Capitalizing on Benefits

Benefits division provides counsel
for small employers

Agency offers cost control options for businesses with 2-50 employees

By Len Strazewski

Large employers have huge employee benefit cost problems but a myriad of remedies. They can self-insure to reduce administrative costs, mandate health screenings and wellness programs and, in the case of the largest companies, hire medical directors, benefit plan design consultants and claims auditors.

When regulations change, they can turn to law firms that specialize in federal, state and local compliance issues.

Small employers have the same big problems managing employee benefits and health care costs but many fewer options for cost control advice, plan design modifications, health and wellness programs and legal advice.

Mostly, they rely on their independent agencies and whatever tips and tools the agencies can put together from their own expertise and the health plans they represent.

At Des Champs & Gregory, Inc., in Bradenton, Florida, small employers are the cornerstone of the agency’s growing employee benefits practice, says President/CEO Tom Hayes. And the agency tries to provide them with the same comprehensive service and value that it might provide to larger firms that have advice and counsel that can help them navigate the increasingly challenging employee benefits marketplace.

Founded in 1908, the agency has two offices in Bradenton and 37 full-time employees. The employee benefits division has six full-time employees, including three producers and three support specialists. Employee benefits generates about one-third of total revenue and, on a per-employee basis, is the most profitable of agency services.

The agency also provides commercial property/casualty insurance; financial services, including personal and business financial planning and securities; and personal lines insurance.

Hayes joined Des Champs & Gregory in 1982 as the agency’s first employee benefits producer and led the firm’s growth into the new practice area. “At the time, we were one hundred percent property/casualty like many other agencies. We were a typical Main Street agency working with small and medium-sized businesses in our area,” says Hayes.

Since then, the agency has grown and diversified. Large clients include the city of Bradenton and the United States Adult Soccer League, a national organization.

Hayes says he found great opportunity with employee benefits services, first with strategic cross-selling to property/casualty insurance customers, but later as part of the agency’s evolving value proposition as a more comprehensive service firm that provides business support and advice for its client base.

Hayes says that while the agency has specialists in various coverage areas, producers work as teams to help clients manage their risk and insurance needs, reviewing commercial property/casualty insurance and employee benefits needs.

Des Champs & Gregory producers meet with their clients on a regular basis and educate themselves on the business needs and strategies of each client. Hayes says he personally spends very little time in the headquarters office with traditional internal management but, instead, prefers to be in the field where he can learn more about client concerns.

Health care costs is one of the big ones.

“Health benefits are a huge overhead cost for small employers and a great concern as they manage their annual budgets,” says Hayes. “However, there is less they can do to reduce their costs, outside of shopping for price at the annual renewal.”

The agency specializes in employers with two to 50 employees, and at the lower end of that range, insurers tend to pool or community-rate risks, giving individual employees less opportunity to control their own costs, Hayes says.

Price shopping also has limitations, he notes. Health insurance industry consolidation has left small clients with fewer choices and less competition. In Florida, the big competitors include Aetna Health, BlueCross/BlueShield of Florida, UnitedHealthcare and, recently, Great-West Healthcare, which is now part of CIGNA.

Joyce Rice, employee benefits marketing manager, agrees. “One of our biggest challenges for our group market is affordability. Costs are continuing to rise in the double digits and among our health plans, rates are all over the place.”

The smallest clients with community-rated coverage see increases despite a good claims history, and larger experience-rated clients can see dramatic increases at renewal after a relatively small increase in claims.

Most employers believe that they have little control, she says. “Most small employers have done pretty much all they can do with plan design changes and increased employee contributions. Some are opting for reduced coverage to lower costs. “

Kim Cummins, a life and health specialist and producer, says the agency’s job is to help educate clients about options and help clients educate their employees about getting the best value from their health plans.

“The client’s biggest concern is price. The majority of employers want to continue to provide health benefits to employees but are asking the big question: Can they continue to pay for it?”

For the smallest of employers, the agency can alert them to new plan designs, including several small business health packages from the local health plans. They include: the BlueCross/BlueShield 3801, Aetna Value and United Edge programs, which feature higher deductibles and co-insurance levels but reduced premiums.

Des Champs & Gregory also assists with annual enrollment and employee education. “It is important that employees also know what they can do to lower their costs under the plans,” Cummins says. “They need to be educated about the value of staying in network and making appropriate choices about their own health care.”

Cummins says some small employers with 50 employees and larger may qualify for “level-funded plans” sponsored by local health plans, including Great-West/CIGNA Health, which is relatively new to the area. The level-funded plans allow small employers to self-fund a portion of their employee benefits costs, usually about the first $120,000 of total claims.

Employers pay a monthly deposit premium based on the cost of claims administration, stop-loss coverage against catastrophic claims and anticipated health claims and receive a dividend if claims are below predictions.

This form of self-funded plans provides an opportunity for the agent to better profile the client health claims expenses and suggest proactive cost reduction schemes, according to Cummins.

Health screening and employer-sponsored wellness programs are natural fits for partially self-funded plans, but Cummins admits that while interest in wellness is high, small employers are not as committed to them as they should be.

“Most of the carriers provide some sort of wellness or health education programs built into the cost coverage, but they are not as popular with employers as they should be,” he says.

“Unlike large employers who can design strategic benefit plans over several years and evaluate claims over time, small employers tend to change health plans more frequently and expect immediate value reflected in the premium,” Cummins says.

As a result, it is difficult for small employers to understand and appreciate the long-term value and return on investment of health promotions and wellness. Many may not be tracking their own claims history and improvements year-to-year related to better health management.

However, Cummins says, the agency continues to recommend wellness programs and employee health education, and growing numbers of clients are beginning to see the value of programs that give participants more control of their own claims and the tools to reduce them over time.

Health savings accounts (HSAs) are gaining more popularity as alternative plan designs as health plans allow more dual-choice options for small employers. Choices usually include traditional preferred provider organizations (PPOs) or HSAs coupled with a high-deductible catastrophic level plan. Options could also include reduced coverage for a smaller total premium.

Not all small employers are investing in more sophisticated health coverage, Cummins notes. As employers increase deductibles, co-pays and employee contributions, some plan participants prefer to drop out of the employer-sponsored plans or remove their family coverage from the expensive employer plans.

In some cases, employers are offering employees less expensive, reduced coverage or mini-meds that are more affordable, Cummins says.

“Most employers care enough about their employees that they need to offer some affordable health coverage and employee benefits. Also, they realize that if they do not offer a substantial employee benefits package, they will lose their ability to compete in the human capital market and recruit qualified employees.”

Few employers are adding benefits or funding ancillary coverage such as dental and vision insurance or long- and short-term disability insurance, he says. However, employers are offering employee-paid voluntary coverages, and groups of 15 to 20 employees are eligible for steeply discounted rates.

“Dental insurance has been particularly competitive in the voluntary market and very popular among employees,” he says. Also, disability and income replacement coverage from nationally advertised carriers such as AFLAC and Colonial Life Insurance Co. are popular voluntary add-ons.

Des Champs & Gregory does not provide employee benefit consulting or regulatory administrative services for COBRA or HIPAA compliance, but Rice says regulatory compliance has evolved into another serious employee benefits concern for the agency’s clients.

Since the introduction of the Obama Administration economic stimulus package, which includes a federally mandated subsidy in COBRA charges for former employees, “we are getting more and more calls for regulatory compliance analysis. What are the new rules? Do they apply to me?” Rice says.

And, as a result, the agency has had to become an informational resource on these topics as well. “The new regulations couldn’t be more convoluted,” Rice says.