The four blunders that law firm partners make in buying health insurance. Are you guilty as charged?

When it comes to health insurance, and benefits in general, law firms frequently make crucial errors that result in significantly overpaying for their insurance policies.  Although law firms must be generous to retain their best assets (their employees), these common four mistakes while looking like generous strategies, do not provide any benefit to the employees.

Here are the four mistakes and of course, as this blog is about improvements for your firm, what you can do about it.

1)      Fear of the complex.  For regulatory and other non coverage reasons, there are better ways to skin the cat.  There are more sophisticated policy structures that enable firms to achieve meaningful financial savings.  HRA’s and HAS’s are the most common, but these are variations in the way the coverage is structured that do not diminish from an excellent and generous benefits package.

Solution: Focus on the big picture, not the monthly premiums.  Determine what level of health care you want to provide through insurance, and do not fear unusual structures if they meet your big picture financial goals / philosophy.  For more strategy information, see here

2)      Commission problems.  There are some health insurance companies that sell very good insurance policies but not every broker is permitted to sell their products.  There are also some insurance companies that structure their commission schedule for virtually no compensation for the broker

Solution: Instruct your broker to leave no stone unturned including companies that pay little or no commission and to charge you an appropriate service fee.

3)      Wrong person involved.  Partners need to be involved at the beginning of your benefit process: at the strategy meeting, 5 months before your renewal (see here for often forgotten partnership issues in selecting health insurance and at the final meeting with your benefit advisors, 3 weeks before your renewal.  All too often, Managing Partners delegate these responsibilities on this very important (and expensive) decision to an administrative person thinking that there isn’t much to be done anyway so why spend time on it.

Solution:  Reality is that benefits being a large firm expense, are important since they touch every single employee and are often the most tangible demonstration of your firm’s culture.

4)      The number one reason that firms overpay for their insurance is being reactive and not proactive in managing the process.  Most firms wait until they get their renewal pricing package (i.e. increase) from their current provider and only then explore alternatives.  This is too late to make the right decisions and have a smooth transition.

Solution:  The first strategy meeting with your advisor / broker should be 5-6 months in advance of the health insurance renewal.  Custom designing your healthcare needs should begin well in advance.

Our next post about benefits (in two weeks) will be your timeline template.  Planning an efficient and professional renewal will pay dividends in better healthcare options and happier employees.

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