Changing the game in benefits

Engaging employees helps control health care costs

By Elisabeth Boone, CPCU

Which do you want first: the bad news or the worse news?"

As an independent agent who offers employee benefits to your commercial clients, you may not actually have uttered those words, but chances are you've felt as if that's the unwelcome message you're delivering at group health renewal time.

As the costs of health care and health insurance continue their inexorable rise, employers face stark choices: reducing benefits, increasing deductibles and co-pays, or requiring employees to pay a greater share of premiums. That ends up being bad news for employees—especially those who make little or no use of their group health coverage.

According to the authors of Health Care Tsunami (Dean Halverson and Wayne Glowac, 2008), 88% of employees incur less than $500 in health care costs per year, even though they may be contributing $100 or more per month to the group health premium. Understandably, these people often feel resentful about having to pay more each month for something that doesn't look much like a benefit to them. Employees who believe that their employer doesn't care about them tend to become disengaged from the company's mission and goals, and the resulting lower morale and decreased productivity can have a negative impact on the bottom line.

Most employers do care about their workers and want to provide them meaningful benefits. They don't like to place an additional burden on employees when group health rates increase each year, but they see no alternative—and they often feel frustrated when employees seem less than appreciative of what management is trying to do for them.

Given this grim scenario, it's no mystery why both employers and employees feel like they're caught in an endless spin cycle, with no way to turn the dial and stop the madness.

Can we change the game?

What if there was a way to flip the switch, turn off the "same old, same old" dialogue, save money on benefits, and re-engage those employees who have stopped listening and stopped caring? What if there really was a way to "change the game in benefits"?

According to the principals of insurance brokerage HNI Risk Services, there is a way to do just that—and it's getting raves from the firm's commercial clients and their employees. Called GetMOR™, the concept is described by its co-creator, Nancy Melcher, as a tool to engage employees by giving them choices to spend tax-free, employer-funded dollars on health as well as illness. Melcher is president of GetMOR Enterprises, LLC, which has partnered with HNI Risk Services to offer the GetMOR program to employers.

Based in the Milwaukee suburb of New Berlin, Wisconsin, HNI provides insurance and employee benefits to transportation, construction, manufacturing, and retail risks throughout the Midwest. The firm's principals are Mike Natalizio, president and chief executive officer; Jim Natalizio, chief financial officer; and Anthony Fioretti, executive director of business development.

HNI's journey to Melcher and GetMOR began, says Mike Natalizio, when he and his fellow principals faced the fact that, although successful, their brokerage was in a holding pattern.

"We realized that if we want prospects to think we're different, we have to talk to them differently," Natalizio asserts. "Our old approach was to play the game. Our new approach is to change the game."

In researching the field of employee engagement, Natalizio and his partners made a game-changing discovery: Employees' perception of the value of their benefits is 80% psychological and 20% rational. In a white paper titled "Employee Engagement and Employee Benefits," HNI explains how these two elements are linked and how employers can use their benefit programs to improve business outcomes.

"Employee benefits are a huge cost to virtually every employer organization, and health care is the primary driver," says the white paper's background statement. "The folks in Washington, D.C., have helped raise public awareness, but they have focused on the financing mechanism (health insurance) and not the real problems in health care. While some issues are beyond employers' immediate control (i.e., government cost shifting, provider quality), a tremendous opportunity exists to change the game by improving the health of your employees and the way they consume health care services. Full employee engagement is at the heart of stabilizing health care costs."

The white paper continues: "Those of us in the benefits business have rarely looked at it in these psychological terms. Companies that promote the 'what' of benefits without the 'why' miss a huge opportunity to engage their work force toward greater performance. ...Employee engagement must be the starting point for taking control of our collective health care future. We cannot rely on the other players (insurers, providers, government) to fix the problems. To create meaningful change, we must engage the hearts of our employees."

From theory to practice

Engaging employees is exactly what GetMOR co-creator Nancy Melcher is all about. Her background encompasses broad experience in human resources and employee benefits management, combined with a keen grasp of the principles of employee engagement.

"Ten years ago, I was serving as a human resources adviser for Burger Boat Company, which designs and builds mega yachts for customers around the world," Melcher says. Based in Manitowoc, Wisconsin, Burger was experiencing growing demand for its products and needed to expand its team from 200 to 500 employees. It was an exciting time for the company—but it was already struggling with double-digit increases in its group health premiums, and management knew the company couldn't add 300 employees to its existing plan without breaking the bank.

"In 2004, Burger retained me to help it build an engaged, world-class work force," Melcher explains. "That required world-class benefits, and the health care piece challenged us as it does virtually every employer of every size."

As the owner and president of an employee engagement and benefits consulting firm, Melcher worked with employers to develop consumer-driven benefit plans that give employees meaningful incentives to get and stay healthy and to shop wisely for health care goods and services.

Here's how Melcher's plan worked at Burger Boat:

First, management increased the group health deductible from $500 to $1,500. It then reallocated the funds by placing $1,000 on a debit card for each single employee and up to $3,000 per family. The employee-provided funds were allowed to accumulate and ultimately transferred to an employee-owned tax-exempt trust account.

The company used a companion flexible spending account with the debit card and educated employees on how to use these funds for short-term, predictable health care costs while preserving the company-provided funds for the future.

With the new plan in place, Burger went from double-digit increases in health care costs to a 12% reduction in the first year. Premium rates have remained virtually flat over the last five years, and employee premiums have been reduced in each of the last three years. Some 97% of employees have accumulated funds, with an average balance of $2,292.

When Burger Boat and other clients of Melcher offered their employees this benefit opportunity, along with the ability to accumulate dollars for future health expenses, they saw real behavior change.  This translated into improved claims and utilization outcomes for employers and employees alike, and employers achieved what they had long sought: the ability to stabilize their health care costs.

Choice is the key

The plan Melcher created for Burger Boat became the basis for the GetMOR plan she later created in collaboration with tax strategist Matt Skiles.  GetMOR is a new model of care that transforms traditional health insurance plans into a long-term health and wellness reserve account.

GetMOR, Melcher explains, is a health enrichment program that gives employees incentives to spend their health care dollars wisely and builds commitment to company goals and objectives. It's suitable for any size company and is designed to engage every employee in the organization. Here's how GetMOR works:

• The employer funds a debit card for each employee with a set amount (say, $1,000) that the employee can use to purchase prescription drugs and other items not covered by the group health plan. Employees can also fund the debit card with contributions to their flexible spending account. The card automatically depletes the FSA contributions first because that money can't be rolled over from year to year.

• During the plan year, the amount on the debit card that the employee hasn't used goes into a tax-exempt vehicle known as a VEBA (Voluntary Employees Beneficiary Association) trust. Contributions to the trust are tax deductible to the employer, and the funds accumulate on a tax-deferred basis until an employee retires.

According to an article by Matthew Tuttle in The National Public Accountant ("VEBA: An Underutilized Planning Tool," November 1, 2001), "VEBAs are not subject to the rules for qualified retirement plans. For example, distributions can be taken from a VEBA prior to age 59 without penalties. You [the employer] can contribute and tax-deduct much more than $30,000 per year. ...A business can make substantial VEBA contributions even if it is making maximum pension contributions. One program has nothing to do with the other."

• In terms of tax advantages, the GetMOR card is similar to health savings accounts, health reimbursement arrangements, and flexible spending accounts, but it is more flexible than those vehicles. It does not require that the company offer a qualified high-deductible group health plan, or any health insurance plan at all.

• The debit card is purposely detached from the health plan so that employees clearly understand its value.

Joining forces

When Nancy Melcher met the principals of HNI Risk Services, both realized it was a match made in heaven. Since 2009, HNI has been the national distributor of GetMOR, and it is the primary distributor in Wisconsin. The plan, Natalizio says, is proving to be the ultimate game changer for HNI's clients, both philosophically and financially.

"With GetMOR, employees now see their benefits as a benefit," he says enthusiastically. "They have much more choice in how they spend their health care dollars. Employees can use their debit card funds not only for prescription drugs and dental and vision expenses; they can buy a health club membership, home fitness equipment, even 'joint juice' drinks and running shoes. We coach employers and employees on eligible expenses."

The HNI clients who are using the GetMOR system give it rave reviews. The president of an investment firm, Natalizio says, was astonished to discover that her employees were less than thrilled about their benefits before the company began to use GetMOR. "I always thought my employees were tickled pink with the benefits we offered, but then I discovered that a lot of employees weren't even using the plan," the executive said. "So whenever I talked about health care costs, they weren't even listening to what I was saying."

The company implemented the GetMOR system, but the economic downturn forced the company to stop funding its 401(k) plan and the GetMOR debit cards. "When things started getting better, the first thing employees wanted back was the GetMOR card," the president told Natalizio. "I was surprised."

Over the past seven years, Natalizio says, "The GetMOR program has given employers a new direction in health care, essentially by empowering employees to shop for health care as they do for other products and services.  With employers and employees working in partnership to get healthier, stabilize costs, and maintain a vital safety net for the long term, everyone is 'getting more' for their benefit dollar."

Growth engine

Introducing GetMOR to clients and prospects has powered impressive growth in HNI's employee benefits practice, Natalizio says.

"In the last year we've experienced 33% growth in our benefits practice, and two thirds of that growth is directly related to GetMOR," he says. "We've achieved 75% of our growth as the result of new relationships, not by writing additional coverages for existing property/casualty clients. For 2011 we're again anticipating benefits growth of 33%."

For HNI Risk Services and Nancy Melcher, the GetMOR plan is about much more than money, and the concepts on which it is based go far beyond insurance. It turns the conventional wisdom about the "benefits equation" on its head—and that's a game changer.

For more information:

HNI Risk Services

Web site: www.hni.com