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Plan surfing doesn't always save employers money

Employers looking for ways to reduce their bottom line may be tempted to "surf" health benefit insurers to find the one with the lowest price, but this strategy can end up costing the employer more in the long run, according to administrators with PacifiCare Dental and Vision, a dental and vision benefits provider for employers in the Western United States.

"The major drawback to plan surfing is that it's disruptive for workers."

Nearly 70 percent of small employers say they switched health benefit plans within the past five years and 34 percent of those report changing plans within the last year, according to PacifiCare administrators, citing the "Small Employer Health Benefits Survey," a study released by the Employee Benefit Research Institute (EBRI) on Sept. 5, 2000.

"Unfortunately, employers don't realize the pitfalls of frequent plan switching," says Mary Kay Dieter, a spokesperson for PacifiCare Dental and Vision Administrators. "Buyers who shop for health plans make a mistake when they consider price alone."

There are indeed hidden costs to plan switching, according to Paul Fronstin, a senior research associate with EBRI. "The major drawback to plan surfing is that it's disruptive to workers," says Fronstin. "Employees either don't have time to develop relationships with their providers or they lose providers they really like. This can reduce workers' productivity."

While plan switching can result in positive changes, such as increased coverage or improved service, PacifiCare says employers should weigh the following factors before they decide to surf plans:

  • Plan switching may have hidden costs: Every time an employer switches plans, there are additional administrative tasks involved that cost money in terms of work hours lost. Employers must be notified, new forms need to be completed, and orientation meetings must be held to communicate new plan information.
  • Switching plans frequently may mean losing preferred providers: Employees may be unhappy if their current providers are not affiliated with the company's new plan. This can affect workers' morale and their attitudes toward their jobs. Switching providers also interrupts any ongoing medical treatments, causing further employee dissatisfaction.
  • Employers may be branded as "plan surfers" and denied the opportunity to purchase coverage: Some insurers are reluctant to accept an employer who has been plan jumping. According to PacifiCare, insurance underwritersestimate it takes three years for an insurer to break even after a new case acquisition. Additionally, PacifiCare says that underwriters will take a look at how many times a company has switched carriers in a five-year period. If it is more than twice, it's considered too often, and an insurer will "load" the rate with an added penalty for moving too frequently, or not insure the case at all.

    When is it a good idea to switch?

Dieter says that price alone is seldom a good reason to change plans, but quality is. "If buyers choose benefit plans solely on the basis of cost, they're going to be disappointed down the line, and tempted to switch. The hazards and hassles of switching are not worth it, unless you are moving to a plan that provides higher-quality service."

To avoid having to make a switch later on, Dieter advises employers to look for a plan that stresses quality in all phases of its products and services. She says a good plan is interested in developing long-term relationships with customers and will offer quality in order to retain those customers.

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