Changing Your Benefits Plan? Consider the Soft Costs
Oct 15, 2021
Benefits brokers have seen a significant increase in the number of clients who want to change their benefits plans every year as they attempt to avoid annual price increases. And while managing costs is a good thing, there are some things you should know about changing plans before you get into it. A solid benefits broker can help you navigate this transition smoothly by providing expert advice on managing soft costs and making thoughtful decisions when selecting a new benefits provider. In this article, we’ll discuss the importance of clearly understanding the soft costs associated with changing insurers on fully insured or level-funded plans.
What is the “Shadow Price?
The shadow price of a benefit is the opportunity cost associated with that service. When changing plans, it is important to consider what your company and its employees are giving up by choosing to switch. Shadow pricing your benefits plan helps you make intentional decisions about which soft costs associated with your changing your plan are acceptable and will outweigh both the financial and convenience costs incurred.
What are the soft costs of changing your group medical plan?
The soft costs of changing the insurer of your group medical plan may include hidden fees, benefit changes within the insurer’s certificate of coverage, pre-approval requirements, provider networks, covered prescription drugs, and underwriting methodology. These are items that don’t show up on a billing statement but can have a negative impact on employee experience with your plan and increase your costs. It’s important to know the impact of as many of these soft costs as possible so that they may be weighed against any potential premium savings.
You may find a new insurer that looks less expensive on a spreadsheet comparison but may have many benefit variances beyond those shown on the spreadsheet. For example, a service like complex imaging (CT or MRI scans) may have higher cost shares for the employee. There may be visit limits differences for certain services like physical therapy. It’s important your benefits broker obtain a sample certificate of coverage from the insurer you are considering and compare some of these benefits for you.
Changes in medication prices and cost-share or “tier” where that drug falls on the drug list can make a big difference in the covered member’s expense. The approved drug list for the new insurer may have differences in the drugs covered and may have new authorizations or step therapy requirements needed before dispensing. It will be important your benefits broker guide you carefully through this process.
Shifting to a new medical insurer may make significant changes to which providers are considered in-network and may force employees to change medical providers or incur higher out-of-pocket costs to stay with their current doctor. There may also be changes in what services require prior authorizations on different plans. A good benefits broker will perform disruption analysis for you and help guide employees through changes.
Other examples of soft costs include the administrative processes involved in the implementation. Moving the enrollment data from one insurer to another accurately while managing employee decisions at open enrollment adds to the work and potential for error. Employees and their dependents will have accumulated claims towards their deductible with the existing insurer. Your benefits broker will need to work with the new insurer to have these deductible credits transferred to the new insurer, if possible. If the credits may not be transferred, this becomes another soft cost to making a change. Your benefits broker should help you manage these costs and minimize them by providing expert advice on what soft costs to watch out for and help guide you in the right direction for your company. In addition, your benefits broker should provide resources for your employees to call for help during this transition so that you are not carrying this burden.
Moving from one medical insurer to another requires having a trusted benefits broker by your side who will help you manage the transition and avoid the pitfalls of hasty, uneducated decisions. At Total Employee Benefits, our benefits brokers have the knowledge and experience to guide you through every benefits-related decision. If you’re receiving limited support from your current broker, managing your benefits program on your own, or have experienced dissatisfaction from many soft costs that were not explained to you when making a change, it’s time to make the switch to TEBPros and let us be your trusted advisor and partner.