By Len Strazewski

Cost. Compliance. Communication. As the New Year in employee benefits charges forward into 2014, employers continue to brood about questions that linger from 2013.

Even though real estate values have rebounded, employment is rising and the stock market is at record highs, employers fear that health benefit costs are still not under control—and may be getting worse under health care reform.

Compliance with state and federal regulations is more complicated than ever as health care reform rules become active and states establish health insurance exchanges to provide market access.

And communicating with employees about these issues is an increasing challenge as employers seek to share more financial responsibilities with their workers and benefit dependents, agents and brokers say.

“I spend 90% of my time talking about these issues,’ explains Michael Parks, managing director of financial services at Higginbotham, headquartered in Fort Worth, Texas, one of the state´s largest independent insurance brokerage companies.

From left: Maggie Hadden, Director of HR Technology; Ross Carmichael, J.D., Vice President of Compliance and Operations; Leah T. Scoggins, MS, Director of Wellness and Health Risk Management; and Donna Maloy Tuscana, Director of Communications.

Higginbotham promotes itself as a “single source’ for commercial property/casualty insurance, risk management and employee benefits services, and is comprised of 20 branch offices and subsidiary firms across the state, including Austin, Dallas, Houston and Corpus Christi.

“Cost concerns have been important for many years—they never go away—and just keep getting more imposing. Most employers believe that the Affordable Care Act is increasing costs for employers, not reducing them,’ Parks says.

Compliance with the new law complicates an already burdensome regulatory environment that has also been evolving for many years, since the Employee Retirement Income Security Act of 1975 (ERISA), the Family and Medical Leave Act (FMLA) and a host of other regulations and requirements, including COBRA and pension reporting.

Higginbotham takes a consultative approach to its client base, Parks explains, and provides guidance to employers on these issues. But advice isn´t all that an agency or brokerage must provide in the 21st century. Service is critical, he says, and the firm must also provide the resources to help its employers execute their responsibilities.

“We want to work with our employers to help them design a strategy to contain their costs and comply with regulations, but we also need to communicate directly with their employees about benefits and their own responsibilities under the laws and their new employee benefit plan designs.’
Founded in 1948, Higginbotham now has about 620 employees, including about 200 in employee benefits and related services. The firm´s employee benefits practice includes group health, life and disability insurance, dental and vision care benefits, voluntary benefits and executive benefits such as deferred compensation and individual life insurance.

In addition, the company offers a broad range of benefits and management-related services such as regulatory compliance consulting, Flexible Spending Accounts, Health Savings Accounts, Section 125 plan administration, employee communications and wellness consulting. The firm also has three retirement plan specialists on staff.

Employee benefits accounts for about 45% of total revenues, Parks says, a testimony to the productivity of employee benefits operations and the increasing importance of the services in the employer community.

Parks says employee benefits has been a significant portion of the firm´s practice since 1989, just two years after the present president and chief executive officer, Rusty Reid, took over executive leadership, appointed by a seven-person board of directors.

The board also appoints managing directors who provide sales or subject area leadership or manage subsidiary offices. Parks joined the firm in 1989 to develop a life and health insurance sales department that quickly grew into a more sophisticated and comprehensive operation that successfully cross-sells with the property/casualty insurance and risk management practice.

“When we meet with prospective customers, we sell Higginbotham, not just employee benefits and the same is true with our property/casualty insurance producers,’ Parks says.

From left: Michael Parks, Managing Director-Financial Services; Jim Hubbard, Managing Director-Financial Services; and Rusty Reid, CIC, President and Chief Executive Officer.

The firm´s subsidiary offices also promote both property/casualty insurance and employee benefits services, he notes, and many of the subsidiary agencies joined Higginbotham specifically to expand their employee benefits resources. The parent company began acquiring smaller agencies in 2007, after identifying several independent agencies with substantial customer lists that required broader and more sophisticated services.

“There are a lot of smaller agencies that need to provide a broader range of services if they want to retain their clients and many have sought out Higginbotham as a partner to provide those services. However, we continue to apply our ‘Thanksgiving test.´

“If they aren´t people with [whom] we would be happy to celebrate a Thanksgiving holiday at our family table, we probably do not want to establish a business partnership,’ Parks says.

John Petrosky, CEBS, RHU, managing director in the Houston office, is a lead employee benefits producer. He says clients turn to Higginbotham more for strategic advice than simple access to employee benefits products. “They look to us as an adviser and it is up to us to simplify an increasingly complex marketplace,’ he says. “It is important that we simplify the messages of the marketplace and provide cost-effective answers to their business challenges.’

Higginbotham clients range in size from 100 to more than 2,000 employees, but the firm specializes in employers with 100 to 500 employees. The small to medium-sized employers have the greatest need for the firm´s consulting and support services, he says.

For many employers, cost is the critical issue, but achieving cost control involves the highest level of expertise. Higginbotham has been successful in keeping health care cost increases to as little as 5% for the past five years with a comprehensive benefits management strategy.

First, employers need to identify a benefits package that is competitive with industry peers, Petrosky notes. Then, they need to develop an administrative design that contains administrative costs.

Compliance issues with ACA will continue to plague employers and several provisions have yet to take effect, like the “Cadillac tax’ and a reinsurance tax for self-funded plans. “I don´t see the questions ever going away.’ —Ross Carmichael

Leading health plans in Texas include Blue Cross/Blue Shield of Texas, and the three largest national insurers: United Health, Cigna Health and Aetna Health. Humana Health Plan of Texas is also competitive, particularly in rural areas of the state, executives say.
However, most clients´ companies self-fund a portion of their health benefits claims and leverage the management of administrative costs and stop loss insurance, Petrosky says.

Next, employers need to engage their employees in cost management. Petrosky says the brokerage has promoted HSAs since their inception in 2003 and most Higginbotham client employers have already introduced Consumer Directed Health Plans (CDHPs) and HSAs for employees.

“In many cases, we have seen health care costs go down as employers have identified their key cost drivers and addressed the underlying issues,’ he says. “But it is also important to engage employees as better health care consumers. The account-based plan design allows employees to make choices about health services and their out-of-pocket costs.’

But in order to make good decisions, employees require cost transparency, he adds.  “The-fee-for service medical model is so opaque that many consumers cannot make good decisions on their own,’ he says.

Higginbotham contracts with Compass Professional Health Services in Dallas to provide cost surveys and comparisons for local health networks and service providers. The firm also supports wellness and health incentive programs to help curb rising cost trends with improved employee health.
Ross Carmichael, vice president of compliance and operations, joined Higginbotham in 2012 after serving as an attorney and investigator at the U.S. Department of Labor.

He leads compliance consulting and manages the firm´s “compliance check’ program that monitors 20 key areas: loss control, human resources, employee benefits, workers compensation experience modifier, workers compensation claims review, risk transfer, replacement cost/building ordinance, business income, EEOC, employee manual, FLSA, FMLA, IRCA, records retention, sexual harassment, COBRA, HIPAA, policy provisions, Section 125, ERISA/SPD and OSHA.

Health care reform and the Affordable Care Act still plague employers, he says. While many of the early regulatory issues have been resolved and market access tools—such as health exchanges—have been enacted, there are still gray areas for employers, Carmichael notes.

“When we meet with prospective customers, we sell Higginbotham, not just employee benefits and the same is true with our property/casualty insurance producers.’ —Michael Parks

Most Higginbotham employers are unlikely to abandon employer-sponsored health benefits and their recruitment and retention strategies, so they have no choice but to carefully monitor their compliance with the law.

For example, coverage for leased employees and temporary agency staff is still an issue of concern, and determining hours worked for commissioned sales employees and by-the-mile drivers is still not clearly defined by published standards, he says, and several provisions have yet to take effect. They include the so-called “Cadillac tax’ on employers with richer than standard benefits and a reinsurance tax for self-funded plans.

“I don´t see the questions ever going away,’ he says.

Carmichael also leads communications training for open enrollment, responding to employee questions during the traditional end-of-the year rush to assist employees in making their benefit choices. Open enrollment is a critical period for many employers as they educate their employees about the consumer-driven plan design and their ability to manage their own health care.

Higginbotham also offers client access to ClaimReturn LLC, a Dallas-based company that works with employers, administrators and insurance carriers to recover overpayments to medical providers and reduce health insurance costs related to claim payment errors.

According to the company, ClaimReturn performs compliance-centered examination of records for large and small private employers, unions, Multiple Employer Welfare Arrangements (MEWAs) and federal and state health plans.

ClaimReturn identifies improper payments and recovers dollars lost due to errors in benefit claims administration, provider billing, application of network fee schedules, industry payment guidelines, duplicate payments and more.

The author
Len Strazewski is a Chicago-based writer, editor and educator specializing in marketing, management and technology topics. In addition to contributing to Rough Notes, he has written on insurance for Business Insurance, Risk & Insurance, the Chicago Tribune and Human Resource Executive, among other publications.