Recently I wrote “5 Questions to Ask When Hiring or Changing Retirement Plan Vendors” to help plan sponsors protect themselves and better serve plan participants.
Today I’m providing five questions that you, as an administrator, need to ask healthcare plan consultants. I say “need” because these questions make it more likely your healthcare plan will best serve your company’s needs in terms of both cost and scope of services provided to your employees. They also help ensure that you are using the right consultant. The costs involved with employer-provided healthcare are prohibitive—the average is $9,560 per employee according to a recent survey by Towers Watson and the National Business Group on Health;you can’t afford to not ask these questions!
Before I get to the questions, I should note that these aren’t the only questions to ask, and also that just asking the right questions isn’t enough. You need to understand what the answers to these questions mean to your plan so you can properly evaluate what your consultants are telling you. Remember, consultants give recommendations and analyses; decisions need to come from your company. This is extremely important to keep in mind. We discuss this extensively at our Mid-Sized Retirement and Healthcare Plan Management Conference; and it is one of the areas plan sponsors often come up to me to discuss.
Now, five questions you need to ask healthcare consultants.
1. What can you offer in the way of a strategic evaluation of how our current healthcare benefits package aligns with our objectives as a company?
Health benefits play an important role in a company. Among other things, a strong benefits plan can be valuable for employee attraction and retention, so determining the right health plan is a significant strategic function. You want to make sure the program you are offering matches how you want to position your company as an employer. Do you want to be an employer of choice, or are you okay with being somewhere in the middle of your competitors?
Considering this, you want to see if your healthcare plan consultant will provide expert suggestions and recommendations on strategies you should consider to offer a benefit that is both attractive to your employees and won’t break your budget. You also need to see what expertise and insights the consultant can provideabout different options. For example, can the firmhelp you evaluate whether consumer-driven health plans, private exchanges and ancillary plans such as voluntary benefits make sense for your company? Do they match the strategy you’ve outlined? And, another reallyimportant question to ask is whether they are considering possible exposure to the Affordable Care Act’s Cadillac tax, and how you can avoid that. The Cadillac Tax is coming in 2018, which will be here before you know it!
2. What role will you (the consultant) play in the renewal process, including in:
- Soliciting bids
- Evaluating proposals in detail
- Assisting with selection of provider
- Assisting with negotiations
- Communicating with employees
- Handling open enrollment
When evaluating your consultant or selecting among consultants, it’s essential to determine what value they add. Don’t assume they will be doing something unless you explicitly determine that they will. Some consultants will provide a wide variety of services, while others will get bids for you but won’t do much else. The latter may charge less but provide far less value.
3. Will you provide data about claims (at the macro level) that will allow us to evaluate where our potential risks lie, and what kind of analytics will you provide in connection with that data? Based on the results of the analytics, do you have the capability of recommending disease management and/or wellness programs? What role will your firm play in ensuring that these types of programs are successful?
Finding trends in data can be highly valuable both for containing your costs and for providing services that your employees will find valuable, so it’s important to see how consultants will or won’t help. For example, if the data shows that your workforce has a high population of diabetics, instituting a successful disease management program for diabetics would be of great value. As a result, having a consultant that has the proven capability to identify trends, recommend programs and help them be successful is highly desirable.
We have had many sessions at our conferences that discuss in detail the data that can be gathered and how it can be used. Many benefits departments understand the need to utilize this data but may lack the resources or knowledge to analyze it and/or figure out the appropriate action to take. This is where consultants can come in. If you don’t know how valuable this data is, you may not know to ask for assistance in this area, though.
4. Will you provide a dedicated customer account rep?
As I’m sure anyone who has ever dealt with healthcare benefits can attest, there are bound to be troubles and frustrations associated with claims. Employees will have issues and questions and, as the administrator of your plan, it’s important that you have a specific person available who you can rely on to address these issues and other administrativequestions when they arise. Also, make sure that you understand what priority you will have with this person. Having a “go to” person who doesn’t respond when you need them is not very useful!
5. What other sources of compensation will you derive from our relationship other than the fee that we pay your firm? Will you fully disclose all the fees you receive as a result of our relationship, e.g., commissions from insurers or other vendors associated with our health plans?
Not only should you know just how much your consultant is earning from their engagement with you, it’s crucial to know if they have any conflicts of interest driving their recommendations. I know you will find this shocking, but every once in a while some service providers might have a bias and think about recommending the product that offers them the highest commission. And, that can lead to you going forward with a servicethat isn’t ideal for your company. (OK, hope you’re recovered from that shock!)
Again, these are just some of the questions you should ask and just a taste of what you need to know to effectively administer a healthcare benefits plan that fits with your company’s objectives. Feel free to add your own suggested questions in our comment section.
The best prescription I can offer to be better informed regarding your responsibilities as an administrator of a health or retirement program is to attend one of our Mid-Sized Retirement and Healthcare Plan Management Conferences. Your last chance for 2014 is September 7-10 at Caesars Palace in Las Vegas. If you don’t make that, we start our 2015 programs in San Diego, March 8-11.
Hope to see you soon!