Benefits – Is use it or lose it the right approach?
Recently, an article offering financial advice encouraged people with employee benefit plan coverage to use as much of their benefits as possible, prior to the end of the year. The author went on to say that, in her case, as she is paying 100% of the cost, she makes sure she uses as much as possible of her dental, chiropractic, massage etc.
If everyone in that group plan adopts the same approach the plan fees are going to consistently escalate.
Usually around September you start seeing messages from extended health practitioners like dentists, chiropractors and massage therapists reminding you to use it or lose it with your benefit plans. Let’s be real, these services are all running a business and using ‘use it or lose it’ as a marketing tactic to increase sales. One would hope that they’re not pushing needless services to clients to build their bottom line.
Maintaining the Value of Employee Benefit Plans
An employee group benefits plan is a commitment by an employer to make life insurance, disability insurance, health and dental benefits available to their employees, as a part of their overall compensation package. Employers generally cover the full cost or may share some of the cost with employees. Employers are, however, limited in the amount of premium that can be shared with plan members. While the life and disability benefits are insured and costs are (generally) unaffected by usage, the health and dental benefits are not insured and are affected by usage.
WHY? Employee benefits are a funding arrangement whereby insurers set rates based on historic claims and predicted usage, plus administrative charges. This means that the more plan members actually use, the higher the cost of the plan. If all members maximized their benefits plan, there would come a point where the plan would be unaffordable and the employer would need to reduce the benefits offering, thereby reducing the value of the plan for members and their families.
Plans are not used in the same way by all members. Some make few claims, perhaps the odd prescription or dental checkup; while others may have health issues and need to make more drug claims or require significant paramedical services. Individual claiming patterns can change as circumstances change. It is that variation in usage between members that keeps a plan affordable.
It is important for plan members to remember that employee benefits are part of their overall compensation package. The goal is to provide members and their families access to vital health coverage such as covering or offsetting drug costs, dental costs, paramedical services (physiotherapy, chiropractor etc.) in order to help them maintain good health. The idea is to use the plan when you need it and need it when you use it. That is in contrast with a ‘use it or lose it’ approach. Using a benefits plan for the sake of using it needlessly increases the cost of the plan for everyone.
We always encourage plan members to take ownership of their plan. Plan value can be maintained by using it judiciously, watching costs, using (where possible) service providers, such as pharmacies, that don’t charge top dollar and resisting the temptation to ‘use it or lose it’.
ASSOCIUM Benefits is a very unique employee group benefits provider, focused on supporting benefits Advisors and their employer clients. We provide Brokers and Plan Sponsors with a range of solutions from traditional group benefits to more customized, cost and tax effective employee compensation. Let’s connect to find out how we can help.