How to Cut Your International Benefits Costs
PART 3 of 3
For multinational companies, the cost of purchasing benefit plans for their foreign subsidiaries is expensive – more so than buying the same benefit in the United States. These high costs are driven by several factors, and while there is no way to avoid them entirely, there are some ways to mitigate them and make them more manageable.
Monitor and Manage Your Plan’s Performance
As we’ve shown, risk pooling and transparency with broker arrangements can help reduce benefit costs. However, one area that is often overlooked or not fully scrutinized is benefit administration.
Most companies rely heavily on the carriers, brokers and third-party administrators to perform the plan administration tasks as part of their engagement. Plan administration performance standards outside of the U.S. are often set at low expectations, if set at all. Smaller plans tend to be the most vulnerable to inadequate plan administration as the process is often ad-hoc and risk failing to adequately perform critical tasks. Typical affected areas are assessment of deductibles and co-insurance, unwarranted use of expensive medical facilities, ineligible individuals using the system, underpriced voluntary benefits, etc. Failure to scrutinize the benefit adjudication, claim processing, employee education and pricing for voluntary benefit processes could have a significant effect on plan costs.
All multinational employers should devote attention to the plan administration function to avoid these and a host of other preventable mistakes. Plan administration oversight is a valuable addition to the global benefit governance process. Some of the oversight routine activities that should be performed come with cost-saving advantages, such as mandating periodic independent benefit audits and monitoring claims for patterns that might suggest abuse or even fraud. The audit recommendation can also lead to the introduction of incentives for the brokers, plan administrators, or carriers to minimize unwarranted leakage of plan resources through ineffective plan administration.
These three cost-savings measures, risk pooling, transparency with broker arrangements and investing in plan administration are some of the most common methods for deriving greater efficiencies with global benefits. However, an experienced advisor should be considered to get the most value from your company’s global benefits plan. These experts can examine your strategy through the lens of the corporate hub as well as the local subsidiaries and provide the guidance to meet your goals.