expenses, and yet many employers don’t know how much they should be spending on their plan. (Photo: Shutterstock)

The price of health care benefits rises dramatically every year, and it looks like 2021 will be no different. The Society for Human Resource Management (SHRM) projects that next year’s healthcare benefits will cost 5.3% more than they did this year, further necessitating effective cost management strategies for employers who want to increase their savings.

While some brokers may offer rate holds to business owners to combat this struggle, employers should still think twice before accepting such an offer, especially if they don’t have access to important data about their claims.

Related: How benefits can keep up with a changing world

Here’s why you may not want to accept a rate hold from your benefits carrier:

Trust in transparency

The benefits industry has jaded many business owners into thinking that they should take their brokers at their word when it comes to securing the best possible prices for their plan. Because of this, many employers have become accustomed to paying more every year for their benefits, trusting that their brokers are truly getting them the best possible deal.

In reality, though, knowing whether or not you’re getting the optimal price on your benefits package is impossible if you don’t know what you’re paying for. Most fully funded plans don’t allow advisors to access claims data, meaning that business owners have to put all their trust in brokers who get paid on commission. The average benefits plan provides little transparency, and that means that employers have no way of knowing if they’re getting a good deal or if their carrier is getting a good deal.

No deal without data

Your benefits plan is one of your company’s largest expenses, and yet many employers don’t know how much they should be spending on their plan. Your broker may frame your rate hold as a good deal, but if you don’t know the numbers behind it, you may be getting ripped off.

Imagine this happening with other major purchases in your life. If a car salesman offered you a brand-new high-end sports car at 50 percent off, you might think you’d be getting a great deal. But you’d never sign the papers without knowing the actual price and quality of the car – otherwise, you might end up having to pay off a $50 million car (discounted to just $25 million!) with a faulty brake system.

Rate hold offers from your carrier should be met with the same skepticism and scrutiny. Otherwise, you can still end up paying too much for a low-quality plan.

The search for something better

Rather than accepting a rate hold, work with an advisor who has the tools to access the data within your benefits plan and can help you adjust your costs accordingly. For example, if you’re paying $600k for your plan, but the numbers show that you only have $400k in claims, you may be giving $200k back to your carrier without even realizing it. A great advisor could analyze the data and prevent that money from going to waste, enabling you to put it toward:

A rate hold may sound like the best option available to your business, but you may just be settling if you don’t have an advisor working to create savings from your plan.

Letting go of rate holds

Before convincing yourself that a rate hold is the best way to avoid dramatic price hikes in your benefits plan, speak with an advisor who wants to help decrease your benefit costs. By increasing the transparency in your plan through access to important data, your advisor can help find savings that might otherwise be buried in your plan, going straight to your carrier instead of being invested back into your company.

Jim Blachek flipped his traditional brokerage model in 2017 to focus solely on consulting and building value based health plans. In 2019 he co-founded a consulting only firm Dynamic Benefit Solutions and founded Local Script a transparent pharmacy and marketing organization focused on reducing employer and employee costs while supporting the local community.

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