|
Capitalizing on Benefits
Managing change in the health market
Nebraska firm provides options to clients in a shifting legislative and regulatory climate
By Len Strazewski
Health care reform and other employee benefit policy changes weigh heavy on employers who are trying to manage their workforce strategies and costs. What are the rules? How do they affect future human resource and employee benefit plans?
Tough questions demand expert answers delivered in the context of good strategic planning. In Nebraska, Iowa and South Dakota, employers turn to the SilverStone Group, a diversified agency that markets itself as a “resource management organization” that provides employee benefits, human resources and retirement plan services, private client personal lines and risk management consulting, and related insurance.
SilverStone employs about 200 employees and has a book of business divided evenly among its three business categories. But the ever-increasing cost of group health insurance and the recent government legislative and regulatory issues have put employee benefits and client education “front and center.” About 50 employees specialize in employee benefits.
The firm has four offices, including its Omaha headquarters; Council Bluffs, Iowa; Lincoln, Nebraska; and Sioux Falls, South Dakota.
“Employee benefits have always changed over time,” says Bill Fox, vice president and senior consultant in group benefits. “It has always been part of our responsibility to be flexible and change with the times. Right now, we are dealing with the recent government programs and legislation that have literally created a wave of change.”
Fox has more than 15 years of experience in group benefits and specializes in multiple-plan and multiple-location employee benefit plans and all of the related government compliance filings.
He says health care reform and the employee benefit components of the Obama economic stimulus package may provide some positive support for laid-off or uninsured workers, but they could prove to be headaches for employers.
Recent SilverStone employer advisory publications highlight several new laws enacted during the first days of 2009.
They include economic stimulus plan provisions that provide for an employer-paid subsidy of 65% of COBRA benefit premiums for laid-off workers, new legislation that provides technical corrections to the Pension Protection Act of 2006, and the new Children’s Health Insurance Program Reauthorization Act which funds and expands the State Children’s Health Insurance Program (SCHIP).
The new COBRA rules pose some serious problems for employers, Fox says. “The new COBRA law carries a lot of questions about how employers are supposed to budget for and deliver COBRA benefits.
“For example, for a mid-sized self-insured employer, the cost of the new subsidy could have a seriously disruptive effect on corporate strategy and finances. The law, he notes, would compel employers who have laid off workers to re-extend COBRA benefits for the new law maximums.
“This can pose some serious liabilities for employers who have not budgeted for the cost of these extended benefits. As with many government programs, the cause may be noble, but the real costs and compliance may be fundamentally disruptive to the organizations that they affect,” Fox says.
SilverStone has been monitoring the evolution of employee benefits for more than 17 years. Founded in 1945 in Council Bluffs as a property/casualty agency, the firm merged with an employee benefits agency in 1991. The merger spurred cross-selling opportunities, notes employee benefits principal Grant Matthies, and led the agency to rethink its approach to insurance selling. Bringing a team of specialists to client meetings, the firm developed a more sophisticated approach to employee benefits and risk management.
“We begin with an overall needs assessment,” Matthies says. “We attempt to determine where our clients feel their pain and then find the right approach and the right products to help them deal with that pain. It’s more of a consultative model, and we find ourselves dealing more often with chief financial officers and controllers than human resource executives on benefits.”
The firm’s client base has also evolved from primarily small, fully insured businesses to larger companies that apply more sophisticated funding and management techniques. SilverStone still has some small groups, Matthies says, as well as large corporate employers with as many as 15,000 employees. But the agency’s strength is in medium-sized employers with 300 to 1,000 employees.
“The biggest challenge for these employers is managing employee expectations and the corporation’s financial strategies,” Matthies says. “Most of these employers have been steadily shifting costs to employees as their health care costs have increased, and now there are questions about how much more they can shift with their traditional plan design.”
The pressure has led many client employers to begin self-funding all or a portion of their health benefits, using administrative-services-only contracts (ASOs) or third-party administrators or other funding plans.
“The mid-sized self-insured market is where we can really provide strategic options and value,” adds Fox. The firm provides claims analysis services to help clients identify patterns that can be addressed with alternative plan designs or additional services such as wellness or health management.
Among the more traditional health plans, “options continue to dwindle,” adds Brett Sesker, a principal and senior consultant in group benefits. Sesker has 19 years of group benefits experience and spent 10 years as a group benefits underwriter.
Sesker says the firm still can offer health plan choices and works with several large health insurance carriers, including BlueCross and BlueShield of Nebraska, United Healthcare, Coventry Health, and Principal Life Insurance Co. National carriers CIGNA Health and Aetna are also active in the area.
The agency still seeks competitive bids, but over the years the emphasis has shifted away from locating the lowest total premium to finding the best strategic connection. “Who is the right partner for a particular client? What is the best? Who incorporates wellness programs or other services that fit a particular client’s strategy?”
For many employers, “cost-shifting is at the breaking point” as a cost management strategy, and employers are turning to less technical, more health-oriented techniques, he says.
Sesker says many employers are now considering or implementing wellness or health management strategies, including biometric testing, blood screening, and disease management programs. However, the nature of their wellness programs varies by employer, size and strategy.
Matthies says wellness plan costs also figure into the decisions. “Wellness has a lot of different meanings and a wide range of costs,” he says.
Wellness education programs with Web-based educational resources and written health training can cost as little as $5 to $10 per employee per year, and health management programs with medical testing can cost as much as $150 per person per year.
“The employer financial commitment may vary, but most employers realize that if they are going to reduce costs in the long run, they need to reduce utilization,” Matthies continues. “And after all of the managed care techniques that have been implemented over the years, the only real options left involve reducing utilization through better health.”
Consumer-directed health plans (CDHPs) are also finding places in the SilverStone client base. Matthies says CDHPs are not yet a dominant plan design in the SilverStone area. Few employers have mandated CDHPs as a single plan option.
However, about 75% of clients offer CDHPs as one of multiple plan options, and about 95% offer some kind of wellness program,
The employers who take time to emphasize CDHPs and accompany the plans with an education and employee communication plan have had documentable success in reducing utilization and claims, Matthies says.
Executive buy-in is also important, adds Sesker. “In the most successful plans, the chief executive officer is investing in its success with encouragement, support and programs. However, for most CDHPs, we are a long way from making them pay in the way that employers would want to really contain their costs.”
What lies ahead for employee benefits clients? Health care reform remains on the agenda for the Obama administration, but just what the eventual reform package will mean for employers, employees and the administration of employer-paid benefits is unknown, executives note.
And among the laws and regulations that have already been passed, cost and administration issues also remain a little murky.
The new COBRA rules require employers to identify and communicate with “assistance eligible” employees to identify who may be qualified to make a special election of COBRA benefits or extend their existing benefits—a new and potentially expensive administrative burden.
The federal SCHIP law provides for subsidized employer coverage for dependent children, but it excludes high-deductible health plans and high-deductible Flexible Savings Accounts (FSAs) for which the employer doesn’t pay at least 40% of the cost.
However, the law also provides for some new administrative burdens including special enrollment rights for children of some employees and notice to all eligible employees of assistance programs for which they may be eligible.
What exactly that will mean, however, remains to be determined and model forms have yet to be issued by the U.S. Department of Health and Human Services.
And there may be more to come, SilverStone’s Fox says. In the meantime, SilverStone must keep its collective attention focused on new developments as well as the old problems of cost and administration.
“We’ll just have to stay on top of those issues and be flexible. There’s always something new to consider,” he says. |
