Many organizations have begun evaluating their supplemental plans more frequently because of rapidly changing employee medical needs and current economic uncertainty. Demographic shifts in the workforce are changing the way carriers address the needs of their population, and the advancement of data and analytics has allowed employers to tailor plan designs to focus on claims that actually occur—and remove coverage in areas where claims exposure is virtually nonexistent.
Being able to take such a proactive approach is game-changing for organizations looking to get the most from their voluntary benefits and ensuring employee needs are met. In the past, companies primarily relied on loss ratios, which didn’t take into account the value to the individual consumer claimant. But by using an approach that brings about what Aon calls a plan-value ratio, companies can better pinpoint and address their risks and eliminate inefficiencies in their plan’s design.
To build a plan-value ratio, Aon uses a four-step process that dives into data to ensure company plans are customized and cover the average out-of-pocket exposure associated with a claim. Here’s a closer look at the process:
Separate and compare your data.
Start by evaluating your most prevalent claims and wellness claims separately. This will help you gain insights from expected vs. actual claims and the average claim paid compared to the average out-of-pocket expense.
You can then determine if the product design you have covers the average out-of-pocket exposure associated with that claim. It not, that’s a good place to begin.
When one firm went through this exercise, for example, it found the average paid claim for hospital indemnity was $980, but the average out-of-pocket exposure for individuals accessing that indemnity was $4,900. This told the company their product design needed to change.
Optimize your plan.
Now that you have an idea of where you’re getting value from your plan, it’s time to tackle claims utilization by looking at utilization from the medical and supplemental plans. If the supplemental health plan can’t show claims utilization, you may want to reconsider your plan. Of course, optimization is more than just eliminating or reducing benefits that aren’t being used — it’s also about incentivizing and maximizing wellness for satisfied, healthy employees.
After assessing claims utilization for one organization, Aon found it had a high emergency-room utilization, particularly when it came to fractures and dislocations. The company therefore decided to increase benefits for ER visits to eliminate out-of-pocket exposure.
Assess your carrier.
After you’ve analyzed your data and addressed your claims utilization, it’s time to look at how your carrier can properly address your employees’ needs. Plenty of carriers can offer affordable plans, but if what’s covered doesn’t align with what your employees need, there’s no point in just checking a box to offer a product that consumers may not find valuable.
Reassess and communicate.
Making changes to your plan’s design isn’t a one-and-done exercise. To get the most value out of your supplemental health plans, you must constantly ask “How are we doing?” and ensure you constantly communicate the value of the plan to end users. Companies can create a fantastic value-based plan, but it’s all for naught if it’s not changing the ways in which employees ultimately engage with that plan.