Capitalizing on Benefits

Perfect balance

Benefits-focused non-brokerage services are impetus for new business

By Len Strazewski

Balance doesn’t come easy. It takes the right strategic plan, the right personnel and a commitment to a broad base of services to build an employee benefits practice that can equal a long history of property/casualty insurance sales.

Wallace Welch and Willingham, Inc., in St. Petersburg, Florida, founded in 1925 as a commercial property/casualty insurance agency, began marketing employee benefits only about 15 years ago, says Chief Executive Officer Scott Gramling. The decision to build an employee benefits practice to balance its traditional business required strategic commitment to personnel, resources and sophisticated business practices.

Balance was an important consideration in the agency’s commitment to employee benefits, Gramling says. Like many other agency executives, Wallace Welch and Willingham leadership recognized the difficulty in managing the boom and bust pricing cycles of commercial property/casualty insurance and the trend toward longer and longer soft markets. Meanwhile, health insurance premiums moved steadily higher as health care costs continued to increase and health plan commission rates remained stable.

“Employee benefits business offered more stable revenue with higher profit and better margins. It was clearly an important direction for the agency,” he says.

Today, the agency has about 90 employees, including 10 full-time property/casualty producers and six full-time employee benefits producers, and employee benefits business is responsible for about 45% of total revenues.

In 2008, the agency actually generated more revenue from employee benefits and related services than commercial property/casualty insurance for the first time in its history as property/casualty insurance rates continued to drop, Gramling says.

“About five or six years ago, employee benefits became our agency life blood,” he says. “Previously, we brought in benefits business by cross-selling our property/casualty insurance clients; but today, our employee benefits business leads us to new commercial property/casualty insurance clients and gives us access to the chief executive and chief financial officers that make the high-level decisions about insurance and benefits.”

About six years ago, the agency reached a turning point, Gramling says, with the arrival of Senior Vice President John Fraser. Fraser, with long experience in both agency and insurance company operations, built the employee benefits service infrastructure that he believes is critical to building and servicing a successful book of employee benefits business.

“I felt it was important to institute a service model for the agency that differentiated us as more than just a sales organization, but also as a service provider that recognized the business needs of our clients, not just their insurance needs,” Fraser says.

Federal regulatory compliance and the increasing complexity of legal issues rank high on the list of customer concerns, he says, and the agency that can help employers understand and manage those issues is more likely to be the choice for insurance purchasing as well.

Fraser also led the agency into the acquisition of online enrollment technology and employee benefits self-service portals, as well as helping establish stronger relationships with the five largest health plans in the region.

Wallace Welch and Willingham health plan partners include: CIGNA Health, UnitedHealth Group, Aetna Health Insurance, Humana and Blue Cross/Blue Shield of Florida. The agency also has a relationship with Coventry Health Care, Inc., in Bethesda, Maryland, for small group health plans.

Senior Vice President and Employee Benefits Producer Steve Farmer agrees that many employee benefit client engagements begin with non-brokerage services such as Compliance Check, an allied human resources and risk management services program that analyzes customer compliance with state and federal regulations and proposes management solutions.

Education is also a prominent customer service, and many new customers are introduced to the agency by regular programs and seminars that provide continuing education credits for human resources.

Wellness and health management has also become an important agency service, executives say. However, Wellness Coordinator Amy Hammond is more likely to begin taking clients on the road to wellness with small steps rather than large, expensive programs.

“Many employers are not yet utilizing the wellness resources that are already available for no extra charge from their health plans,” she explains. “Many of the larger health plans provide nurse help lines toll-free 24 hours a day and online health education resources that employees can use in their health decisions, but many employees aren’t even aware of them.”

Moreover, many employers aren’t requesting aggregate health claims data from their health plans. The data, which maintains individual employee confidentiality, provides employers with indications of health issues within their organizations that might benefit from wellness and health management programs.

“I like to start clients out with using what is already available to them and guide them in developing programs that are targeted to their own employees and health concerns,” Hammond says. “It’s all about changing the culture, getting an employer and their employees to understand the relationship between wellness and health management programs and their individual health and company costs.”

The agency’s own wellness programs have already had notable results. Last year, agency employees committed to using tracking devices to measure their personal activity in terms of physical steps as one part of group wellness activity. The program, managed by Sonic Boom Wellness in San Diego, guided agency employees through the equivalent of 3,798 miles in a two-month period.

Chairman Wayman Willingham won second place overall for his participation, which included a commitment to regular treadmill walking as well as other physical activity, according to coverage in the Tampa Bay Business Journal.

However, while wellness and health management have become popular approaches, Farmer notes that employers aren’t seeing immediate results from their efforts and commitment.

“The return on investment for these sorts of programs is not immediately realized. It takes a minimum of 36 months before some meaningful return is seen in the claims and the renewal premium,” he says. “In the long run, the success depends upon how many people quit smoking, succeed with substantial weight-loss and how many medical conditions are revealed and treated successfully.

“I’d like to see more transparency in these programs about the way health care management influences claims. In order for them to be successful, there has to be a very strong participation by employees to offset the higher trend and increase in treatment costs as conditions are uncovered. A lot depends on the follow-through.”

Employers also continue to look at plan design changes such as consumer-directed health plans with health savings accounts (HSAs) or health reimbursement accounts (HRAs), but the tax-incented account plans have not taken the Florida market by storm.

“All of our employer clients are concerned about their costs and are looking for answers,” Farmer says. “But consumer-directed health plans aren’t the answers—at least not yet. I’d like to see more interest in these. I discuss them with every client at every renewal,” he says, but employers still have concerns about enrollment and ongoing account management.

Employers are also aware of the lead time and educational commitment to the launch of consumer-directed health plans, he says. “Education needs to take place at least 12 months before roll-out of the actual plan,” he explains. “And an employer needs to continue to provide on going health care education and resources if the consumerism approach is going to be successful.”

Farmer also notes that the decision to implement new employee benefits plan designs has become more complicated. Because of the magnitude of the costs involved now in every health care program, decisions that have been previously made by human resource executives have been bumped up to the chief financial officer or the chief executive officer.

These executives hold every proposal to the highest level of financial scrutiny and tend to make decisions based on documented potential for returns.

Employers’ obsession with controlling health care costs has also led to some negative impact on other aspects of benefits programs, Farmer notes. As employers look to reduce their overall spending on benefits, they are beginning to stop or reduce contributions for other benefits that have traditionally been employer-paid.

“I have seen employers that have begun moving disability insurance from employer-paid to employee voluntary programs, resulting in a serious drop in overall participation in disability programs,” he says.

The pattern has human resource implications for the employer as well as marketing implications for the agency. Long-term disability insurance provides a way for employers to fill in income gaps for ill or injured workers who are not covered by workers compensation. If disability benefits are not available, employees may seek coverage under workers compensation, leading to higher litigation and workers compensation costs.

The agency must also step up its marketing of voluntary disability insurance programs in its worksite marketing programs to provide better explanations of the value of benefits, Farmer says.

“Many employees don’t seem to understand the real value of disability insurance benefits and their importance in income protection. Whenever dental insurance and disability insurance are offered at the same time, workers most often choose the dental benefits—even though dental benefits are generally capped at a much lower benefit level.”

In the long run, disability insurance pays a much higher dollar value of benefits—as much as 60% of a worker’s salary—and contributes much more to a worker’s overall financial security, he says.