Insurance has always relied on combining individual customers into larger groups to help spread risks and lower costs. But all pools are not alike, says Arthur Chung, CEO of the British Columbia Construction Association Employee Benefit Trust (BCCA EBT). Experienced administrators can help ensure that pools not only share the risk but maximize the benefits of being part of that pool.
"Everyone understands the basic concept of pooling," says Chung. "But there are some misconceptions about how pools work. We're a non-profit trust acting as a third-party administrator and we pool our clients who are similar in that they're all involved in the construction industry."
However, the trust only pools on catastrophic coverage, which typically involves costly payouts. That includes group life insurance, accidental death and dismemberment and disability. Other benefits, such as extended health, vision and dental are partially underwritten by the trust, but not pooled—contributions are based on the individual merits of each member group.
"By combining sheer numbers of insured people—now more than 6,600 workers in 450 employer groups—we leverage the buying power of a large group and pass those benefits on to the clients," says Chung. "As a non-profit trust we won't take advantage of that buying power to hide a rate increase. We also don't add brokerage fees or commissions that you might encounter in the private market. Those numbers also empower us to lobby on behalf of our members regarding issues that affect their health care."
With a large group of clients, the trust also achieves an economy of scale, allowing it to upscale the services offered. That can include offering a greater range of wellness programs or hiring experts to staff those programs and to help clients benefit from cost containment strategies.
While insurance companies may be constrained regarding the eligibility requirements of applicants, the trust can bring more flexibility into play.
"In the private market, when a group employs fewer than five people, often they need to be in business for more than two years, and there are limits to how many family members they can employ," says Chung. "It can be harder for them to find benefits. However, we have the ability to look at their eligibility as part of our larger pool, not just the company itself, so we can often still provide them with benefits."
The trust also works to ensure that the pool is optimized by screening potential new members. The group's existing track record and claims history are first taken into consideration.
"If a group approaches us and all they're interested in is pricing, we'll know that this group is not necessarily a good fit for the pool," says Chung. "We help new clients to understand that insurance is about more than simply mitigating risk. It's about looking after their employees."
With some pools, everybody is thrown into the same category, sometimes forcing good groups to heavily subsidize poorer performers.
"We won't let that happen," says Chung. "Identified groups typically receive the benefits of our programs to help promote wellness, foster a healthy workplace and to address issues that might lead to claims. Our philosophy is not only about sharing the risks, but reducing the pool's overall risks."
While the BCCA EBT's membership forms a single pool, the trust still recognizes them as individual members with unique circumstances.
"In one case we saw that a member had submitted several claims for hepatitis C treatment in one year," says Chung. "The course of treatment for hepatitis C costs between $125,000 and $200,000. However, our research showed that once the condition is treated with this medication, the condition would not be recurring. We pulled that claim from consideration when we did the underwriting for the renewal. Just because you're part of a larger pool doesn't mean you're anonymous. As a trust, we can give our members individual consideration."
This content is sponsored by the British Columbia Construction Association Employee Benefit Trust (BCCA EBT) in collaboration with ConstuctConnectTM Media. To learn more about BCCA EBT, visit www.bccabenefits.ca.