The Connected Business of Insurance
July 02, 2019
We all know the traditional way of presenting plan options for renewal. The broker goes in and shows the client several plan options with different benefits, including the total cost of each plan. Once the employer decides on a plan, the broker may help them decide on a contribution strategy to make the plan fit in their budget; other times, the employer has to figure out how to pay for the plan themselves.
The problem with this way of handling benefits renewals is it doesn’t focus on what really matters to employers. Total plan cost isn’t the number that employers really care about. They are concerned with the amount they have to pay. However, the typical plan renewal process doesn’t integrate premium share into the initial plan discussion. First the employer chooses a plan, then premium share is discussed. If the cost is higher than the employer was hoping to pay, they are forced to either pass off those extra costs to employees or absorb the extra costs themselves. Or, it may open up another round of discussions with the broker to look at additional options to lower costs, leading to more meetings and a drawn out process.
This facet of benefits planning is a major reason employers find the process so cumbersome and frustrating. It is the one area where they can’t budget ahead of time, which is detrimental for employers of all sizes.
There is an alternative method to consider that is a completely different way of approaching the renewal conversation, and it’s one that employers love. It begins with the employer’s budget in mind, then focuses on various plan options that fit within that predetermined number.
A New Approach to Renewals
Budget-based benefits planning turns the traditional renewal experience on its head, allowing brokers and employers to start with a budget and find a plan that fits within that framework. So how exactly does it work?
- Start with the budget
The renewal conversation should start with the employer’s budget. What do they want to spend this year? Do they want to keep costs flat, are they trying to save money, or are they comfortable with a small increase? Not every budget will be feasible, but by starting with a budget, you can present plans that fit and give the employer an idea if that number is reasonable or not.When you start having these conversations with clients, they may need some explanation to understand the new approach. You may get clients who say, “Just negotiate it as low as possible.” Explain that you will of course still negotiate on their behalf, but that isn’t the intention of asking a budget. By establishing a number up-front, you can present only plans that fit their budget. For example, if the client has a 15% increase coming on their existing plan, tell them that, and ask how much they can afford or want to spend. Maybe it’s 6%. That gives you a starting point for step 2.
- Present plans that fit the budget
Once you have a budget, it’s your job to present only plan options that fit that budget, taking into account premium share and contribution strategies. Using 15% as a renewal example, to hit the 6% budget, you’d need to make that plan fit a 6% increase – or not present that plan at all.Think outside the box a little. Though there are only so many insurers, there are essentially unlimited plan options you can present when you take into account different ways to apply premium share, add HRAs or HSAs, change deductibles, etc.
- Change the conversation
Presenting only plan options that fit the budget changes the conversation to a more consultative one, and makes the employer more comfortable knowing what they will pay up-front. As you discuss the plan alternatives, it will be easy to look at employee impact as well, so employers can take that important factor into account.
Differentiate Your Business with Budget-Based Benefits Planning
Traditional benefits planning focuses on total plan cost, but employers want to know what their bottom line is. This disconnect causes employers to be frustrated with their renewals year after year, and struggle with budgeting on an annual basis.
Budget-based benefits planning can differentiate your business, grow your sales and delight your clients. It’s a more consultative approach than just shopping insurance policies each year, and a less frustrating experience for employers. Your prospects and clients will feel the difference, and reward you with sales and retention.