Benefits this, benefits that, what’s the difference?

In an industry full of jargon, clearly explaining benefits features is super-important. Whether differentiating between cost-plus and spending accounts or explaining how premiums rise and rarely ever fall, it’s a tough job to make sure it’s as digestible as possible. That’s why we decided to write a blog, laying out some easily digestible and memorable terms so you’re better equipped to shop plans.

There are three ways to pay for health and dental costs using group benefits:

• Cost-based
• Claims-based
• Premium-based

Here at Blendable, we focus on cost-based and claims-based health and dental benefits. That’s totally different from insurance companies that offer premium-based health and dental benefits broken down by category with limitations and maximums.

What are premium-based health and dental benefits?

The health and dental benefits you commonly see from insurance companies are what we call premium-based health and dental benefits. That means that instead of paying the actual cost of health and dental expenses, plan sponsors cover these expenses by paying a premium.

Ok, but what’s a premium?

A premium is a payment to an insurer to compensate them for taking on risk. Think of your car insurance. You pay a monthly premium so that if an accident happens the insurance company will foot the bill. But your premiums alone wouldn’t cover the cost of a major accident. Instead, insurers rely on premiums from a large group, so they have the funds to support the unfortunate few who do experience a tragedy.

Seems like a great deal. Doesn’t it work for health and dental expenses too?

Nope. The whole point of insurance and premiums is to cover major expenses that seldom happen. The actuaries at insurance companies do some serious math to calculate the risk they take on and spread that risk over their pool of clients.

Health and dental expenses, on the other hand, are transactional. They are low cost and high frequency. This means there isn’t a risk that they will happen, there’s almost a certainty!

For these transactional benefits, the “premiums” a plan sponsor pays aren’t related to risk as much as actual usage. The insurance company pays health and dental claims on your behalf, and they need the cash to do that. When claims go up, your premium goes up to recoup costs.

These premium increases can get out of hand, leaving plan sponsors with a major expense they didn’t budget for. What are you supposed to do? Cancel your benefits?

HSA and EHB to the rescue!

Compare this to the health and dental options that Blendable offers – Health Spending Accounts (HSA) and Enhanced Health Blends (EHB). When you set up Blendable benefits there is no premium involved – you have total control and transparency.

Health Spending Accounts

Health Spending Accounts are contribution-based instead of premium-based. They let you set your budget, make fixed contributions, then give plan members the freedom to reimburse any eligible expenses. This ultimately provides you with high levels of cost-control and your team with complete autonomy and flexibility over their benefits.

Enhanced Health Blends

Enhanced Health Blends are claims-based instead of premium based. You set a ceiling on how much you’ll pay in each category, then only pay for claims plus an admin fee. If claims are low, you pay less. This gives you cost control, plus the advantage to save money if claims are low. Plan members still get excellent support with a plan that feels like the premium-based plans they may be used to.

Got questions?

We have answers! We love talking benefits, so give our Growth Team a shout today! We’re also social, follow us on LinkedIn, Facebook, Instagram, and Twitter for more group benefits news, updates, and fun.