The following articles have been drafted on behalf of the UBCM Benefits Plan, a collective of approximately 130 municipal and affiliated groups across British Columbia.
Every group insurance program includes operating costs. Some examples of these activities are as follows:
- Claims adjudication according to the terms of the plan (typically an insurance carrier completes this function).
- An insurance carrier providing some element of insurance (varies depending on underwriting arrangement).
- Creating and maintaining plan documents (Booklets and Contracts).
- Service representatives to assist members and administrators with their inquiries (either through a broker or directly with the insurance carrier).
- Financial analysis of your plan for renewal rating purposes.
If you purchase coverage through a broker or directly with an insurance carrier, the total operating costs are funded by your plan on its own. These costs are sometimes added explicitly (for self-insured arrangements) or implicitly through the financial terms under your policy (for insured arrangements).
You can reduce the operating costs of your group benefit plan by working alongside other organizations and purchasing coverage through a pooled arrangement. By purchasing alongside other groups, you share operating costs amongst a greater member base, and ultimately reduce your plan’s portion through economies of scale. This strategy enables small and mid-sized organizations the ability to purchase coverage according to similar terms that are enjoyed by larger groups.Image
In addition to reducing the operating costs under your plan, a pooled arrangement can also have the following advantages:
- Providers are more receptive to offering customized services due to the size of the existing contract. For example, the UBCM Benefit Plan has a Performance Standards Agreement with their insurance carrier (Pacific Blue Cross) which outlines the service timelines that their participating groups will receive under the Plan. Participating members therefore receive superior service that is measured and managed over time. These groups would not be able to obtain these terms on their own outside of the pool.
- A pooled arrangement can also provide access to subject matter experts such as pharmacists, actuaries, lawyers, and disability management experts. A Plan Sponsor could engage these individuals under broker or direct models, however, doing so under a pooled arrangement as part of a broader initiative helps to reduce costs given the fees can be spread out over multiple Plan Sponsors who have similar needs.
Pooled arrangements reduce costs over the long term. That being said, they are not a “one size fits all” type of arrangement and the following considerations should be noted before joining a pool:
- Under most pooled arrangements, the choice of benefits provider (i.e., insurance carrier) is determined by the sponsor of the pool and is not chosen by the individual groups.
- Transparency is a common concern in the group benefits industry, but this can be exaggerated in some private sector pooled arrangements. If you participate in a pooled arrangement and are not aware of the financial terms, you should ask to ensure you are aware of the general process as to how your premium rates are established.
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