One of the major problems with regard to Group Insurance Benefits is the misunderstanding by ER’s with regard to the renewals of group plans. A client’s plan could show a very respectable renewal claims history (Premiums less Claims = administration and profit margin) and still be asked for an increase in premiums.

  1. TLR (Target Loss Ratio) seems to be what an insurer wishes to achieve with regard to premiums vs claims. (TLR 69%) should indicate $100 premiums, $69 claims and the plan should renew with no increase. This varies from case to case.
  2. In a renewal, many companies show a term called Health Trends. With regard to the 69% TLR example, a renewal could still show a Health Trend of an additional 14 to 17% or more. This additional cost is not representative of the client’s claim history, but anticipated claims experience.
  3. Inflation Factor (another verbiage for the above) which has been seen as high as 52%. The term inflation factor can not normally be justified allong with health trends.
  4. Finally, the TLR is not the only factor that has to be taken into account. The charges for pooled benefits, commisions, and other auxiliary items can also be added to the discretionary renewal report. Pacific First takes care to explain to clients what fair expenses are in their group plan. With the Blended Plan (since we rely on a co-operative effort with each insurance carrier that we work with), the insurance company is expected to make a fair profit, but no more.

The Private Heath Services Plan is a very effective method of saving costs on employee benefit plans, enabling an employer to tailor-make the benefits plan to suit their particular requirements. Contributions in a PHSP are made up of either premiums, deposits or other considerations. Our Pacific First Plan charges fees on claims not premiums (cost plus), but is not a reimbursement plan. We invoice our contribution requirements along with the premiums that are being billed by the insurance companies. This is the first part of the Blended Plan.

We have designed our plan as a PHSP under the Income Tax Ruling ATR-8 passed in May, 1986. This ruling describes that only Dental, Hospital and Supplemental Healthcare can be put through the PHSP. Under the H&W Trust it makes reference to a combination of the PHSP, Accident & Sickness and Group Life Insurance. We have taken this literally and over a number of years, have done just that. We are able to work in harmony with specific insurance providers to maximize the clients’ options at a reduced cost. It works due to the fact that we have spent time and money to co-ordinate our adjudication services with that of the insurance companies that we work with.

Our Blended Plans begin with the understanding that ALL questions, claims and servicing issues must go through our office FIRST. The insurance companies take this into account in the costing of their premiums as well as the high deductible we request with regard to the Health coverage.

The main difference between an insurance company plan and a cost plus plan or self-insured plan, is that the insurance company wishes to take their profit margin, claims payments, taxes, reserves, Canadian health trends and pooled expenses out of every dollar of premium paid whether there are any claims or not.

We have ongoing administration expenses, staff and other business expenses, mailing and accounting costs, but the adjudication fees are only based on actual claims. The possible limitation of a self-insured plan is what might occur in the event of a catastrophic illness or accident. Pacific First grappled with this problem for a number of years until the concept of the Blended Plan was formulated. That is that the majority of health claims are under $1,000.00. Any major claims, plus travel and hospital should be insured.

The plan must be set up properly. The explanation of the plan briefly is:

  1. All claims and contributions must be submitted to the offices of Pacific First
  2. Pacific First must adjudicate the claims in the same manner as an insurance company Limitations on the dental plan will match the client’s present plan, or enhancements may be suggested
  3. All health claims are sent to Pacific First for payment on the initial expenses and then passed on to the insurance company
  4. All catastrophic illness or accidental claims are covered by the insurance company
  5. Travel and Hospital expenses are covered by the insurance company
  6. Pacific First insures that the client’s classifications are taken into account. It is very important that each class is defined properly with regard to the contractual agreement.
  7. All claims problems and enquires are handled by Pacific First
  8. All administration services and accounting services are handled by Pacific FirstThis cooperation of coverage and services results in a savings that is accredited to the client.

An insurance company might promise to pay for these types of extraordinary claims, but if they do not receive their normal 30 – 40 % margin out of every contributed dollar, the rates would automatically be raised in the following year. lf they make more than their projected profit margin, they will keep the extra premiums.

Beginning in the l980’s, PRAS Ltd. asked the question: “What if these two ideas were both put into one combined plan, blending the best of both concepts?” PRAS Ltd. has spent a number of years formulating this idea and has worked with several insurance companies to form a workable method of offering to the public the Blended Plan concept.

Each employer’s case is different, but with proper claims and premium experience, PRAS Ltd. has found that they pan demonstrate to a client how they can provide the same benefits with an actual savings and/or improved benefits.

Pacific First has been able to provide this concept of the blended plan for small and large companies, unions and professional associations and franchise groups. Many of the union members at the BC Airports are covered under the Blended Concept.

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