Fourth quarter seems to come quicker and quicker every year. Somewhere in the middle of it, you receive your employee benefits renewal package, usually accompanied by a nice big rate increase. Your carrier says this change is “necessary” because of “the rising cost of health care” or “demographic changes in your area” or “new claims experience.”
This obviously doesn’t sit well. You call your health insurance broker and talk to him for the first time this year. You let her know this isn’t acceptable and you need to shop around. A few days or weeks later, you’re presented with a confusing list of alternative health plans. These plans are not quite as good as your old plan and not quite as inexpensive, either. But, one of them is close enough to your old benefits and doesn’t raise your rate quite as much as your old plan wanted to, so you decide to make the switch.
You schedule a day or two to enroll your employees in their new benefits. By now you are coming up on your renewal date- likely with under 30 days to go. “It’s the holiday season” and “we’re almost at the end of Q4– there’s a huge backlog” are the popular responses when you ask when you’re receive notification of approval and get ID cards for your new plan. Maybe we’re even a few days past your renewal date. Employees are starting to ask “When will my ID cards show up? I need to see the doctor today!” Finally, you receive notification of approval. Your welcome letter is in the mail- allow 7-10 business days. Employees will receive their ID cards in about the same amount of time. You breathe a sigh of relief, happy to have the renewal process over.
What’s wrong with this picture? Of course this is an extremely outdated, arduous and unnecessarily difficult renewal process. This is plain to anyone, even if you’re not responsible for your company’s employee benefits. But what even experienced professionals may have missed is that not only is this renewal process frustrating to your business and employees alike, it’s also illegal.
Employers are required to file a “Summary of Material Modification” a full SIXTY (60) days in advance of making any material changes to their employee benefit program. This means if your plan renews on January 1 like most employer groups, you have to issue written notification to all of your beneficiaries no later than November 1. Failure to comply can result in several different penalties, ranging upward of $110 per employee per day! In order to be in a position to furnish the documents in a timely manner, you actually need to begin your renewal process far earlier than you may be used to. For a full and proper analysis, we recommend beginning the renewal conversation no later than September 1 for a January 1 renewal.
Yes this may seem early, but given the penalties for violating Summary of Material Modification notification rules it is necessarily early. Your business deserves a comprehensive and complete analysis of all available programs, including non-traditional benefit options that aren’t available via standard mass-market quoting tools used by most brokers. Starting your renewal process by September 1 allows your HR department the time they need to collect the full gamut of benefit options available to your group, properly analyze them to account for the cost and benefit of each, make a final benefits decision and notify all of your beneficiaries in a timely fashion, avoiding any sanctions or fines.
Additionally, having your benefit decision made 60 days in advance of your renewal date gives your HR department and health insurance brokerage the necessary time to implement the changes and secure welcome packages, ID cards, and doctor choices. This avoids your employees wasting time on the clock complaining about not being able to properly access their benefits and saves your HR department from having to deal with these disgruntled employees.
With the California Department of Labor taking on additional manpower and vowing to audit every business by the end of 2019, it’s no longer acceptable to procrastinate your company’s benefits decision. Not only does it make for a frustrating renewal experience but it could cost you tens of thousands of dollars in fines for non-compliance. For the sake of your management team, employees, insurance broker but most of all your wallet and your sanity, start your renewal process at least 120 days prior to your renewal date.