In today’s employee benefits marketplace, employers are encountering annual increases, specifically in the area of health trends, that they have little or no control over.
Currently (2004), health trend factors are averaging increases of 17.4%. In addition, with reference to Dental trends, we are experiencing a minimum of 5% increases for utilization and 2-4% increases for changes within the local dental association fee guide. This obviously impacts employee benefit plan holders negatively. For example, if we use the a assumed combined Dental Trend of 9.5% and an expense margin of 30% (70% loss ratio), claims for the year would have to be less than 60.5% of premium to ensure that rates did not potentially increase for the upcoming year. What this means to you is that for each premium dollar you spend it would only be allocated 60.5 cents to pay the actual benefit. The remainder of your premium dollar is directed towards the increasing costs associated with the benefit administration charges by the insurer and the insurers required profit margin. It is obvious that this scenario negatively impacts your employee benefits program.
The impact of self-insuring is a reduction in costs to an employer for benefits such as dental and is due to their credibility & predictability. If you can identify the risk and afford the risk than you should self-insure the risk.
At Applied Benefit Concepts, one of our jobs is to implement the most practical and sensible plans available. Consequently, ASO Dental may just be the solution for your company. Please contact us to learn more.