Written – November 3, 2003
Anyone whose life is touched by Employee Benefits—employers, employees, and brokers—has been forced to deal with a tremendous amount of change in the last few years.
Group health insurance premiums are increasing across the country at a rate of 14-20 percent. Carriers are either exiting markets or pricing themselves out of consideration, leaving only a handful of fully insured options for employers to consider. The managed care, copay approach is giving way to higher deductible defined contribution plans. Reinsurance markets have tightened as varying HIPAA interpretations have drastically restricted the flow of information. Human resources staffs are being inundated by changes in federal and state legislation, complicating the administration of benefit plans and adding to potential liability of non-compliance. And, employees are being asked to make more and more decisions about things they understand less and less.
Basically, the “Cheese” has moved, and we are all still stuck in the “Maze.”
Rather than hope for the old days to return, here are some “Handwritings on the Wall” so employers and brokers can adapt and thrive in the face of these changes.
Follow the money
The money employers and their employees pay for benefits will generally flow to the following areas:
1) employee claims,
2) insurance (shifting the risk of excessive claims to a third party),
3) administration of claims and bills, and
4) a fee or commission to the broker/consultant who helped put it all together.
On average, employee claims are responsible for 70 percent or more of total plan costs. Employers that manage these costs have the best opportunity to control their own.
Understanding this, more and more employers and brokers are aggressively targeting claims expenses by developing extensive corporate wellness programs. These programs vary in size and scope from one employer to the next. However, many wellness providers are able to illustrate hard returns on the investments employers make in their programs.
Regardless of the degree and approach, it is important for employers and their brokers to develop a strategy to address this issue proactively.
Make the intangible tangible
Employers offer benefits so that they can attract and retain good employees. Because employee benefits are intangible, employers must create a tangible value for their employees by communicating and administering their benefit plans effectively.
Some ways employers and brokers successfully communicate the value of benefits are personalized enrollment materials, compensation statements, and benefit Web sites. However, none of these offerings are as effective as person-to-person benefit plan communication and personal customer service to resolve claims or administrative issues.
Employees don’t understand and don’t want to understand the inner workings of claims processing and network discounts. These procedures are confusing enough to the people who deal with them every day. Employees who are using their lunch breaks to try to figure out a bill that is “Not a Bill” will inevitably blame their benefit plan for their frustration—eliminating any tangible value associated with the plan.
You want to buy value, provide value
When employers “follow the money,” they become aware that some percentage of the money they spend on employee benefits is for professional assistance through this process.
If it is important to choose a valuable benefit plan, it is equally important to choose a valuable broker to analyze, negotiate, and communicate these plans. For this reason, the carrier evaluation and selection should be made separately from the broker evaluation and selection.
Here are a few areas to consider when assessing the value of a broker/consultant.
• Carrier Market Access.
• Industry Knowledge and Experience.
• Client References.
• Administrative Services Provided.
• Out-Sourced Services.
• Benefits Communication Capabilities.
Once an employer selects a broker, benefit plans can be designed collaboratively and rates and provisions negotiated with the strength of a unified voice.
Seeing the “Handwriting on the Wall” about the Employee Benefits industry cannot guarantee that we will find our “Cheese.” It can only focus our attention and our efforts where they can make the most tangible impact—making the “Cheese” we are always searching for seem easier to find.
Tom Daly is the co-founder and managing principal of Hartwig Moss Benefits (www.hm-b.com), a full-service employee benefits consulting firm in New Orleans.