Over the years, many benefit professionals have waited anxiously for the release of an annual benchmark survey and invariably compare the figures contained within to their own numbers. With fingers crossed, the hope is to be below the benchmark data. But should that really be what we use to measure ourselves against? If you are a company with over two hundred employees, you should receive your own claims data and renewal calculations each year. How you compare to a national or regional survey, or even a specific industry survey, may be the blind leading the blind.
Let’s say the most recent benchmark survey says plan costs are going up 10% to $15,000 per employee per year. What does that really mean to you and your company? Very little. First, your plan offerings are quite different, or at least different enough, from the benchmark survey to require further consideration. Second, your demographics are your demographics and cannot easily fit into a cookie-cutter survey benchmark. Let’s say your demographics skew toward an under-thirty population, while someone else’s skew over fifty. Chances are good that the “older” crowd is generating higher claims than the “younger” population. Where is that accounted for in the survey? Also, the net cost to your company should be your guiding light if you are accountable to the C-suite. That is the benchmark. How much can the company afford to pay for benefits? Produce a number and measure yourselves against that. Yes, we all want the same thing: to offer benefits that are cost-effective and help recruit and retain employees. But are you? How do you know? Exit interviews covering this area?
Recently, a C-suite executive texted me and said, “Yes, costs are up. And at the same time, XYZ broker is trying to say we are doing better. Same BS from all health insurance brokers, which drives me crazy. Last year we paid X. This year it is X+, not X–.”If that does not tell you what the C-suite is looking for, then benchmark surveys may be your line of defense. There is a better way. Evaluate your own plan performance and see where your cost drivers are. Is it specialty drugs? Are you capturing Rx rebates? Have you considered alternative funding and finding best-in-class providers? Have you considered a captive for your stop-loss coverage? How is the network performing for you? Are your plan designs encouraging generics over name-brand drugs?
There is a place for benchmark surveys: when trying to determine what you charge employees for coverage. That, however, says nothing about the particulars under the hood of your own company’s plan when evaluating gross costs. The devil is in the details, and you should be taking a microscope to your actual utilization to determine how to best manage this extremely expensive line item on your company’s financial statements.
