The Magic Pill
The Rising Costs of Employee Benefits Are Easier to Swallow When Coated in Cooperation
By Charles Dyson

A prominent national publication recently ran a piece about the rising tuition costs in higher education. The numbers were staggering, but the report highlighted colleges and universities that were some of the most expensive institutions in America, and did not really reflect the other eighty percent of colleges in the United States, many of which are still affordable.
     
The report, however, did bring to light an important issue that all institutions face on a daily basis—the high cost of payroll including the expanding cost of employee benefits. A college president at one of the schools featured in the article pointed out that half of her budget goes to payroll and employee benefits, and that everyone is looking for the “magic pill” that will reduce these costs.
     
Working primarily in college employee benefits for many years, I know that one solution to the rising cost of employee benefits is through institutions cooperating with each other in an employee benefits partnership. Most institutions now usually bear the employee benefits cost burden alone, especially small colleges that traditionally have seen other institutions as competitors for students, faculty, and grants.          
     
There are many reasons why a small, mid-sized, or even large institution should be a member of a college employee benefits partnership. One reason a college or university might not be part of an organization that strengthens their position in academia is that they aren’t aware of the opportunities available. In the last twenty years economic pressures in our global economy have forced colleges and universities to rethink how they might view each other and to see the benefits of partnerships.
     
Partnerships can best be observed with group purchasing cooperatives. Group purchasing cooperatives are highly effective ways for institutions, both big and small, to cut costs and reduce the many-layered decision-making process. Group purchasing cooperatives have been around for many years, focusing on the product and service needs of member institutions, but they have not generally included employee benefits in their choice of offerings. Nevertheless, they have paved the way for other organizations to bridge the gap between higher education and the business world.
     
Despite the fact that pooling the employee benefits package will save money, time, and frustration, and will strengthen the group’s claim experience, employee benefits are not common in the world of most group purchasing cooperatives. The expertise required to manage a college benefits partnership is similar to that of a group purchasing cooperative—the management must understand the business world, but at the same time be sensitive to the higher education culture. However, the organization that manages the employee benefits partnership needs to have a diversity of skills in the employee benefits arena. The organization also should be separate from its member institutions so that any one college will not dominate the decision-making process for the group.
     
This process takes a dedication to cooperation by the colleges and universities forming the partnership. The insurance company will not price the insurance policy as a larger group if all of the colleges in the partnership do not work together on establishing a common base group employee benefits package.
     
Once the employee benefits package is agreed upon by the institutions it needs to be continually managed. This is when a conventional insurance broker is not always a good fit for the partnership. Insurance brokers are traditionally trained to find the right fit at the right price, but are not trained to manage the ongoing needs of a multi-college employee benefits partnership.
     
One of the most important services a highly effective management team at a college benefits partnership can perform for its member institutions is the claim management process. Normally when employees are in need of their benefits from the insurance company they have to pursue the claim by themselves. Most human resource departments are stretched to their limits and are not set up to walk the faculty or staff member through the claim process from beginning to end.
     
When employees contact an insurance company for payment of their claim they are required to gather all the correct documents from their employers and doctors for the insurance company before the claim is paid. The problem with this scenario is that most likely the faculty or staff member is going through one of the hardest times in their lives, because either they are injured, sick, or grieving from the loss of a loved one. The burden of collecting paperwork to process their claim can be overwhelming. This is where the experience of the right college benefits partnership management team can make the process as easy as possible for the employee to ease that burden. The service provided by the management team helps the employee and eases the workload of the human resource department as well.
     
The burden for the human resources department in dealing with claims can be lightened by the benefits partnership management team with ongoing communication with faculty and staff about their employee benefits. For example, if someone is inadvertently dropped from his or her benefits, decides to leave on a sabbatical, or just disappears from the payroll deduction report, the management team that oversees the partnership can contact these individuals and resolve the discrepancies.       
     
The power of a college benefits partnership shines most when it comes to claims experience. “Claims experience” is an insurance industry term that describes part of the process to establish the premiums for the group insurance policy. The insurance company estimates the number of claims any particular group might submit in any given year. If a single college is hit with large claims by a few employees the insurance company typically increases the premiums to cover the increased losses. The insurance company might also cancel the insurance policy because they have now determined the group to be an unfavorable risk.
     
The more colleges that join a college benefits partnership the stronger the claim experience will be. If the group of institutions becomes sizable enough even large claims most likely won’t adversely affect the group. The insurance companies see ten thousand employees and above as a very healthy group size. It might take time for a college benefits partnership to reach this size, but it is well worth the effort, and even at below numbers of ten thousand the group is building purchasing power strength and increasing valuable services.
     
Collaborating with other colleges and universities to build a college employee benefits partnership might not be the last magic pill needed to resolve the challenges higher education faces, but it is a major step in the right direction. 

Charles Dyson is a managing partner at College Benefits Group and has been in the insurance industry for many years. He can be reached at charles@collegebenefitsgroup.com.