Why are fees for traditional insurance so high?

As an employee, you may have heard the terms Target Loss Ratios (TLRs), Large Amount Pooling (LAP) charges, and various other fees that make up your overall employee benefits premiums. Have you ever stopped to wonder how much of each dollar you are putting into a traditional group employee benefits plan is actually going towards paying for claims? It’s possible that you’re paying more than you should be for predictable benefit lines such as dental, vision care, and paramedical services including massages, chiropractic, and physiotherapy.

Large amount pooling, also known as stop-loss coverage, was initially introduced to protect against the financial consequences of catastrophic claims, such as high-cost prescription drugs, emergency travel coverage, and hospital expenses. However, this protection comes at a cost, with providers charging a premium, whether or not the protection has been used. The LAP charge is applied to the entire extended health care premium, and a similar TLR is applied to the dental premium, leaving less of your dollars going towards paying dental claims.

By utilizing health spending accounts, you can save anywhere between 25-30% in fees on predictable claims that are not protected under LAP, such as paramedical coverage. A health spending account is a defined contribution where paramedical coverage can be carved out from your traditional plan and covered through a separate account. This often charges 5-10% of claims and leads to cost certainty for employers. Through Aya Mastercard’s best-in-class platform, you can access affordable health and wellness spending accounts by making the best use of your benefit dollars. Reach out for a demo to see how we can help you optimize your employee benefits plan.