How can plan sponsors navigate a carrier exit?

Disruption to members, internal HR workload, and the loss of familiar processes can outweigh the lure of a new provider for plan sponsors. And when service issues stack up or key people leave, this can often complicate a carrier relationship, with some considering a switch in providers or ending a relationship altogether.

However, switching benefit carriers should “always be a last resort”, according to Avinash Maniram.

He believes the preference is always to avoid change unless “absolutely necessary because that can be hugely disruptive,” said Avinash, senior consultant at PBI Actuarial Consultants. “There’s a huge HR cost in terms of time and effort, and potentially in terms of reputation.”

The only exception, Maniram underscored, is when members’ needs aren’t being met - whether that’s due to poor claims handling, confusing adjudication processes, or call centre staff unfamiliar with a plan’s unique design.

“If you’re not meeting the needs of the members… that’s definitely rule number one,” he said, adding service issues, disrespectful treatment of members, and financial renewals that “just don’t make sense” without a willingness to negotiate are also deal-breakers.

He added that communication breakdowns often stem from both the carrier and the plan sponsor. Too many points of contact on either side can cause delays and misdirection. That’s why he believes streamlining is key. Those who assign a single primary contact within each organization who can escalate issues internally helps avoid the “runaround” and ensures requests are handled more effectively.

However, as he notes, changes in key personnel at the carrier, particularly at the account management level, can quickly alter the quality of service. Maniram recalled a long-standing relationship that soured after a highly experienced account manager retired. The replacement, though familiar with large case management, didn’t understand the client’s market or how to advocate internally.

As a result, renewals began to “not make sense,” service challenges emerged, and the plan sponsor eventually launched a marketing search.

He pointed to another case of a poorly executed implementation after a carrier change led to years of finger-pointing instead of problem-solving. The result was another marketing process in just three years, despite the client’s prior 20-year relationship with its former carrier.

Flexibility in administering custom plan designs is also a common breaking point, said Maniram.

“There's nothing that's standard in these plan designs. There's no off the shelf,” he said. “You're not buying Plan A, B or C, so you need to have the right carriers who can administer those unique design. If they're unable to do that and they're not open and they’re not willing to find solutions, that's where things start impacting members. And they're the end users. We need to keep them happy. If there’s no solutions being brought forward, then that’s another reason to change.”

Maniram explained that his role as a consultant covers negotiations, relationship management, and keeping up with trends in the provider space. On financial matters, his team handles all discussions, gets sponsor approval, and then passes the details, such as updated rate sheets, to the administrator for implementation.

From there, administrators manage the day-to-day flow of claims. And while 95 per cent of operational matters stay with administrators or HR staff, his team steps in for the remaining 5 per cent, usually systemic problems or those requiring plan design changes.

Maniram noted that in the multi-employer large-case market, carrier reviews and changes happen far less frequently than in other sectors. He said there’s no formal governance rule requiring regular marketing, and strong relationships often mean contracts run for years without disruption. Initial agreements usually include rate guarantees lasting about 28 to 36 months, followed by several renewal cycles before trustees start reassessing. And if service and account management are strong, sponsors may overlook moderate financial pressures.

“If they have a good account manager, then sponsors generally feel that they can work through those financial issues,” he said, explaining that when a new account manager comes in, they’re typically given a couple of years and multiple touchpoints with the client to build rapport before any decision is made.

On average, a carrier change might occur only every six to seven years. Occasionally, the arrival of a new administrator, often bringing different experiences and relationships, can prompt an even earlier review. Still, Maniram emphasized plan sponsors should treat benefit carriers like any other key service provider, with formal performance reviews built into governance practices. This starts with a clear service agreement that may include performance metrics and even financial penalties.

“Just like you would with your actuaries, consultants or your accountants. It’s the same thing with the benefits side of things,” he said, noting annual renewal reviews provide one checkpoint, but he recommends a more comprehensive satisfaction review roughly every three years, either led by the administrator or consultant or done in a formal meeting with the plan sponsor.

Maniram reiterated that ending a carrier relationship should only come after other avenues have been exhausted. Before moving to a formal search, he advises starting with meetings at the account manager level and escalating if needed. In some cases, carriers are effectively put “on probation,” either formally or informally, so they’re aware improvement is required.

When it becomes clear a marketing process will proceed, transparency is key, emphasized Maniram, stressing the importance of giving carriers advance notice and explaining whether they’ll be included in the bidding.

If the decision is made to move, Maniram recommends calling the carrier before sending formal written notice and offering a debrief. This allows the outgoing provider to understand what went wrong and improve for the future. In some cases, that conversation is handled by someone outside the direct account team to give a neutral perspective.

“Who knows. Two or three years into the future, you might be trying to recommend them,” he said.