Knowing what details to drill your Broker or Benefit Representative on will put you in the drivers seat for your next meeting.
This first of five tips will improve your knowledge on how Employee Benefit Plans work, how pricing is structured, how the insurance companies and brokers earn their money and how to take control of the costs and time associated with your plan.
The goal is to help you stay competitive in the work place and provide you tips on how to structure your plan to be sustainable for many years to come.
Tip 1: Always know your TLR! TLR stands for Target Loss Ratio.
This piece of data, that is often over looked, is the percentage of profit the insurer plans to make on your group plan.
Why is this important to know? Well, because if the insurance company does not earn the margin required within the calendar year, guess what? Those dazzling rates you signed up for will be increased in an effort to make up their margin.
At this point, your broker sets up one of those coffee meetings with a great idea to solve this problem, shop the market...
and start the process all over again.
It keeps everybody busy, but is it the best way to solve this problem? Here is how this works.
If your TLR is 72%, it means that the insurer needs to make 28% on your plan, if claims exceed this, well you know what happens.
As you can see, getting your TLR as high as possible is good news for your company, but it is not always as easy as it looks.
Generally speaking, larger companies (over 50 employees) are given a TLR between 75%-81% because of their volume, which can be a good bargaining tool, smaller companies are awarded a lower TLR between 57%-75% (yes, I have seen some below 60%).
It is simple stuff and as you can see, a key component to save your time and money! If your TLR is under 81%, it most likely means your organization is not buying benefits from a large purchasing group and buying as an individual company.
Ask your Broker or Rep.
what your current TLR is, if you feel it is low, seek alternatives with them.
There are many avenues available to all brokers who provide you with your Employee Benefit Plan.
Some of those avenues provide lower TLRs then others for a variety of reasons.
Knowing how this works, will help you in your next meeting.
Happy negotiating! If this is still not enough detail to quench your benefit number crunching thirst, please feel free to contact me directly.