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Benefits Agency
Small department provides sophisticated services
D.C.-area firm says offering benefits is critical, especially to smaller clients
By Len Strazewski
Employee benefits is a booming business. Rates and premiums climb steadily higher with every renewal, and employers are constantly on the lookout for any agency that can help them manage their plans and costs.
To take advantage of this perennial trend, many property/casualty insurance agencies are cranking up their operations to provide an increasingly expensive and broad array of benefits-related services such as wellness programs, human resource support and regulatory compliance in an effort to boost the percentage of revenues they generate from group and voluntary benefits.
But managing the employee benefits needs of your clients doesn’t have to be an expensive proposition or a huge commitment of people and service. And employee benefits revenue doesn’t have to dominate a strategic plan in order to play a significant role in getting and keeping clients and fulfilling an agency’s service commitment.
At The CIMA Companies, headquartered in Alexandria, Virginia, with offices in Hanover, Maryland, and Havre De Grace, Maryland, employee benefits sales accounts for only about 10% of the agency’s total revenues, but it is a critical component of the firm’s service commitment to its property/casualty insurance and risk management customers, executives say.
Gary H. Hurst, CIC, President/COO of Corporate Insurance Management, Inc., and Senior Vice President of The CIMA Companies, Inc., says employee benefits services have played a significant role at the agency for more than 20 years, though not a particularly dominant role.
“We have been predominately a property/casualty insurance agency,” Hurst says. “But employee benefits—and group health insurance specifically—is a major concern of our commercial clients. It is important that we provide employee benefits expertise to address those concerns and provide a resource to our client base.”
Founded in 1949, the agency has about 60 employees, including two employee benefits specialists. CIMA has more than 6,000 clients nationwide that range in size from small social service agencies with fewer than 100 employees to large corporations with more than 5,000 employees and national associations that service thousands of members with sponsored insurance programs.
Based in the Washington, D.C., area, the agency has a strong base in the technology, contracting, service, transportation and nonprofit organizations that are tied to federal government business and legislative activities. Client premiums range from $500 to more than $1 million for property/casualty insurance and employee benefits.
Only a fraction of the clients—10% to 15%—rely exclusively on CIMA for employee benefits services; and employee benefits clients tend to be among their small clients, ranging in size from two employees to 500 employees, executives say.
But Hurst notes that the availability of these services remains essential to the agency’s ability to secure its client base and compete for new business among client employers that appreciate a consolidated service relationship with a single agency.
“Philosophically, we try to be as helpful as possible as we can to our clients. And that means being able to address the broad range of their concerns,” he says
CIMA has a strong corporate identity and service philosophy that shapes it approach to risk management and employee benefits, executives say. “Cima” is the Spanish word for “summit,” and the agency uses the name to represent its commitment to functioning at the highest level of the insurance and risk management profession.
The agency mission and philosophy, published proudly on its Web site, says:
“Our purpose is threefold.
First—We are dedicated to providing clients with considerate and professional risk management services.
Second—We work fairly with the companies we represent in our joint efforts to produce profitable business. We feel that this can be accomplished in a spirit of partnership in which neither has the upper hand.
Third—We have a special relationship towards one another in our office. Each staff person has definite responsibilities, yet each is an integral part of the whole. If any one part of the organization does not function perfectly, the entire organization is affected. Therefore, for CIMA to succeed, each person must not only discharge his or her responsibilities, but assist others as well. No one person can act autonomously.
This can be accomplished only through continuous personal growth, self-discipline and compassion towards one another. Compassion must encompass consideration, understanding and love. It eliminates egotism, selfishness, envy and nonconstructive criticism.
We are a prestige organization, alert toward maintaining our respected position in the community.”
Hurst says the agency’s commitment to meeting the employee benefit needs of its customers is consistent with this philosophy. While the existing client base is the usual source of new employee benefits revenues, the agency does pursue new employee benefit clients and provides a resource for employers that are seeking news ideas and alternatives as they struggle with their cost concerns.
“Of course, employee benefits is a highly profitable business and we would like to see it grow to 40% or 50%,” but growth for its own sake and expensive increases in services in anticipation of an employee benefits sales are not consistent with the agency approach.
Nonetheless, employee benefits revenue continues to continue to grow—despite the economic recession that has made employers more cost-conscious than ever and has reduced employee counts.
David Brantlinger, vice president and an employee benefits specialist, says his line’s revenues have more than tripled in the 20 years that group coverage has been offered, and the agency anticipated about a 12% increase this year—until layoffs and employee cutbacks reduced premium volume from some clients.
“More than any other year, employers are telling us that they can afford no increase at all or must see a reduction in their health care costs.”
While this trend is a struggle for everyone, it does provide some opportunities for the agency, which can bring the latest cost control and plan design strategies to the clients, he says.
Though the department is small, it does not lack in sophistication, Brantlinger notes. CIMA provides a full range of services, including:
• Self-funded or partially self-funded plan designs
• Representing employers in underwriting and price negotiation with health plans
• Reviewing plan design alternatives and provider networks
• Developing appropriate human resource policies
• Assisting with government reporting and compliance issues
• Reviewing claims experience for patterns and trends and auditing individual health claims
The agency represents about six major health plans, led by CareFirst, Blue Cross/Blue Shield Health Insurance, the largest provider in the Maryland, Virginia and District of Columbia region; three third-party administrators; and more than 10 stop-loss insurers and reinsurers for self-funded employers.
The agency also suggests and evaluates health and related service vendors that can provide health management and wellness programs, enrollment and other benefits-related services.
About 10%—including the largest of CIMA client employers—self-fund all or a portion of group health claims. Self-funding has become more accessible to small employers in the past few years and, depending upon an employer’s cash flow and its willingness to accept risk, firms as small as 50 employees can self-fund with stop-loss insurance for catastrophic claims.
“Fifteen years ago, self-insurance was only for employers with a minimum of 150 to 200 employees, but the availability of stop-loss insurance has made this technique much more accessible,” Brantlinger says. “The top concern of employers is their ability to take control of their health care costs, and with self-funding, employers can analyze their claims trend and really take direct control. In three to five years, the employers generally can see a real cost improvement.”
Self-funding is more popular than ever, he says, and “I’ve never seen an employer who has gone to a self-funded approach go back to a traditional guaranteed cost plan design.”
CIMA also directs employers in the use of consumer-directed health plans using Health Savings Accounts (HSAs) and Health Reimbursement Accounts (HRAs).
“HSAs and HRAs are part of every client presentation we do, and employers continue to be interested in the technique. While none of our employers have chosen to exclusively offer a consumer-directed health plan, many make them available as an alternative to employees.
“About 10% of employees are choosing these plans over more traditional deductibles and co-insurance.”
The agency also has a separate communications department that publishes frequent customer advisories and maintains an archive of documents that inform and support client programs. Employee benefits is a regular component of The CIMA Letter, published quarterly on the company Web site (http://www.cimaworld.com) and The CIMinute, an e-mail newsletter that is designed around a single topic that can be read in a minute or less.
Both the Spring and Summer CIMA Letter included benefits, health and human resources, related topics, including tips on compliance with the new COBRA subsidy from employers and health tips and information about the H1N1 swine flu international health crisis.
The agency also provides at no charge to employee benefits clients, the Benergy human resources support Web site from Benico, Ltd., of Huntley, Illinois. This customizable Web site provides human resource managers a range of technical information and communication tools and services that can be made available to employees to support health, wellness and employee benefits self-management.
Communication will be critical to the future of the firm’s employee benefit clients as national health reform evolves and is finally legislated, Brantlinger says.
“Nobody knows how it will end up, but it certainly will affect everything we do in group health benefits,” he says.
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