Capitalizing on Benefits

The bigger picture

Employee benefits is part of Cobbs, Allen & Hall's focus on total risk management

By Len Strazewski

Health care reform casts a dark specter over most agencies that market employee benefits. Usually the single biggest contributor to benefits premium volume, group health insurance could be radically changed in less than a year and its steadily increasing premiums could disappear.

But while some agencies are waiting and quaking, Cobbs, Allen & Hall, Inc., in Birmingham, Alabama, is confident it can maintain a thriving employee benefits practice in spite of what Congress does next.

Group health insurance is only a small portion of the agency’s total revenues and a relatively insignificant portion of its employee benefits sales, says Chief Executive Officer Bruce Denson Sr. He says that in Alabama the group health insurance market is dominated by Blue Cross/Blue Shield of Alabama which sells direct to local employers.

“Blue Cross/Blue Shield has about 90% of the market here and does not work with independent agents,” Denson says. “While local agencies still have access to other markets for some situations, group health insurance is not much of an opportunity in Alabama.”

But the Cobbs, Allen & Hall employee benefits division, which consists mostly of group life and group disability insurance and employee-paid voluntary benefits, is the fastest growing department in the company, complemented by value-added human resource and benefits performance measurement services.

The agency has about 150 employees and posts about $30 million in total annual revenues, including $24 million in retail property/casualty insurance and employee benefits and about $6 million in wholesale property/casualty insurance.

The employee benefits division, which has about 20 employees, including seven producers, generates about including $7 million in revenues, say agency executives. About $500,000 comes from group medical stop loss coverage for self-funded employers, the only significant health insurance contribution.

Despite the unusual book of business and no fuel from rising health insurance premiums, Cobbs, Allen & Hall has been on a jet-propelled ride for more than 15 years of its long history.

The agency was founded in 1887 as the John G. Smith Company. The name was changed to Cobbs, Allen & Hall in the 1920s to reflect the principals in charge at that time. In 1993, the company was purchased by investors, including the present chief executive officer, with a strategic plan to expand operations beyond the Birmingham headquarters area.

“Our goal was to increase revenues by at least 15% a year while expanding our client base, business mix and geographical base,” Denson recalls.

The plan worked brilliantly. The agency now has offices in Atlanta, Georgia; Gadsden, Mobile, and Montgomery, Alabama; and Shreveport, Louisiana. Since its management change, the agency has grown from about $1 million in revenues and 20 employees with no employee benefits sales to its present size, averaging 20% annual growth until the recession hit in 2008. Despite the economy, the agency posted a healthy 8.5% growth last year.

Employee benefits has been a relatively recent success story, Denson says, part of a more recent strategic change to focus the agency on risk management and human resource services rather than insurance product sales. The agency advises its clients about the Total Cost of Risk, executives say, a calculation that cuts across disciplines and includes all situations that contribute to a client’s business expenses.

Agency executives point to a 2006 meeting of the Marsh, Berry & Co. Total Agency Sales Culture (TASC) agency group as a seminal event in the agency’s recent history. TASC is a best practices benchmarking and peer exchange network for agencies sponsored by MarshBerry.

The TASC network provides market performance metrics, accountability practices and benchmarking tools, producer training and sales training and value-added technology resources.

“The experience and our participation in TASC have helped us develop a real value-added service proposition for our clients and help us differentiate ourselves as a partner and advisor to our clients,” Denson says.

The agency is also a founding member of the MarshBerry Agency Peak Performance EXchange (APPEX), a related peer exchange group that uses quarterly benchmarks and agency best practices to guide its growth. In 2007, the agency received the APPEX High Climber Award as the agency with the largest revenue growth from 1997 to 2007.

Amy Parkman, executive vice president and director of employee benefits, says, “The agency has really transformed in the 12 years I have been with the firm. When I started, all we had going in benefits was life insurance and disability insurance sales. We had developed some great relationships with our markets that had allowed us to successfully compete with other agencies in the area.”

The agency also developed a voluntary benefits program, marketing dental insurance, vision care, supplemental term life insurance and individual disability and income replacement insurance. To facilitate the voluntary benefits program, the agency partners with Enrollment Advisors, Inc., in Birmingham to assist with open enrollment periods.

But the TASC meeting gave the agency new directions in employee benefits as well as risk management and created opportunities for cross-selling beyond these core insurance products.

“As we became more consultative in our approach to our property/casualty insurance customers, we began to engage with a higher level of executive—the chief executive officer, chief operating officer, chief financial officer,” Denson says.

“With access to these executives, our property/casualty producers have more opportunity to bring in our employee benefits experts to address the broader business needs of clients that relate to human resource management, total compensation and employee benefits cost management.”

Parkman notes that the shift in focus also expanded the agency’s range of prospective employee benefits customers to larger, more sophisticated employers that are more capable of controlling costs and managing health care risks with strategic analysis of claims and cost trends and proactive health care management.

Cobbs, Allen & Hall risk management clients range from 200 to 2,000 employees, and employee benefits services clients range in size from about 200 to 1,000 employees with an average size of about 500 employees.

About 30% of these employers are large and sophisticated enough to self-fund a portion of their group health insurance, Parkman says. “These clients are better educated in human resources and employee benefits and better able to leverage the claims information of their plans to control their costs. The self-funded groups are able to influence their claims trends and costs with case management and really develop wellness programs that have the potential to reduce their costs over the long term.

“It’s important for employers to pay attention to the future of their health care costs and take steps to improve the overall health and well-being of their workforce,” she adds. “Whatever the next generation of health care, employers need to take control of the trends and influence them as best they can.”

The local health plan juggernaut contributed to the opportunities, she notes. “Blue Cross/Blue Shield has had a lot of layoffs” limiting its ability to offer customized services to large policyholders. Cobbs, Allen & Hall is filling the vacuum with its own services that include:

• Health plan review and carrier mediations

• Benchmarking

• Contractual review

• Actuarial reporting and consultation

• Claims analysis

• Merger and acquisition assistance/due diligence

• Establishment of internal and external claims policy

• Benefit plan communication and enrollment services

The agency provides some of the services directly but also recommends and oversees outside vendors that can meet a particular client’s needs. “Our own wellness people can help an employer design and implement its wellness program, but we can also recommend vendors to do programs such as biometric testing, smoking cessation and weight control, as needed,” Parkman says.

Technology is also a component of the agency service. Cobbs, Allen & Hall offers its larger clients the MyWave online benefits management portal from Zywave, Inc., and CSR24 24-hour customer access from Artizan Internet Services, Inc.

The agency also supplements the human resource management needs of its clients with human resource training programs, human resource audits, job description and employee handbook design, and employee satisfaction surveys. Clients attend regular educational seminars and can receive consultation on employment law issues, including assistance with state and federal regulatory compliance.

Parkman says the agency isn’t ignoring health care reform legislation, even though it is likely to be somewhat insulated from its impact. The agency is monitoring legislation and is likely to participate in any market changes that reform brings to its area.

Whatever Congress does, clients will continue to need to design and implement employee benefits programs that can help them recruit and retain the best employees for their industries, adds Denson. As a component of human resource management, employee benefits services will remain critical to managing the total cost of risk—which has become the hallmark of Cobbs, Allen & Hall.