HR professionals who challenge the status quo when it comes to benefits costs have an opportunity to position themselves as strategic partners with top management.
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Get Your Report Now!Looking for ways to cut benefits and insurance costs is nothing new for HR. In recent years, the rising cost of healthcare has prompted many employers to search for more cost-effective medical insurance plans.
However, the recent recession makes it that much more important, according to Theodore D. Lanzaro, Jr., CPA and managing partner of Lanzaro CPA, LLC (www.lanzarocpa.com). “It is probably the biggest strain on them now.”
Many vendors do not inform customers about new products that are more cost effective--until asked to do so, explains Lanzaro. “Keep in mind that people don't always sell you what's best for you.” Products change yearly, but you might not hear about the most cost-effective options unless you ask about them, Lanzaro says. “In a lot of cases, if you're not saying that the cost is bothering you, then you're not hearing what they've got.”
Lanzaro says employers should “shop around” all of their benefits and insurance costs, including healthcare; disability, life, and dental insurance; and administration of their 401(k) plan. “You could be reducing your costs by shopping the administration around or tweaking the program.”
The first step is to examine your existing--and other--insurance to evaluate whether your current plan provides “the right amount of insurance” for your employees. For example, “it doesn't pay to have disability insurance that only covers 20 percent of your income,” Lanzaro says. In the case of life insurance, “a person who is the primary money-earner for his or her family should have at least $500,000 of insurance for each child plus enough to pay off the mortgage plus a year's living expenses.”
Next, he recommends asking for “apples-to-apples” comparison quotes--the cost for each vendor to provide identical coverage. Otherwise, it may be difficult to evaluate how good a deal you would be getting if you switch to another plan. A cheaper alternative might end up costing you more in the long run if the plan reduces benefits to employees because they may resent the changes.
Be proactive by researching alternatives before being asked to do so, he recommends. “Look at all of your alternatives, and don't be afraid to talk to a lot of people,” such as vendors and other HR professionals, he says. “If you're not talking to a lot of people, you may be getting sold what's the best for the salesperson, not necessarily what's best for you.”
More Resources on Employee Benefits