The Claims Review Meeting is Part 3 of the year for the employee benefits advisor and their client, the employer. Most advisors and employers should recognize this part of the process, however, perhaps again, not as a separate event. There is a pattern within the CloudAdvisors Annual Advisory Model that we are actively trying to distinguish the advisor value proposition from the insurer, policy, and renewals. We see missed opportunities when lumping claims experience reporting into the renewal reporting. As a unique event, prior to the Renewal, the Claims Review can be thought of the meeting before the meeting designed to manage expectations of any pending rate action as well as to re-visit the employer’s evaluation of plan audit recommendations.
During the course of Governance and Plan Audit, claims data has already been generated that shows how employees and their families are using the current plan, a representation of last year's decisions, or indecisions. The Claims Review meeting is now the time to evaluate what has occurred year to date, the experience that will impact this year’s renewal and to take some decisions on advisors' advice. In this article, we’ll unpack the CloudAdvisors Claims Review meeting as a unique and comprehensive combination of reporting and evaluation that will allow advisors to not only differentiate their services but also explore new conversations with their clients.
A Refresher: Benefits and Claims 101
First, however, for employers reading this unfamiliar with the context, we offer a quick overview of the basics (advisors you may skip ahead). Insured employee benefits, for the purpose of pricing, can be categorized into two basic groups, pooled and experience-rated. The primary difference between the two is the impact of claims on the rating of each benefit the following year. Pooled benefits generally represent large risks and high-cost claims, such as death, disability, critical illness, and emergency medical. These claims are less frequent but if or when they occur a single claim does not directly impact the next renewal. Pooled rates are primarily based on demographic factors and the experience of the entire pool. Experience rated benefits, however, are priced based on claims experience, meaning that this year's claims have a direct impact on next year’s rates. Examples of experience rated benefits include extended health and dental, frequent claims that occur at a lower cost by comparison to pooled claims. Insurance companies that offer experience rated benefits in Canada typically make available some form of claims data, in aggregate, that shows a summary of claims by category for each group. When a new group policy is placed with an employer there is commonly a 15 month or longer rate guarantee offered on a yearly renewable term. What this means is that there will be a 3-month gap or more between 12 months of claims experience and the next renewal. Insurance company underwriters use that period to price the next renewal. Advisors will have the prior 12 months already, with all of the data needed for a thorough evaluation, the Claims Review Meeting!
Reporting Period: Basic Monthly Summary
We're proposing a monthly summary to every client during the 12 month reporting period. Reporting claims every month for every client may seem like a daunting task but similar to the governance review there can be an incredible pay off in the form of new and proactive insights. With claims being incurred throughout the year, a lot can happen in a full quarter that could have been learned two to three months prior. Basic monthly reporting reveals an emerging trend in health and dental claims, serving as the early warning detection for advisors and clients. This process is as much for the advisor to review each month as for their client to receive the update. The advisor’s review here is key as it could uncover significant claims that could be further supported by other benefits. The main focus, however, will be monitoring the accumulating claims data, measuring premiums paid versus claims paid, known as the loss ratio, and tracking that against the target loss ratio for the year. A simple metric can be established to gauge the odds of an increase or decrease at renewal. If the trend is significant in a single month it could serve as a warning that something unexpected has occurred and immediate evaluation is in order.
Evaluation Period: Detailed Annual Reporting
While monthly reports accumulate data, a full picture will emerge in the final quarter, months before renewal. With 12 of 12 months in the record book (or even 10 or 11), the writing is pretty much on the wall as to what the renewal should look like a month or more before it’s released by underwriting. The objective of the Claims Review meeting is to manage expectations of the renewal, reviewing and updating the budget for benefits as well as pricing the impact of recommendations. This may be the time to re-prioritize some recommendations or re-visit considerations and ask the benefit provider(s) to quote alternatives with the proposed renewal. It’s important this process starts now as by the time the insurance companies release renewals it may be too late to do much more than negotiate and accept the rate action. The reason for this urgency is that adequate time needs to be offered to clients to evaluate decisions and communicate, with reasonable notice, any changes of benefits to employees. If an increase is expected early detection will be key for planning changes, education sessions or communicating to plan members what steps have been taken to manage costs (especially when employees are cost-sharing/premium splitting benefits and relying on the employer for decision-making).
What story does the claims data tell?
An important distinction in claims evaluation is the different intention of the advisor’s presentation of claims versus that of the insurance companies reporting with a proposed renewal. Insurers generally share claims data in a format that justifies rate action, whether it be an increase or a decrease. This is one key value of claims data however if the review is relegated to only the Renewal Meeting much of the story, risk and opportunity could be missed. There is so much more that can be learned from how employees and their family members claim. We’ll explore just three questions to pursue, with examples:
Are claim patterns matching the intention of plan design decisions?
This may reveal claims that do not match an employer’s benefits philosophy or objectives:
Example: Paramedicals vs Drug Coverage compared to benchmarking. Are claim dollars being wasted in one category and underutilized in another?
What do claims suggest about the health of group plan members?
A detailed examination of drug data will reveal the indication of acute vs maintenance medication as well as the therapeutic class (the indication of therapies or medical conditions). This is a key example of claims data presented for financial vs wellness evaluation:
Example: The total cost of diabetes medications vs. the total number of employees, spouses, and dependents making claims each year. Are high-cost specialty medications driving a therapeutic class or is the prevalence of certain addressable metabolic conditions across many members in your organization the real issue?
Which elements of plan design expose the plan to risk that are not being claimed?
Most advisors are comfortable shining a light on high claims that are driving cost but an investigation into areas of low claims may reveal the potential volatility in a plan. Small plans may be a single “normal” claim away from a dramatic shift in total claims and a single high-cost specialty drug away from an unbearable renewal increase.
Example: A class of paramedical practitioners that are not utilized such as naturopaths or acupuncturists. When compared to benchmarking of claims patterns a projection of risk could reveal an entirely new, true budget for benefits. A change in claims could happen from something as simple as a new hire, change in family status or a re-education session of available benefits. Would the employer like to offer communication to increase the visibility of those areas?
Example: Fertility Drugs are covered at $15,000 per year but have not been claimed in the last few years. Understanding the impact of $15,000 of additional claims, and considering the constraint in optimizing limited benefit dollars, would the employer be interested in eliminating this coverage, with reasonable notice, and re-allocating risk to other aspects of the plan?
The final step in Claims Review would be to set the renewal meeting as it’s coming up fast, more on that next post with Part 4: The Renewal Meeting.
If you’d like to learn more details about how CloudAdvisors can organize your claims data, automate claims experience reporting as well as digitally deliver reports to clients please contact us for a demo. CloudAdvisors offers the platform to benchmark benefit and retirement plans, comparing and ranking data as well as developing insights to support advisors providing the most effective advice. Visit www.cloudadvisors.ca to contact us and see how you could become #poweredbyCloudAdvisors.
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