By Len Strazewski

What does a property/casualty agency need to tackle the challenges of the Patient Protection and Affordable Care Act?

Expertise and experience, says Jeff Haney, president of ECM Solutions in Charlotte, North Carolina. And if you don’t have those attributes, you need to acquire them to avoid losing your competitive edge.

Founded in 1987 as a property/casualty insurance and risk management specialist, ECM Solutions has about 6,000 employer clients and 65 employees, including 12 in employee benefits services. While the agency didn’t ignore the growing employee benefits business of the past 10 years, it didn’t commit to the complex services the field demanded until last year, Haney recalls.

From left: John Ferguson, Executive Vice President; Charles F. Irick, Benefits Consultant; Charles T. Campbell, CLU, ChFC, Benefits Consultant; Luke Ferguson, Benefits Consultant; Scott Ogburn, Benefits Consultant; and Stephen Colquitt, Benefits Consultant.

“We opened a small benefits office with a single producer about eight years ago, but benefits produced only about 10% of our overall revenue, more of an accommodation to small business clients,” he says. The passage of health care reform, however, was an eye-opener.

“It was pretty clear to us that the passage of health care reform would lead to the end of the small group benefits business as we understood it,” he says, as small employers ceased to provide group health insurance and referred employees to health insurance exchanges for individual coverage.

“We expect that there will be some small group business over the next 10 years, but not really enough to sustain a practice for us. If we were going to continue to have a benefits practice, we would have to make a serious penetration into the large group business. And we just didn’t have the tools to compete in that arena.”

Haney began to spread the word that ECM was interested in acquiring or merging with an established benefits specialist that could provide the experience and expertise the agency needed to enter the mid-sized to large employer market for health benefits and support the agency’s current property/casualty customers—many of whom would be likely to consolidate their insurance needs with a single agency.

Haney found his answer with an old friend, John Ferguson, president of Ferguson Employee Benefits Agency in Greenville, South Carolina. The Ferguson agency, founded in 1980, had a complementary book of business focused on large employer groups and offered more sophisticated benefits management services, including self-funded health benefits and wellness programs.

“The key differentiation is not what insurance policies we sell, but rather what package of services we provide and what client needs can we meet.” –John Ferguson

“I called John, who was a college friend who had been in the benefits business for many years, and asked if he could recommend someone who fit our profile and might be interested in joining us. He said, ‘What about me?’”

Like Haney, Ferguson saw opportunity in a proposed combination. The agent/broker system had been moving steadily toward consolidation for several years, he notes, as commercial customers looked for more sophisticated risk management and employee benefits strategies.

“The values we are promoting to our clients are no longer just insurance products,” he explains. “We are providing the tools and resources necessary to meet the needs of commercial customers who have a range of issues to which they need to respond.

“The key differentiation is not what insurance policies we sell, but rather what package of services we provide and what client needs can we meet.”
Of course employers are looking to lower costs, he notes. But they are also seeking administrative support for overworked human resources departments, technology and expertise in employee communication, and strategic consulting to support ongoing compliance with health care reform.
Moreover, they expect both quantifiable and intangible returns on investment, such as healthier and happier employees who are more productive in a competitive work environment.

Assisting client employers in navigating health care reform will be an important priority for the next three to five years, Ferguson says. “Each employer will need to reexamine its own needs and commitment to providing group health benefits. Some employers will find that their employees will be better off turning to exchanges for individual health insurance.

“Others will continue to offer group benefits but may need to provide different plan designs, such as consumer-directed health plans, and many may find value in increasing their level of self-funding,” he says.

All of these needs are best met by a single broker with a depth of capabilities and vision, Ferguson says, rather than several agents and brokers competing with each other for portions of the client’s business.

“It’s like trying to conduct an orchestra with three or four conductors leading at the same time. The result is confusion,” he says.

The two firms completed their merger in July of last year, doubling the revenue derived from benefits services to about 20% and dramatically expanding the range of services available to clients. With the new capabilities, Haney anticipates that revenue derived from employee benefits is likely to increase to about one third of the agency total by 2015. Ferguson Employee Benefits Agency continues to operate in Greenville under the name ECM/Ferguson Solutions.

ECM now offers traditional guaranteed cost group benefits, partially self-funded benefits financing programs, captive insurance company structures for employee benefits, high-deductible health plans, and voluntary benefits including life insurance, short- and long-term disability insurance, and long-term care insurance.

The agency also provides benefits administrative services, including claims management, communication resources such as print booklets and plan descriptions, and employee benefits Web portals.

The firm is a member of United Benefit Advisors in Indianapolis, an organization of 140 employee benefits advisory companies in North America and Europe. UBA provides access to technology services as well as to partner agencies around the country for large employers with multiple locations.

“It was pretty clear to us that the passage of health care reform would lead to the end of the small group benefits business as we understood it.” –Jeff Haney, CPCU, ARM Partner

“For many of our clients, we wear the benefits hat for the human resources department.” –Scott Ogburn

Wellness and disease management are important components in ECM’s benefits services and a key differentiator, executives say. The agency has nearly 20 years of experience building and tracking disease management programs and was a founder of one of the nation’s most famous health management projects.

In 1997, Ferguson Benefits and the City of Asheville, North Carolina, began an experimental health management program, teaming with community pharmacists to provide education and support for employees with chronic conditions, including diabetes, hypertension, asthma, and high cholesterol.
According to the city’s history of the project (www.theashevilleproject.net), participants received education about their conditions from the Mission-St. Joseph’s Diabetes and Health Education Center and met regularly with pharmacists to make sure they understood their treatments and adhered to the program.

The self-insured city tracked improvements in claims that could be linked to improving health risks, including lower health care costs, fewer sick days, and improved test results. The project continues under the direction of HealthMapRx in Washington, D.C.

Philip Benetatos, a wellness nurse with the agency’s disease management company, Lifecycle, LLC, says the disease management technique continues to be an effective way of lowering health risks and health care costs and is more effective than Web-based education programs and telephone coaching used by other providers.

“The program works because it is more human compared to other wellness coaching methods,” he says. “It is important that the wellness nurse work one on one with the client and develop a plan together that addresses the individual health issues.”

The disease management program is proposed to a client to explain the technique and the return on investment experienced by previous clients. Prospects include local government entities and mid-sized to large private employers.

Most small employers are underserved, particularly in the rural Southeast, Benetatos explains, and this creates a growing market for wellness services provided by the agency.

As a first step, the employee is asked to undergo a health risk assessment, including appropriate tests, and attend a health fair to choose among support and incentive programs. Employees then work with their individual wellness nurses to develop a customized plan.

The wellness nurse meets once a month with the employee to track results and respond to questions. Benetatos says frequent meetings are a key to success and a key differentiator from other, less personal approaches.

“Clients have varying expectations,” he says, but history indicates that employers can anticipate less sick time among participants, fewer health insurance claims, and lower premiums at renewal—as well as a healthier employee population overall.

The health management process has produced consistent savings over time, adds ECM senior consultant Scott Ogburn. For the past three years, the agency’s employer clients have been reporting annual premium increases of 3% or less against a regional health care cost increase trend of 9% to 11%.
Clients are also happy with the increased administrative resources now available. “For many of our clients, we wear the benefits hat for the human resources department. We are on site at our clients four to six times a year, meeting with employees on their benefits questions and with financial executives for updates on our services and capabilities,” Ogburn says.

The merger of the two agencies also has transformed sales management. Cross-selling is now part of the ECM culture, with benefits and property/casualty producers meeting with prospective clients as a team and addressing their strategic financial needs in a more comprehensive way.
“It has been an automatic door-opener for me. We are taking more of a total risk management approach to their needs, focusing on overall cost strategies across disciplines,” Ogburn says.

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.