Employee Benefits Plans and How They Impact Your Business
In today’s episode of Risky Business Paul Martin and Colin Rooke are joined by Ryan Warner to discuss the importance of reviewing your benefits plan, and routinely tailoring it to fit the needs of your business and team.
Listen to the full episode here, or read the full transcript below
Paul Martin: Welcome to Risky Business Commercial Insurance with Butler Byers. This is Paul Martin, the business commentator on CKOM, and we’re back in the studio talking about all the things that a business owner, or those of you who are in charge of operating the business, maybe not the owner but a professional manager, these are the kinds of questions that boy you probably don’t think about very much, but every once in awhile you need to just stop, take a look, and we’ll bring in the expert that’s going to tell you these are the questions you need to be thinking about.
Paul Martin: Joining us in studio as always is Colin Rooke, the commercial risk reduction specialist with Butler Byers. And we brought in another guest who will be joining us in a minute or two, and that’s Ryan Warner who comes to us from The Big Smoke. He’s going to be talking to us about some areas that we don’t usually talk about. But Colin, the whole point of this program is to try and arm business owners, business managers with these are the kinds of questions you need to be thinking about, and that as an insurance broker, your job is really to bring those forward and say, here’s a flag, here’s a flag, look out for these.
Colin Rooke: Yeah. We traditionally, of course the focus is on risk, and in this case we’re going to talk a little bit more on the benefit side of risk. One of the sort of major issues or sort of new emerging risks are there’s a lot of drugs out there that can get particularly costly pretty quickly. If you’re not looking at your plan, if you haven’t re-evaluated or you have taken a second look, you could be stuck with a rather large bill. Now, I mean on top of that there’s sort of individual drugs that you wouldn’t use all the time that are costly, but there’s also other drugs out there where just repetitive use, again, if you’re not monitoring, could really affect renewal premiums.
Colin Rooke: Yeah, so Ryan, he’s in studio. We thought, okay, well who better to talk to than the expert. He’s just going to say, okay, we’ll talk about what he’s seeing in the market and then ways the business owners that are listening to this show can say, okay, well geez, I’ve never thought of that, and maybe I need to take a second look at my plan design to make sure I’m protecting myself against some of these would be surprises.
Paul Martin: Yeah. Just before we lose you though, I mean today’s topic, we’re talking about benefits plans. I mean, often we’re talking about insurance coverages or approaches to looking at the way you manage your business that aren’t one size fits all or not necessarily applicable to all businesses. But boy, virtually every company has a benefits plan, so what we’re going to talk about today is really universal, isn’t it?
Colin Rooke: Yeah. It is going to be fairly universal. Some of the things that we’re going to touch on, we’re going to identify the risk. We’re not saying if you have a benefits plan without a cap on certain drugs that that’s a bad thing. Certainly it’s up to the business owner to make those decisions, but we just want to make sure you’re aware of some of the risks that you could be faced with if you’re not paying particular attention to really what’s changing in the marketplace. I mean, I think that’s the main point of today’s show and why we wanted to bring Ryan in the studio to discuss it further.
Paul Martin: Good point on that is that things are always changing and every once in a while you think, well, I kind of got a handle on this, but then you got to circle back and say, wait, what’s new, what’s changed, government rules will change, that kind of stuff. Let’s get Ryan into the chair then. Ryan, welcome to Risky Business. Great to have you on board. Now, you’ve been with us before, but by phone, so it’s great to have you in studio.
Ryan Warner: Thanks for having me on today. I appreciate it.
Paul Martin: You Heard Collin in the run up to this that things change and there’s always some new development out there. So in your world, what are the hot topics these days? What is changing? What’s the thing that’s catching business owners by surprise, or what issues are you seeing that people should be cognizant of?
Ryan Warner: Well, I think a lot of business owners mean well when they set up these benefit plans, obviously have good hearts and are doing what they can to try to help their people. What they often don’t realize until it’s too late is if you don’t structure a plan properly, you can really leave yourself set up for some serious exposure, specifically in the drug space. Big Pharma isn’t getting much less expensive these days, so certainly as drug costs increase, those benefit plans, if not designed properly, will pick up those expenses for their staff, which is fantastic, but it could leave a renewal looking pretty ugly and ultimately that cost has got to come from somewhere.
Paul Martin: Well, do people labor, business owners, business managers, labor under the impression that, well this is a group plan, so how much can it impact me if I have somebody who’s at the extreme end of the consumption scale because it’s going to be spread out over hundreds of thousands of people across Canada. Not necessarily so?
Ryan Warner: Well, the traditional structure is you’re participating in a pool for sure, and there is some safety nets put in place, but ultimately somebody’s got to pay for these medications. As far as I know, the insurance companies aren’t not for profit, so eventually those costs are coming back to the end users, which ultimately is the employer.
Paul Martin: All right, well let’s maybe dig into a little bit of specifics on this. Have you’ve seen some, well, let’s just get it right out there, any horror stories in this country that, I get that they’re probably extreme, but it’s the kind of thing that you’ve actually seen happen in this country where business owners and business managers were caught on the wrong end of this equation?
Ryan Warner: Yeah. I think, again, I mean to be perfectly clear, it’s not something that’s going to have an immediate impact. It’s over a few years you’re going to get those increases start to appear on your renewals and at some point it might become unaffordable. As a business owner, it’s a tough position to be in and you almost have to take a step back and realize that you’re working within a budget of course, but also trying to do something for the masses, not necessarily just one individual. Sometimes, I mean there are medications out there right now that cost tens certainly of thousands of dollars and upwards to hundreds of thousands of dollars. One of those expenses that lands on a benefit plan can cause the premium to influx over a few years. It doesn’t take long before either the premium gets out of control and an employer can’t afford the plan, or … Excuse me, lost my train of thought.
Paul Martin: Or you just start to exclude people? Is that what happens in this? I mean do the insurers just say, sorry, we’re not going to do your company, or we’re not going to do that individual within your company because they’re just simply too expensive?
Ryan Warner: No. I mean, you can’t exclude somebody. That’s not the way group benefits is designed. It is to be all encompassing. But the whole idea of a benefit package is to structure it so that the cost is manageable and you don’t see the roller coaster ride that can be from one year to the next if costs start to flux one direction or another.
Paul Martin: We’re hearing even in Ottawa these days they kicked around the idea of a national pharmacare program.
Ryan Warner: For sure.
Paul Martin: I mean obviously if the politicians have cottoned onto this thing, there’s a sensitivity somewhere. You’re talking about it. They’re talking about it. Perhaps this is something business owners need to just say, hang on everybody’s talking about it except me. Maybe I’m the one who’s out of step here. Is that kind of your message is that you encourage business owners take another look at this?
Ryan Warner: I think so. I think my key message is look under the hood and truly understand what the coverage is offering so that you at least have a perspective on what your exposure is so that you understand what you’re willing to do or not do. I think as a business owner myself, I think it’s important that we understand and protect the masses. I have a limited budget to work in, so I have to structure that plan to ensure that it’s sustainable over a long period of time, not just from one person to the next.
I think as a business owner myself, I think it’s important that we understand and protect the masses.
Paul Martin: You’re using the words structured properly. I guess that’s probably, that’s where the fine print all comes in and that’s where your expertise and people like Colin and his team, his benefits team, they bring that kind of expertise to the table that will help a business owner go through the step by step plan that you need to make sure that you’ve got it in place. We’re going to take a little break and when we come back I’m going to start to get you to explore that question, or that wording, of structured properly, if that makes some sense. Good with that?
Ryan Warner: Sounds great.
Paul Martin: All right, we’re going to take a little break. You’re listening to Risky Business Commercial Insurance with Butler Byers. We’ll be back in a moment.
Paul Martin: Welcome back to Risky Business Commercial Insurance with Butler Byers. This is Paul Martin, and joining me in the studio today, Colin Rooke, the commercial risk reduction specialist with Butler Byers, and Ryan Warner, who is with PPI and he is a specialist in the area of benefits plans. That’s what we’re talking about today. More specifically, about the drug components of benefits plans.
Paul Martin: I am assuming, Ryan, that drugs are the thing we’re talking about today because it’s kind of a du jour topic, but there’s probably aspects of benefits plans that go beyond just drugs. But today we’re talking about the pharmaceutical component of it. You were saying that there are some expensive drugs, and I guess we know about this, we see it on the news all the time, or hear it on the news that some people are faced with tens of thousands or even a hundred, $700,000 bill for a drug or something like that. How do you guys look at that stuff, or how does the industry, the insurance industry, look at that? I mean they know about them too, right?
We hear it on the news that some people are faced with tens of thousands or even a hundred, $700,000 bill for a drug or something like that. How do you guys look at that stuff, or how does the industry, the insurance industry, look at that?
Ryan Warner: Of course. Yeah. The insurance companies have to be considerate of all of these things to understand how their pools are going to be impacted. From my seat as a consultant, I mean I try to put myself on the side of the table as the business owner first and try to help them understand where their exposure lies. We’ve talked a lot about the whole idea of properly structuring a plan, and I think there’s a bit of an old school style to most benefit plans. The traditional method is to have unlimited coverage.
Ryan Warner: Most people will open their benefit booklets and see just that word sitting right there, it will say unlimited. I think that’s where the risk lies because frankly most of your traditional day to day maintenance medications are not going to be the ones that are the issue. It’s those one-off major medications that are nuances in the industry, biologics, I mean some of these more complicated medications that come with serious price tags. If you don’t structure your plan to change that word unlimited, and there’s a variety of ways you can do it, you can leave yourself exposed.
Paul Martin: Do you have kind of a standard recommendation you’re making to business owners today in terms of what kind of wording they should be including in their plans?
Ryan Warner: I don’t know that it’s standard. I think the answer is more along the lines of the size of the business and also the budget. I mean at the end of the day, like I said, there are protection components to a benefit plan to help just that, protect the business and the plan’s sustainability, but really it’s can they afford the unlimited exposure, do they want to put in some kind of a drug cap and what does that look like. It could be something as small as 3,000, 5,000 per person, or maybe it’s upwards towards 50,000 or 100,000 per person. It’s taking a step back as a business owner and planning for tomorrow’s premium, not just what I’m being charged today.
Paul Martin: Most employers I think have a benefits plan, and it’s one of, not the only reason they have it, but one of the tools they use in recruitment. They say to a prospective employee come here because we have a full benefits plan. How do they react when you say maybe we should put some limitations on this? They say, well, hang on, I’m in a very competitive environment and I’m chasing talent, and this is critical for me to have this thing. How do they balance those two things?
Ryan Warner: This is a big challenge that we face on a regular basis. I was talking to a client a few days ago about something very similar. The reality is if they haven’t experienced the problem of a large cost drug hitting their plan, now’s the time to have those conversations. It’s far more difficult to discuss it or make adjustments once that’s on your plan. If you’re not talking about it now, you’re leaving yourself exposed to a potential problem down the road.
Paul Martin: Well, as you talk about, and I can envision a situation where I’ve got an employee on my team and all of a sudden there’s the $150,000 bill and well I can’t handle that, and I’m faced with being that employer who pulled the program. Who’s wearing all of the negative ink on all of this, it’s me as the employer.
Ryan Warner: I think, I mean we’re certainly talking a bit of an extreme situation. Like I said, it’s not that $150,000 bill lands on that employer’s desk. The benefit plan is designed to eat that cost initially, but premiums will increase over time to ultimately recoup those costs. That’s the design of the insurance industry. But, as I’ve said a few times, I think that the hard part for an employer is stepping back and putting yourself in the shoes of if I make this plan unaffordable, I can’t cover anyone, versus that one person I’m trying to protect. It is a moral dilemma, but for the sustainability and longevity of a plan it’s pretty important that they consider these risks.
Paul Martin: Was my assumption, my earlier assumption, correct that employers do see benefits plans as a part of their recruitment package?
Ryan Warner: Absolutely. There’s no doubt that that’s going to come up in hiring practices, and employees are getting smarter and they’re comparing plans against prospective employers these days too.
Paul Martin: Colin, you want to jump in?
Colin Rooke: Yeah. I was just thinking, when using benefits as a recruitment tool, I mean how often are you seeing that employers are doing an appropriate job of really explaining the whole benefits package? Meaning that, as Paul said, we have a full benefits program and within that, there’s a wording change from unlimited to maybe a cap of $50,000. I mean, how often is the employee saying specifically is there unlimited coverage for drugs, or is there something lower like $50,000? I mean, I guess I don’t want to say it’s something that you could skirt around, but I mean how much is enough and how educated would most people be on what sort of should be in there, and is it more just a function of I just want to make sure I have something and if I’m explained, if the plan is explained to me properly, I mean like I should be okay with $50,000 a year versus unlimited coverage. What are your thoughts on that?
Ryan Warner: It’s a really interesting point in question because I think it’s not often well explained, nor is it something that employees are going to dig into on a granular level like that. They’re likely to ask just that, are there benefits. They might not know whether there’s cost sharing, or how much of the tab they’re going to be on the hook for. Is it an 80% plan, 100% plan, unlimited coverage, drug caps? It’s hard to say how granular an employer is getting with those prospective employees, but I know from experience that most employees just want the check mark that there is a benefit plan.
Paul Martin: So, it’s up to the employer to be the one who’s most well versed on this. You can’t count on your potential candidates who are applying for a job at your place to be your educator in this. That’s the role of the broker and the business owner to be having this conversation.
Ryan Warner: Absolutely. When you think about a benefit’s booklet, when you open that booklet, there’s an awful lot going on inside of it. There’s a number of line items that aren’t necessarily considered when comparing plan to plan. I think the responsibility should fall more on the employees to educate themselves, but there’s not a lot of time put into doing just that.
Paul Martin: How often should an employer be retooling on this? I mean is this an annual thing, or is every two or three years, that’s the time to sit down and have a conversation with an expert such as yourself, or Colin, or one of Colin’s team members to sit down and say let’s just do a refresh on this thing? How often should we do that?
Ryan Warner: I mean, let’s call it what it is. This is not their focus. This is not their day to day business. They’re not experts in this, and we don’t expect them to be. We don’t expect them to stay on the top of every agenda item going on in the industry. That’s what a consultant is for. Frankly, I mean getting together at least once a year, preferably a couple of times, just to stay apprised to what options are out there, what nuances are available to benefit programs is really important to staying competitive and making sure your plan is protected.
Paul Martin: Yeah, and that it’s sustainable.
Ryan Warner: Absolutely.
Paul Martin: Well, Ryan thanks very much for joining us. The time has slipped by again. Colin is with us. I want to thank both of you for stepping into studio today and bringing us some new insights on what a business owner should be thinking about when they’re looking at a benefits plan. You’ve been listening to Colin Rooke, the commercial risk reduction specialist with Butler ByersCommercial Insurance, and Ryan Warner, PPI. This is Paul Martin. Thanks for joining us. Talk to you next time.