Match Practices to Insurance Contracts

Now is the Time to Ensure Your Employment Practices Match Your Insurance Contracts

There are so many one-off agreements, handshake arrangements, and special provisions granted to one employee or maybe a certain category of employees. Often when we review the insurance contracts, we find them in complete contradiction to their practical applications.  Employers must match their practices to their insurance contracts to ensure everything runs smoothly.

Now is the time to review these contradictions and address areas where you must realign your strategy.

Here are three of the most common items we find out of sync.

Plan anniversary dates aren’t the same

Is it a big deal?   It can be.

Real Life Dental Scenario:

Imagine a Health Plan renewing on January 1st and a Dental Plan renewing on March 1st.  This happens very often and for very real reasons.  But let’s say your employees don’t know, and you operate just one open enrollment.  If your employees make changes to their dental insurance ‘off cycle’, they could get blocked from their choices, blocked from coverage, or even worse, accepted but accidentally (by no fault of their own) imposed with late-entrant penalties.  This is ugly when the employee can’t get that crown, bridge, or post paid for because of this issue.

Real Voluntary Life Scenario:

Your Voluntary Life program has an anniversary five months after the Medical began. And again, you only communicate one open enrollment to your employees.  Sure, you don’t think it’s a big deal since this plan doesn’t include an annual open enrollment. It only has New Hire Guarantee Issue and Initial Plan offering Guarantee Issue amounts.  What about the employee who purchased coverage when it was first available, but wants to change their election amount from $20,000 up to $50,000 within their protected Guarantee Issue rights?  This can get rejected, and most likely you have payroll deduction miscommunication with the employee if it is occurs outside the cycle of the insurance contract.  This is very avoidable with one letter, email, or form to update the plan dates.

If you buy X, we give you that $$ off medical

Imagine that you’ve wanted to install a Dental plan.  You’ve never had great participation, and your Broker suggests that you offer $20 off your Medical for employees that elect the dental plan.  

This isn’t a big deal during year one and maybe not even during year two.  However, no one remembers this incentive by year three, and you have random credits in your payroll software.  On top of that, new employees might not be getting the same cost reduction as current employees because you’ve changed the personnel who input your payroll entries (accidental discrimination issue?). 

We also find this happens under one management regime.  Then, it is never documented or passed down to new management.  Only after communications are done, payroll deduction schedules are set, benefits software is programmed, that all of a sudden management ponies up $20 or $50 more per month per employee than budgeted.  No one is happy here.  HR, Payroll, or the Broker end up with a big ugly mark on their reputation.

How can you match practices to insurance contracts in these scenarios?  If you do practice this scenario, document a finite time limit and document it in big bold highlighted terms for anyone that follows in your footsteps.  Also, question yourself.  In whose best interest was this program idea for – yours or the Brokers?

Inaccurate hire date

Imagine having a Self-Insured or Level-Funded Health Insurance plan.  In either of these contracts, you have a Stop-Loss Insurance company that pays for claims once they exceed a certain threshold ($15,000, $50,000, $100,000, etc.). Say you waive a life event and add an employee off cycle, fudge their hire date and give the big thumbs-up as the employer.

Now, let’s pretend that same employee has $200,000 in claims and the stop-loss insurer decides to audit that employee and their hire date doesn’t match the insurance contract. You (the employer) could be stuck holding the entire bill for claims because you thought you were just doing a good deed.  Not match your practices to your insurance contracts can be very costly.

Bottom line