Welcome to Part 6 of our Employee Benefits Marketing series – Checklist Items for doing it properly and the myths associated with each step.
The 10 Point Employee Benefits Marketing Checklist was created to equip advisors and employers with effective tools and information that go beyond marketing simply based on price. Our checklist is now available in the CloudAdvisors Solution Library, just search for “CloudAdvisors” or contact an employee benefit specialist who is #poweredbyCloudAdvisors to share with you.
Checklist #6: Cost Comparison of Unit Rates and Fees
Cost Comparison may be near the middle of our checklist, but it’s often the only item for many employers. Whether intentionally or not, Brokers can be motivated to just “show the numbers” and present the basic premium savings between providers. However, comparing total premiums instead of unit rates can be misleading; it can cause employers to buy into the optics of saving money without all of the information.
All self-insured benefits have a unit rate or fee that is charged on a volume basis to calculate the total premium or benefit cost per line item. A true comparison evaluates the unit rates independently of volume, or at least compares equivalent volumes to show comparable premiums.
The volume of insurance may be as simple as the number of singles, couples or families on a benefit plan, however life and disability volumes are calculated on the total dollars at risk. Benefit volumes are based on a multiple of earnings and can be calculated and quoted at different volumes by different providers. Many variables can produce a premium, but a true comparison should compare the base unit rates.
Here are some common variations missed when looking at total premium instead of a unit rate:
- Volume calculated differently by provider underwriting
- Volume inaccurately provided to quoting broker
- Volume based on plan deviations including eligibility or evidence of insurability
- Volume based on the time period of the quote (recent employee turnover)
- Volume based on quotation assumptions such as participation
- Overall Premium savings do not differentiate between Employee and Employer Savings
Marketing Myth #6: Quoted Premium is Equal to Future Benefit Costs
False. If an employer is presented a quote comparison instead of a detailed proposal, and the overall premium is lower, this may not equal a lower overall cost on the next monthly invoice.
Unit rates are guaranteed for a period, but premiums are calculated and invoiced monthly, based on changes in volume. For several reasons, the actual invoiced monthly cost will vary from the quote provided upon application.
It is misleading to directly assume the overall premium is equal to overall costs. For a true cost comparison, premiums should be evaluated line by line to see where savings are being generated, either from employer-paid benefits or employee-paid benefits.
Employers should also not assume the overall premium will be their cost in future years (an upcoming renewal myth) but note the month to month volume changes with employee turnover and payroll. In addition to a proper proposal and unit rate comparison, an Advisor can present costs as an average per person / per certificate to show the true dynamic nature of benefit costs.