Capitalizing on Benefits

Becoming your own best client

Commitment to sophisticated benefits services begins in-house

By Len Strazewski

Unlike most agencies that fell into employee benefits as an accommodation to their property/casualty insurance clients or as a result of an acquisition, Assurance Agency in Schaumburg, Illinois, set its sights on building an employee benefits practice pretty much from scratch in 2000. And in just 10 years, the business has jumped to nearly 20% of total revenues in an organization that consistently grows overall at an annual average of 15%.

Founded in 1961 as a property/casualty insurance firm, Assurance dabbled in employee benefits through the 1990s with four benefits-oriented employees and a single producer generating about $400,000 in revenues, executives say.

But in 2000, the agency made a strategic decision to explore the construction of a sophisticated employee benefits practice that would take the firm not only into group health insurance sales, but also into a much wider range of human resource management, staffing, and behavioral change consulting, says Chief Executive Officer Tony Chimino.

“Our business had been changing and evolving,” Chimino says. “Chief financial officers had been getting more involved in employee benefits as well as property/casualty issues, and we found ourselves getting more involved in their business strategies.

“It became clear to us that benefits and property/casualty insurance were no longer two separate segments, but interrelated in many ways as employers looked to improve safety to reduce workers compensation costs, improve employee health to reduce health care costs and reduce their enterprise cost of risk.”

Executive Vice President Liz Smith notes, “We really became more proactive about developing new employee benefits business relationships, not just cross-selling to existing property/casualty insurance customers and accommodating their group insurance renewals.”

By 2005, the agency had really begun to turn up the heat on its employee benefits practice, building revenues and a consulting infrastructure, recalls Smith. In 2007, employee benefits revenues had reached $5 million generated by nine producers and by the end of last year, reached $8.4 million.

In its entirety, Assurance has about 200 total employees, including 32 in the employee benefits services division. The employee benefits staff includes specialists in benefits and employee communication, wellness and behavioral change, human resource management and compliance and online enrollment.

In addition to group health insurance sales, the agency also provides what Smith calls “a robust service platform” that includes voluntary benefits and worksite marketing, retirement plan consulting and administration and executive benefit plan design.

As the business has grown, so has the sophistication of the services and the size of the client base, Smith explains. About 10 years ago, typical client size ranged from 25 to 150 employees; but as the agency grew in its sophistication, producers were able to attract the attention of larger employers with more challenging needs.

Today, clients range in size from 100 to 5,000 employees, and Smith considers mid-sized employers of 1,000 or so employees to be perfect for the agency’s team-oriented risk management approach.

“We now take more of an enterprise risk approach to our clients, focusing on total cost management and treating all of our clients’ cost generators in a unified way,” she says.

The agency specialists do not only assist clients in designing sophisticated benefits programs, but they also integrate health and disability management with workers compensation programs, create employee communications that support benefits education as well as safety programs, and consult on multiple federal and state regulatory compliance issues, she says.

The agency has also become its own best client, Smith says, testing its most sophisticated approaches on its own employees before promoting them to customers.

For example, wellness programs have become important components of client employee benefit strategies, Smith says. And Assurance used its own employees to test a dis-tinctive approach to wellness and health incentives.

“As a company focused on continuous, profitable growth, we knew we needed to find a way to control these expenses, while still offering a competitive benefits package to attract talent. More important, we knew if we wanted to succeed in impacting and improving our clients’ employee benefits programs, we needed to set an example by becoming our own best client,” Smith says.

The agency’s experience not only proved the efficacy of its methods, but has also led to a compelling case study that producers use to tell their own success story, she says. “Through our efforts to improve employee health and control escalating health care costs, the measurable return on our investment has been a staggering 953%.”

According to the case study, Assurance started addressing its own rising health costs in 2005 after a 14% jump in health plan premiums from the previous year—above the national average. Since that time, as the national trend of rate increases continued to average 12.7%, Assurance has managed to lower its annual increases to a five-year average of 1.5%. They’ve done this while adding benefits and creating a more satisfied workforce. In 2009, Assurance was honored by numerous national and local publications and organizations as being a “Best Place to Work.”

The agency began with a measurable goal, that its yearly health insurance cost increase could be no more than 3%, and moving toward a zero increase. To focus its first steps, the agency planned to reorganize its own plan funding, becoming partially self-funded as soon as its cost control programs were in place.

Self-funding gives an employer more direct responsibility for its claims costs, the case study notes. But it also requires the employer to improve the healthful behaviors of employees to reduce long-term claims trends.

“This led us to offer a consumer-driven health care option so employees would be more in control of their health and health care costs. In addition we knew wellness would be a large component of controlling costs,” Smith says.

The agency began by offering employees a Health Savings Account (HSA) that could be combined with a wellness and incentive program to reward healthy employees and their longevity with the agency with the prospect of growing account balances.

The agency targeted 90% employee participation in health risk assessment participation, 75% HSA enrollment and zero health renewal increase by 2009. Assurance reached most of these lofty goals and the results are impressive. By last year, HSA enrollment reached about 80% of employees; participation in health risk assessments and wellness programs reached 62%; and health care cost increases leveled at zero.

As with the programs that Assurance now recommends to its clients, the agency executed its plan step-by-step, year-by-year, beginning with the HSA introduction coupled with a company contribution as an incentive. The agency sets the employee contribution level at a rate comparable to the Preferred Provider Organization (PPO) option.

The initial offering wouldn’t immediately reduce costs, but it was designed to spark employee interest and set up a platform for future cost-reducing programs, including a health risk assessment program with biometric screenings.

“This would help us find out where the risks in our population existed to head them off before they developed into large claims,” the case study says.

In the second year, the agency increased the PPO employee contribution while the HSA contribution remained the same, making the HSAs a little more attractive for employees and economical for the employer. To further incent employees to participate in the health assessment, the agency began offering $100 in cash and a chance to win a weekend vacation.

By the third year, the agency continued to increase the cost of the PPO option and increase the incentives for participation in the health screenings—to $250 for participating employees with their spouses.

More and more employees began jumping on the HSA bandwagon as they learned of its additional benefits in the fourth year, Smith recalls. Some saw it as an opportunity to supplement their retirement savings, and higher wage earners used the HSA as a way to reduce their taxable income.

Smith says the agency can now pass on its experience to its clients in a very practical way—from the strategic designs to the nitty-gritty details.

“For example, we learned that if you’re planning on organizing a walking challenge, these competitions only work for four weeks at a time. Anything longer decreases interest. Wellness seminars pique more interest if lunch is provided and/or if they are offered free of charge. Also, employees like cash! The first two years we offered health risk assessments we gave away gift cards. Once we started to give cash away, our participation sky rocketed!” Smith says.

The agency continues to invest in new strategies, expertise and technology. “We continue to see the increasingly higher expectations of our clients, and that demands that we continue to be exceptional in the resources we can provide. We need to continue to invest in employees with expertise and programs with state-of-the art sophistication,” Chimino says.

Technology is a cornerstone of many new services and Chimino notes the agency provides a client portal, eBenefits360, that allows clients and their employees 24/7 access to risk management and employee benefits information.

Education has also grown into a value-added service. The agency-branded “Assurance University” conducts regular in-person seminars and Webinars on a wide range of issues, including workers compensation, industry segment safety issues and human resource management issues.

Free to clients, the seminars are open to all employers for a nominal charge.

“Education is huge,” Chimino says. “Better educated clients are better prepared to work with our teams in developing comprehensive solutions.”