Capitalizing on Benefits

Benefits beacon

D.C.-area agency devises employee benefits plans that cater to diverse workforce

By Len Strazewski

Rich health benefits. An accelerated retirement plan. A 37-and-a-half-hour work week. It's not easy for private employers to compete with federal agencies, but building competitive employee benefits plans is part of the job at Early, Cassidy & Schilling, Inc., in Rockville, Maryland.

The Washington, D.C., area is famous for its rich and traditional employee benefits plans, explains agency principal Andrew Cassidy. And private employers in Maryland, Virginia and the District of Columbia recruit and retain employees in a competitive environment driven by federal employment and its perks.

"The federal government is a huge presence in this region," he explains. "Until employers experience it in their hiring, they don't realize that an employer's ability to attract skilled employees relates to their expectations. Everyone in the area has friends or family who work for federal agencies and compares what they are being offered with what the government provides."

Principal Timothy Schilling, CPCU, CIC, agrees. While many agencies around the country are in familiar territory in presenting increased cost-shifting to employees and reduced benefits to offset rising health care cost trends, Early, Cassidy & Schilling must tailor its plan designs not only to the national trends but also to the regional competition and its distinctive employer groups, ranging from law firms, lobbyists and trade associations with enormous executive payrolls, to construction companies whose workers maintain the area's infrastructure and blue-collar service firms with laborers earning lower wages.

However, the agency has plenty of experience managing its balancing act. Founded in 1929, the present principals have been part of the firm since the 1970s when the agency made its first foray into employee benefits sales. Messrs. Schilling and Cassidy assumed ownership in 1989.

Today, the agency has 53 employees, including four employee benefits producers and four benefit services managers. The agency also has an office in Reston, Virginia. Employee benefits accounts for about 30% of agency revenues, Schilling says, but could easily increase to 40% or more, depending on the changing regulatory environment.

Impact of health care reform

The agency has just begun a five-year plan to increase its employee benefits revenues, he explains, but much of its strategy depends on the future of health plan delivery under the evolving federal legislation that still remains to be reviewed by the U.S. Supreme Court.

"It all depends on the outcome of health reform," Schilling says. "Will we be dealing with health insurance exchanges? Will our clients be expecting employees to purchase individual insurance? There is still plenty that remains to be decided."

However, the principals expect that the agency will still have some role to play, regardless of the outcome. "How we deliver health care as an employee benefit is a critical question, but I have to believe there will always be a piece of the business for agents in providing guidance for their clients in managing and complying with the future regulations." Cassidy says.

"Insurers do a pretty good job in being the risk bearers and the claims payers, but they have never been particularly good at advising policyholders and helping with strategic services. Our strongest role has always been as an advocate for our clients and that is unlikely to change," he adds.

A member of the executive committee of the Council of Insurance Agents and Brokers, Cassidy has personally lobbied federal legislators on health reform issues and watched the movement grow into a complex jumble of rules and procedures. He laments the "lack of rhyme or reason" in the way health reform has evolved and the burden it is likely to place on employers.

"As the federal government increases its involvement in health care delivery, private employers and their employees are likely to need more advice on how to operate within the new guidelines. Otherwise, I am afraid they will be left holding the bag," he says.

Early, Cassidy & Schilling clients range in size from two to 1,500, but the majority of local employers are somewhat smaller with varying benefit needs. Trade associations, lobbying firms and law firms served by the agency tend to range from 50 to 500 employees and demand a richer mix of benefits.

"Cost issues are universal," explains employee benefits producer Paul Phelan, CFP. "All of our clients are concerned about increasing costs." Health insurance premiums increase 12% to 15% annually, comparable to other regions, but the pressure to contain those increases with benefit cuts varies.

Small employers with 50 employees or fewer have few options. Small employer health plans are community rated and have less access to plan design tools that can reduce or shift costs. Larger firms have the ability to manipulate their costs somewhat with consumer-directed health plan designs and full or partial self-funding.

The agency works with several health plans in providing fully insured health benefits, including Aetna, Carefirst BlueCross/BlueShield, Cigna, Coventry and Kaiser Permanente. Cigna also provides administrative services for partially self-funded plans. The agency also partners with third-party administrators Loomis Companies and GBS for some self-funded plans.

However, the white collar employers that compete with government agencies are under some competitive pressure not to reduce their benefits, Phelan says. "Many of these employers have reduced salaries in the past few years but have found themselves giving back the cuts in benefits in order to retain their top performers."

The blue collar employers—construction companies and property management and service firms—range in size from 100 to 250 employees and generate less premium volume but have some flexibility in design. About 40% of the agency client base is in construction and related fields, providing an opportunity to address property/casualty insurance and employee benefit issues with a comprehensive strategy.

"We have no trouble getting to the table to quote on our clients' entire risk management and employee benefits business. As a result, we often have the opportunity to craft a single multi-year plan that addresses total risk management and employee benefits costs," Phelan says.

This strategic approach has helped the agency reduce annual health care cost increases to 6% to 10% in some cases, he says.

Team sales success

Schilling notes that team-selling is an agency hallmark, part of a comprehensive approach to client service.

"Cross-selling is key," he says, and it is the rule rather than the exception that property/casualty producers and employee benefits producers work together. Agency producers target total client spending that may cross lines between insurance and risk management and employee benefits.

As a result, Schilling says, the agency has made a point of adding bright sales people on both sides of the fence. "Actually, we have increased our sales staff with a new generation of cross-trained producers. We have hired individuals for whom there is no fence—just a comprehensive approach to service," he says.

In addition to health benefits, the agency also administers enrollment for other group and voluntary benefits, including dental and vision insurance plans, life, and disability insurance products. Voluntary benefits paid all or in part by employees, offer a huge potential for the agency, Schilling says.

Regardless of health reform, voluntary benefit programs are likely to grow in size and diversity as employers seek to fill in coverage gaps without increasing costs. In the past two years, the agency has introduced voluntary benefit programs underwritten by UNUM and Colonial Life Insurance Co. that provide optional life and disability insurance coverage, as well as supplemental health coverage. Long-term care insurance, a traditional laggard in the field, is also growing, executives say, as employees come to understand its value.

Voluntary benefits programs also allow the agency to capitalize on its enrollment expertise, Phelan notes. "One of our strengths has been our ability to bring benefits enrollment directly to employees. For example, for our construction industry clients, we often conduct enrollment at their worksites, eliminating the disruption of pulling employees off the job to meet in corporate offices," he says. "Many of our client companies have a small or single person human resources department, and by assuming responsibility for enrollment, we have become a valuable extension of their HR function."

The agency also provides employee benefits communications support, including benefit statements, summary plan descriptions and online services, as well as state and federal regulatory compliance assistance.

Bilingual enrollment services have become a key differentiator for the agency, principals say. A large percentage of the local construction and service industries' workforce is Spanish-speaking and reluctant to enroll in voluntary programs about which they are not clear. "By communicating with employees in their first language, we have been able to provide our clients with a faster and more effective enrollment process," Phelan says.

The agency plans to expand its bilingual enrollment services and is actively recruiting bilingual producers and service managers.

Retirement benefits may also be a growth area for the agency as the national workforce ages and becomes more reliant on private retirement plans. Schilling says the agency has producers who are licensed to sell and administer defined contribution retirement plans and supplemental executive benefits. However, he says the field is particularly difficult to enter and takes a sustained effort which the agency is beginning to mount as part of its expansion plans.