Supplemental benefits have become an increasingly important part of traditional employer-sponsored health insurance programs due to increasing deductibles and out-of-pocket maximums for employees across all industries and income levels.

But employers have expressed their frustration with these policies because of a lack of TRANSPARENCY regarding claims and expenses, which causes suspicion regarding the VALUE being delivered. This is why we established BeneRe, a group captive insurance solution that maximizes value for the employees rather than the insurance industry.

Results

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Average Employee Cost Decrease

Average Annual Member Distribution

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Employees Receiving Benefit Improvements

We believe that value and transparency are what everyone deserves. 

Benefits of Participating Members include:

Three important things to keep in mind:

1. Employees win first via better plans at better prices or we don’t proceed.

2. Employers get quarterly reports that allow them to track BeneRe’s performance.

3. All underwriting gains go back to the employer’s plans for reinvestment in programs.

Voluntary benefits financed the way they should be

Efficiently. Transparently. Benevolently.

Employees pay fully insured premiums. Nothing more.

There is no change to the insurance carrier relationship.

BeneRe reinsures the VB program and returns all profits to the health & welfare fund.

It’s that simple.

How does BeneRe work?

All employee premiums are paid directly to the insurance carrier, which holds the funds to pay all claims throughout the policy year.

BeneRe reinsures 100% of the program but the issuance of policies, handling of customer service and adjudication of claims are all handled by one of the most respected insurance companies in America. Underwriting gains are targeted to range between 10% and 20%, although actual results have been far superior. Because claims experience will vary from year to year, no distributions are guaranteed, however, employers will never face a capital call in the event there is a premium shortfall.

BeneRe Reinsures 100% of participating members’ voluntary benefits.

Contact us to learn more about how this works.

1. Employees enroll in the supplemental benefits program as part of open enrollment. Their payroll deductions are sent to the insurance company that is fronting the program. The employees enjoy the full faith and credit of the carrier fronting the program, meaning there is no financial risk to the employees.

2. Insurance company administrates the program as any other standard program. They issue policies for employees, handle customer service, adjudicate claims, etc.

3. The captive difference is that BeneRe reinsures 100% of the risks from these employer sponsored programs while still allowing all premiums to be held by the insurance company. This means that the insurance carrier holds the dollars until the final claims are paid for the policy period, thus providing extra protection for the employees. Note: All risks from participating employers are aggregated and the resulting loss experience is calculated on a composite basis.

4. Upon policy year end, premiums net of claims and expenses are released to BeneRe and further distributed on a pro-rata basis to all participating plans. Total expenses run 40%, which includes carrier fees, client service, captive management, compliance, broker commissions and taxes, leaving 60% of premiums to pay claims. If claims run at 50%, the employer would receive a distribution at the end of the policy year. If claims ran better or worse than expected; the distributions would be subject to change.

Important Considerations

What is a group captive insurance company?

It is an insurance company that exclusively reinsures the risks of firms belonging to that group. BeneRe is domiciled in Arizona and is regulated by that state’s Department of Insurance (DOI). They monitor BeneRe’s issuance of policies, collection of premiums, disbursement of claims, financial stability and compliance with all regulatory requirements as with any standard insurance company.

What’s the difference between a Single Parent Captive vs. a Group Captive?

The vast majority of large employers own a Single Parent captive and may wish to write these coverages through their controlled insurance company because of the consistently low loss ratios. However, this would represent a prohibited transaction unless the DOL were to grant a specific waiver to that employer. Conversely, the group captive does not require the DOL waiver:

  • BeneRe has removed the employer/employee conflict of interest.
  • Distributions are earned via third-party risk, i.e. the aggregated risk of all employers in the BeneRe group captive.
  • The only policies allowed in the group captive are Accident, Critical Illness and Hospital Indemnity.
  • All distributions must be reinvested in Employee Benefits.

What is the employee value proposition?

Unless employees would receive the same or better coverage at the same or better price, BeneRe will not allow participation in the captive. Analysis is performed on every current VB cost and plan design to calculate the actuarial and benefit value of the program. BeneRe will only allow an employer to join if the insurance program is improved for the employee.

What is the employer value proposition?

Many employers have been uncomfortable with the aforementioned low loss ratios and high commissions associated with voluntary benefits programs. BeneRe has solved for that by transparently disclosing all commissions, expenses, claims and then distributing 100% of all underwriting gains back to employers on a pro-rata basis. There are no contingent bonuses or other misalignments of interest prevalent in the market today.

Driving Change

In the traditional model, commissions are high and the lower the claims, the higher the profits for the insurance industry.

BeneRe’s model fundamentally changes the way the game is played. Commissions come down, transparency goes up and the lower the claims, the higher the dividend for reinvestment for employees.

Typically employees receive a 10% cost reduction, strong enhancements to plan designs and employers receive dividends for benefits reinvestment. Employees are the biggest winners in the BeneRe model.

Putting Distributions to Work

All distributions earned by participating employers must be reinvested in ERISA covered plans which are included in the company’s Summary Plan Description (SPD). This affords the human resources staff wide latitude in determining how to spend the money. Employers can use the funds for wellness programs, benefits administration expenses, enrollment communications or a multitude of other important initiatives. In essence, employers must abide by the same ERISA rules that already apply.

Who Would Benefit From Having Voluntary Benefits?

In a 2017 study, the Federal Reserve surveyed more than 5,000 people and found that about 46% of Americans said that they did not have enough money to cover a $400 emergency expense. When considering the Deductible and Out-Of-Pocket Maximums just mentioned, this situation puts a significant number of employees in financial jeopardy. What is surprising is the extent to which insured individuals have trouble keeping up with their medical bills. In 2017, The New York Times reported that 20% of Americans under 65 with health insurance had trouble paying their medical bills over the past year. Of those, 63% claim to have used up all or most of their savings to tackle their healthcare expenses, while 42% took on an extra job to cover their costs. These medical financial pressures will strike approximately 4 in 10 of employees each year, but pre-existing health conditions, current health status and age demographics do not accurately predict who that will be.

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About 4 in 10 Americans get unexpected medical bills. Pre-existing health conditions, current health status, and age are not clear indicators of who will be affected.

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A Federal Reserve Study found that about 46% of Americans did not have enough money to cover a $400 emergency expense.

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Medical bills are the leading cause of personal bankruptcy. Of those who filed, 78% had insurance.

These supplemental benefits deliver far greater financial protection than dental & vision insurance…

Accident Insurance

  • Provides lump-sum payment directly to the employee for injuries resulting from a covered accident.
  • Covers items such as: broken bones, concussions, ambulance, stitches, burns, and more.
  • Helps employees pay for their out-of-pocket expenses likes deductibles and copays.

Critical Illness

  • Provides lump-sum payment directly to the employee upon diagnosis of a covered illness.
  • Covers items such as: heart attack, stroke, cancer, Alzheimer’s, loss of sight, and more.
  • Helps provide employees financial security and extra money to pay for items such as: mortgage, lawn care, childcare, and more.

Hospital Indemnity

  • Provides cash benefits directly to the employee upon admittance into the hospital for a covered stay.
  • Covers hospital stays for labor and delivery, surgery, accidents, and more.
  • Helps employees meet the unforeseen costs associated with a hospital stay.

Why is Employee Demand for these Coverages Rising?

There are a number of factors at play in terms of rising demand for supplemental benefits. Among them are:

Rising Costs

Heading into 2022, medical cost trend remains stable yet unsustainably high as healthcare costs continue to rise according to PWC. HRI projects 2022’s medical cost trend to be 6.5 percent. This is consistent with the previous five years, which have seen trends between 5.5 and 7 percent. Efforts to cut utilization have run their course and prices have continued to grow. This has put significant pressure on employer sponsored health insurance plans.

Average Annual Premiums for Single and Family Coverage 1999-2020

Source: KFF Employer Health Benefits Survey, 2020

Rising Deductibles

Over the past five years, the average annual deductible among all covered workers has increased 53%. Forty-two percent of covered workers in small firms and 20% of covered workers in large firms are in a plan with a deductible of at least $2,000 for single coverage, similar to the percentages last year.

Average Annual Health Plan Deductible for Single Coverage 2006-2020

Source: KFF Employer Health Benefits Survey, 2020

Soaring Out-of-Pocket Maximums

Most workers also face additional cost sharing for a hospital admission or outpatient surgery. After any general annual deductible is met, 68% of covered workers have coinsurance and 14% have a copayment for hospital admissions. The average coinsurance rate for a hospital admission is 20% and the average copayment is $326 per hospital admission. The cost-sharing provisions for outpatient surgery follow a similar pattern to those for hospital admissions. While almost all (99%) covered workers are in plans with a limit on in-network cost sharing (called an out-of-pocket maximum) for single coverage, there is considerable variation in the actual dollar limits. Twelve percent of covered workers in plans with an out-of-pocket maximum for single coverage have an out-of-pocket maximum of less than $2,000, while 20% have an out-of-pocket maximum of $6,000 or more.

  • 6 in 10 Single Plans have a $3,000 Out-Of-Pocket Max
  • 1 in 5 Single Plans have a $6,000 Out-Of-Pocket Max
  • $4,065 is the Average Out-of-Pocket Max
SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2019