Should Employee Benefit Providers embed “value add” products inside the healthcare rate?
This is kind of a big and loaded question because whether or not they should, they do. It’s common practice.
I will admit that my opinion has evolved over time. I used to think of products embedded in the healthcare rate as a value add and as insurance carrier differentiator. But not anymore. How can a product add value if it’s not wanted? Then it becomes a takeaway. When employers are not given the option to opt out of these so-called value adds, and when the cost is hidden it becomes problematic. Some quick disclosure, over at my day job, my employer and insurance carrier Equitable Life doesn’t embed costs. But my opinion on this was actually reshaped when I was working on the advisor side of our business. Multiple billing wasn’t as big a deal as I thought it was and the admin liability risk on forgetting to add someone to the wellness program is low. Plus these providers do a great job making set up and ongoing admin a breeze.
Way back in 2006 when I joined the wonderful group benefits industry the costs hiding in the healthcare rate were limited to the pooling charge and Best Doctors. Best Doctors is the OG value add. If my memory serves me well, the cost was around $0.50 for a single and $1 family. But today hidden costs have ballooned to include the second opinion program, HR tools, wellness (like lumino and vitality) EAPs, virtual care and more.
All of these programs have a cost.
So who cares? What’s the big deal?
Benefit plans are under pressure. Drug risk is high, disability is suffering from prolonged historically low interest rates coupled with longer duration periods and higher incident rates. Dental fee guides are increase 5-7%. Higher cost is everywhere. These embedded programs could cost an employer anywhere from $1-$5 per person. Since well all like percentages, that could be as high as 10% of the single healthcare rate. Imagine if your clients had an extra 10% to spend?
Here's what else an HR department could get for $1 - $5 per person
The list goes on.
The other problem is that it complicates future cost forecasting. The cost for the add on products is backed out of the healthcare premium in renewal calculations. You can’t quick and dirty math your way into a three-year cost prediction. In addition to backing out the pooling charge you now have to dig into how much do each of these add ons cost. I’m not a fan of this lack of transparency.
Instead, why don’t we price each of these options and let employers choose if they would like to offer the program to their employees? Not all employers want these services tied to their insurer. It creates additional change management for employees. New insurer, new EAP, new virtual care, new wellness. It’s too much.
What do you think? Should third party services be billed in the health rate? Should they be mandatory or optional?