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Wendy Matton

Fully Insured Benefits: Are They The Right Fit For Your Small Business?

So, your business is growing, and you begin to wonder if it is time to look into enhancing your employee compensation with a benefits program. Maybe you’ve even done some research and heard the term ‘fully insured’ but aren’t sure if it’s the right fit for your small business. Follow along below as we walk through fully insured benefits and different considerations.


What Are Fully Insured Benefits?

First, let’s start off with a simple definition. Also known as traditionally funded, fully insured benefits plans are a method of funding where your premiums are set out ahead of time, based on projected usage for a given year. Which is determined by a set of standard calculations used to form an ‘educated guess’ of future claims for your group.  Throughout the year, you will pay a set rate for each employee (single or family) covered under your benefits and will be subjected to an annual review and respective premium adjustment (up, or yes even down).


How Are Fully Insured Benefits Priced?

For individual benefits such as life Insurance and long-term disability (LTD), they are usually based only on age, gender, earnings and occupation.  While health and dental options are priced on your employee demographics and family status (i.e. single, couple or family rates) and the plan design/coverage options that you choose, forecasted using expected future claims.


Budgeting For A Fully Insured Benefits Plan

Setting a budget for benefits can be challenging.  Consider basing it on a percentage of your overall payroll costs, since benefits will form a valuable part of your compensation it makes sense that their costs are somewhat correlated. We recommend that you aim to set a budget that is a percentage of your payroll costs. From there, your benefits specialist will work with you to put together a plan offering that fits within your allocated budget - as mentioned above, your demographics and plan offering will dictate your premiums. Within the budget conversation, it’s also important to know that depending on the product you go with, your own future claims could also impact those costs in any given year – all of which should be communicated throughout the year where possible, and at the time of your plan renewal.

Secondly, you need to determine if you will be sharing in the cost or covering the entire expense. In terms of best practices, group industry guidelines stipulate that as a plan sponsor, you contribute a minimum of 50% of the premium.    

Your business and employees are unique, and a fully insured plan may be perfect for you, or not the right fit at all. Maybe you prefer a set cost for each employee vs. a percentage of overall payroll, and there are options out there to suit that. This is where a benefits specialist comes into play.  A consultant will help you implement a program that is the best fit for your needs and budget.  

Wendy Matton

Wendy has nearly 40 years of experience in the financial services sector. She began in banking and moved on to Bay St. trading in fixed income, currency and commodities, to management. The next phase was spent in sales and advisory roles as an independent financial and insurance advisor. She has spent the last 15 years as a consultant in the employee benefits industry. Wendy enjoys going on gal-pal road trips with her daughter visiting theatres and B&Bs across Ontario. When not hosting a “Scuff ‘n’ Scoff” with her hubby and musical friends, her most treasured moments are outdoors, back in the hills of Newfoundland on a ski-doo or on a pristine lake with her dad, in a canoe.
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