Self Insured Solutions

In the past, companies purchased their employee benefits plans through insurance carriers specializing in group insurance services. This made sense for true 'insurance' services such as group life insurance, long term disability insurance, travel insurance and catastrophic drug claims coverage - insurance works best when the probability of something occurring is low, but its financial consequence is high.

In contrast, most health and dental expenses are frequent, predictable, and relatively low in cost - they don't have the traditional attributes of insurance. In spite of this, carriers offered to 'insure' these services as part of the overall group benefits package.

As far back as the 1970's, large employers understood that they were in fact self-insuring their health and dental coverage through their premiums — over the long run, they paid significantly more in premiums than they claimed. They realized that rather than paying premiums to carriers for insuring and administering the plan, they could save money by paying claims themselves and contracting with insurance firms or Third Party Administrators (TPA's) to handle billing and claims processing only.

And so, Administrative Services Only (ASO) plans were born. Services such as life insurance, LTD coverage, travel insurance, and catastrophic drug coverage continue to be purchased through insurance companies.

In recent years, smaller firms have begun to self-insure using the ASO funding model, generating significant administrative cost savings. In fact, according to Benefits Canada's 2004 Group Insurance Survey, ASO deposits for health and dental services were $9.3 billion in 2003, accounting for 47% of the $19.89 billion spent by employers to fund health and dental benefits - insured health and dental benefits represent 53% of the total.

CLEAR Benefits System™

Benemax’s CLEAR Benefits System™ reduces the cost of administering your benefits program by as much as 50% and allows you to custom-create a plan that complements your company’s unique objectives and corporate culture.

Drug costs have become the major cost driver in employer-sponsored benefits plans. Drugs account for about 75% of the claims of most health plans, which in turn represents as much as 50% of total group insurance costs.

While drug inflation (annual price increases as tracked by the Consumer Price Index) is relatively low, drug consumption, or utilization is growing at a double digit annual rate. This is due to such factors as:

• Our aging population
• Introduction of new, more expensive drugs
• Aggressive marketing by pharmaceutical firms
• Government downloading of services to the private sector

In addition to rising consumption, plan administration costs are also increasing, mainly as a result of insurance industry consolidation and de-mutualization. The drive to increase shareholder value has forced insurance carriers to exploit all opportunities to increase revenue – a task made easier by the reduced number of competitors in the industry.

Read our Benefits Brief on Administration costs, loads and reserves to learn more about how these charges affect your benefits costs.[PDF]

We devised the CLEAR Benefits System™ with this new landscape in mind. We combined a number of approaches that until recently were only available to large employers (Self-insured Administrative Services Only plans and Flexible Benefits) and modified them to work more effectively in mid-sized firms. The result – a solution that reduces long term structural costs while offering employees greater flexibility – the best of both worlds.

To learn more about our CLEAR Benefits System™, have a look at the following Benemax publications or contact us for an introductory meeting. [PDF]