For most employers, looking at the health insurance plan every year is a tradition. The numbers are reviewed, a bid is suggested (or not), and an analysis of the performance and incoming numbers is performed. Unfortunately, other ancillary lines are often overlooked, renewed as-is because they aren’t used as much or there’s a rate hold. This can lead to dire consequences, especially for an employer’s group disability insurance.
Disability insurance is set up to replace a person’s income up to a fixed dollar amount if they become disabled. These policies are often in place for the long term and for the past several years have experienced lower claim rates, thus leading employers to renew the plan without reviewing them.
The consequence of status quo can result in reverse discrimination. For example, if a person’s income has risen over the past few years, then the income being replaced is lower as a percentage of income. The status quo can result in a more anemic plan since enhancements that are added by the carriers aren’t necessarily included.
Another risk is that the policy may have language that provides a benefit to age 65, but an employer may have a claimant who is not eligible for Social Security until age 67. I’m reminded of when I moved and needed to contact my Internet company to move my service. I learned my plan was actually grandfathered because the speed of my subscription was so slow people didn’t use it anymore. I upgraded my plan for pennies and got much faster service that I wouldn’t have known about if I didn’t ask.
One technique that’s frequently used to resolve the reverse discrimination issue is to layer individual polices on top of the group plan for the higher wage earners. This is also a great way to provide an affordable executive benefit that can be a tool for attraction and retention.
Employers should be sure to perform a periodic review on all their policies with their advisor. They might be surprised at the additional value and increased protection they’ll get.
For more information about how the IRS is impacting employer benefit programs this year, request a recording of the webinar: HRAs, HSAs and FSAs under PPACA from United Benefit Advisor’s Employer Webinar Series.