Capitalizing on Benefits

Integrative approach

Lacher & Associates' employee benefits strategy to complement
clients' plans is paying off

By Len Strazewski

It’snot enough to focus exclusively on health care costs. Successful agencies need to be integrative, incorporating employee benefits management strategies into each client’s business strategies.

That’s the philosophy of Lacher & Associates in Souderton, Pennsylvania, a family-owned independent agency where a rapidly growing employee benefits practice complements 50 years of property/casualty insurance sales.

“We’ve been doing employee benefits for 15 years, adding to the property/casualty insurance that was the beginning of the agency,” notes Mark Lacher, co-partner in ownership of the agency with his brother Chad.

“The agency recognized the need to be in employee benefits for both offensive and defensive reasons. Defensively, to retain the clients who were growing and demanding more comprehensive service from their agency; and, offensively, as a way to attract new business from customers who are seeking unified consulting from a single, trusted advisor.”

It was a sign of the times then and a pointer to the evolution of the sophisticated and comprehensive risk and employee benefits management the agency now provides.

Lacher & Associates was founded in 1958 as the insurance division of a real estate sales company. Namesake Greg Lacher joined the firm in 1977 and began building the agency into a powerful regional agency that provides personal and commercial insurance services, according to his heirs.

“He led the charge in creating our regional presence and building the services that we continue to provide today. We are truly a family-owned business and plan to continue to grow as a family business,” Chad says.

Greg founded the employee benefits division in 1995. Sons Mark and Chad took over ownership of the firm in 2007 and have continued to expand the employee benefits division. Today the agency has 32 employees, including five full-time employee benefits specialists in the benefits division, led by Mark since 2006.

Employee benefits accounted for about 20% of revenues in 2009, and the agency expects this fast-growing area to increase to 25% or more of revenues before the end of 2010. New employee benefits business is already growing at twice the pace of last year. In fact, the benefits division has placed new revenue equal to the largest new sales volume ever for the entire firm—all in 2010.

The agency’s sophisticated and strategic approach to client risk analysis and benefits consulting is what sets the agency apart from its competition and guides its clients to a 21st century approach to benefits management. Chad and Mark are leading the charge to be not only risk and benefits consultants, but also to be strategic business partners for their clients.

Two years ago, the agency created a trademarked strategic client engagement approach, Impact, which focuses on a holistic understanding of an employer’s strategic needs. Originally derived from the need to have a clearly defined approach to both property/casualty and employee bene­fits, the approach serves to uncover the various areas of risk that impact a business. Impact allows the agency to uncover everything from procedural inefficiencies in their clients’ benefits processes to serious employment practices liabilities, Chad says.

“Our goal is not to rewrite the business strategy of our clients but to learn and understand what they are trying to do with their companies and apply what we can to their planning,” Chad continues. “What we have learned is that many of the same messages employers need to apply to their property/casualty exposures apply as well to their employee benefits management.”

Health concerns, for example, influence costs in both workers compensation and employee benefits, and the remedies—a safer and more health-conscious workplace—apply across the enterprise, he says. Alterna­tive risk funding and risk-sharing approaches—driven by claims data trends—apply universally to both property/casualty risks and health risks.

“It is our role to help our clients make the choices that, in the long run, will reduce their claims costs but also reduce absenteeism, presentee­ism and improve productivity,” says Chad.

Lacher specializes in small to medium-sized employers with 50 to 1,000 employees or more and has special expertise in nonprofit organizations. In 2010 the agency has added six clients with more than 100 employees, and they view this market segment as their fastest growing customer base.

For example, earlier this year, the agency announced that it had become broker-of-record for Living Branches, a nonprofit retirement living services organization with three residential campuses in southeastern Pennsylvania and more than 600 employees.

Nonprofit organizations provide unique challenges, the brothers say, with many of the property/casualty risks of larger for-profit companies and an even more demanding need to contain costs and maintain high level of services. Nonprofits are particularly vulnerable to increasing employee benefits costs as they attempt to recruit and retain employees and maintain human resource continuity for their organizations.

“Client engagement is critical for our relationships,” notes Mark. “By meeting and engaging with our clients in a sophisticated and strategic way, we can address the connection between their employee benefits and their human resource management and help direct them to solutions that meet the overall objectives of the company.”

The agency focuses more on the “C-level” client executives than risk or benefit managers, Mark adds, and often leads with education, rather than sales presentations, to commun­icate the level of expertise the agency brings to a client company.

“Selling the renewal,” promoting what the agency can do to reduce or level annual health insurance premium renewals, always has some importance, Mark says. But in the Impact model, “what’s important is not so much what will happen this year, but what the client wants to happen three to five years in the future. There are many pieces to the puzzle and our goal is to help our clients identify them and respond to them as an organization.”

“Risk management and employee benefits are our core competencies, but we realize that our clients need a broad range of financial and management services that can support their strategic plans,” Chad notes. “It’s important that we can help them identify these services and assist them in integrating them into their planning. In this way, we serve more as a business advisor, helping our clients adjust to changes in their human capital, financial and operational needs.”

To meet the broad range of client needs, the agency has developed a series of strategic partnerships with other local consulting companies that provide services that can be integrated into the agency’s strategic guidance, including legal and regulatory compliance, payroll management and human resource consulting.

However, the agency has made an extraordinary commitment to wellness and health services with an equity investment in Attentive Health LLC in Telford, Pennsylvania. The wellness firm has five employees and provides integrated health education and wellness activity programs for employees and individuals.

The agency also works with its health plans in accessing their health and wellness services and retrieving health claims data that can provide direction to employers, Chad says. Aetna, Independence Blue Cross/Blue Shield, Cigna Health, Health American and United Health Care are among the leaders in the region.

“We work with our health plans in accessing claims data on a timely basis—at least quarterly and often monthly—and providing analysis that helps our clients make decisions about their employee benefits programs,” Mark says.

Data directs strategy, but approaches vary depending upon client size and philosophy. Smaller employers, with limited resources, focus mostly on health education programs and communication; but larger firms have been successfully integrating plan design changes with wellness strategies, they say. Health Reimbursement Accounts (HRAs), employer-funded consumer-directed health plans, have become relatively popular in the area as one method of self-funding some of the health risks.

Health Savings Accounts (HSAs), funded with employee dollars, have been less popular in the region, Mark notes, but have been growing in number as larger employers have begun to add them to employee benefit options.

“HSA acceptance has been slow in Eastern states where employee benefits have tended to be richer,” Mark says. However, many employers, even small firms under 100 employers, integrate alternative risk funding with the help of a relatively soft stop-loss insurance marketplace.

While health care benefits and steadily escalating costs drive the attention of most clients, a full-service employee benefits agency also needs to offer a full line of other benefits to round out employer offerings, the Lacher brothers say.

The agency provides group life insurance, short- and long-term disability insurance, prescription drug benefits, dental insurance and vision care plans, among other options. Voluntary benefits, paid by employees through payroll deduction, are becoming more popular as employers struggle to add value to their benefits package without increasing their costs, Chad notes.

“We haven’t seen a lot of employers wanting to add to their employee benefits programs, but they are inter­ested in helping their employees if they can do so without increasing their own costs. They recognize the value of group rating in holding down their employees’ costs.”

Dental insurance and vision care are popular voluntary benefit options, Chad says, and interest in long term care insurance is growing, but the agency has also had significant success with a personal property/casualty insurance product.

Personal Advantage, a group-rated home and auto insurance product, has become a major component of the agency’s voluntary benefits portfolio and provides substantial savings to employees, he says.

“The average employee savings is about $500 a year,” Chad says, “and for many employees, that offsets an annual increase in health insurance premiums. Our clients have had very good success promoting Personal Advantage participation as a way delivering value while increasing cost-sharing on the health side.”