HOW TO SMOOTH OUT PRICING SWINGS

Sticker Shock – After You’ve Bought

One of the most common swing occurs at your first renewal: you bought your plan at a certain price, and for the first year that’s what you paid. But when your plan renews, your broker comes to you with a huge price increase.

It doesn’t make any sense: your employee count and composition are basically the same, and you thought the benefits plan you had purchased was priced properly. Why the huge shift?

The answer usually goes something like this: your pricing was based on your expected claims experience, and your claims experience was “high”. The catch is that you’re not just paying for your expected claims going forward, the insurance company also has to “make up” what it lost in the first year! in-between. It’s confidential – only plan members know that they have accessed these services.

Wouldn’t it be better if your first year of benefits was priced rationally? That might mean slightly higher costs in year one, but in the second and third year you’re not “making up” for the first year, and there’s no wild swings. It’s not magic: your broker should be able to make a reasonably accurate prediction of your costs based on your past experience and employee base when you sign up. That’s what your price should be based on, not bait-and-switch pricing to get you to switch (and help the broker meet sales quotas).

Flatten Out Your Price

Best of all, if your benefits plan is designed properly, your plan includes features that are designed to contain your costs. Not only does this flatten out those swings, but it addresses the root causes of price changes. in-between. It’s confidential – only plan members know that they have accessed these services.