By Len Strazewski

Don’t let insurance industry tradition put blinders on your employee benefits practice. Employers need more than group health insurance policies that are renewed every year and cost a little—or a lot—more each time.

Human resource management and the employee benefits that support it have grown into some of the most complex and challenging of all employer risks. And it takes 21st century risk management to deal with them.

The Benefits Team. Standing from left: William D. Rhodes, Executive Vice President; Peter R. Unger, CPA, ARM, Executive Vice President & Chief Financial Officer. Sitting from left: Matthew W. Donahoe, CIC, AIC, Senior Vice President; Bill J. Purvis, CBC, MBA, Senior Account Executive; Scott Addis, CPCU, CRA, President; Yvette D. Smith, Administrative Coordinator; John E. Garber Jr., CSP, SPHR, Senior Vice President.

Employers need a wide range of support in recruiting, retaining and managing employees, and that includes knowledgeable counsel relating to the employee benefits programs they provide their employees, says John Garber, CSP, SPHR, senior vice president of The Addis Group, based in King of Prussia, Pennsylvania. “Employees are an organization’s most precious asset,” he says, and “our employer clients need to respond to their needs.”

Garber notes that the firm has taken the same approach to employee-based risks and employee benefits programs.

The agency’s Human Capital Solutions and Employee Benefits Practice, as Garber calls it, provides an important component to the range of services the agency provides its clients and the management problems it helps resolve, he says.

Many well-intended agents and brokers, he notes, limit their engagement in employee benefits programs to insurance products, such as group health insurance, dental insurance, vision care, short- and long-term disability insurance and life insurance. But those products provide only a limited response to other important business needs.

“If you are truly going to take an enterprise risk management approach to your business, you have to look at more than insurance coverage. You have to look at the holistic nature of risk, the connections between employee health and risks such as workers compensation, for example, and the links between employee health and wellness and performance and productivity,” he says.

The result has been the development of a broad-based consulting practice that focuses on human resource concerns that include but are not limited to employee benefits programs, as well as regulatory compliance, training, communication and other HR management challenges.

The Human Capital Solutions division now represents about 10% of agency revenues, but Garber expects the practice to grow to about 25% of revenues within three years. Clients range in size from five to 500 employees, but the targets for the practice are employers with 50 to 300 employees.

“We need to partner with our customers and become a year-round extension of their business.” —Scott Addis, CPCU, CRA

“Our customers look to us to be experts with the ability to address their problems and concerns.” —William D. Rhodes

“The defined contribution plan design allows employers to stabilize their costs over time and allows employees to choose from a range of coverage designs.” —Bill Purvis, CBC, MBA

“You have to look at the holistic nature of risk and the links between employee health and wellness and performance and productivity.” —John Garber, CSP, SPHR

The Addis Group has about 65 associates, including five specialists in human capital and employee benefits programs and four account managers whose focus includes employee benefit solutions.

William D. Rhodes, executive vice president and founding partner, says The Addis Group approach to human capital consulting and employee benefits is consistent with the agency’s approach to all of its customer needs. And as risk management techniques such as the use of captive insurance companies evolve, the disciplines and approaches have been progressively overlapping.

Early in its history, the agency developed a four-step risk management process to analyze property/casualty insurance risks. The approach, Rhodes says, takes the agency and its clients deeper into an understanding of a risk profile and approaches to responding to risk.

The four-step process involves identifying exposures, developing strategies, implementing programs and monitoring results, making fine-tuning changes as needed to meet client goals.

The process also applies to employee benefits risk, one of an employer’s biggest expenses, Rhodes explains. With the expanded capabilities of the Human Capital Solutions division, the organization’s business development team works in concert to explore a client’s business concerns and provide a comprehensive and holistic strategy. The process also creates a great opportunity to cross-sell existing customers who are looking for a single agency resource for their business, he says.

“Our approach is not just part of an insurance procurement process. We refuse to begin our relationship with a traditional coverage bidding process,” Rhodes says. “We start by learning about our customers and their business needs.”

He says the agency prefers to work on referrals, beginning strategic relationships 60 to 90 days after coverage renewals. “Our goal is to spend time with the client, gaining an understanding of their business and identifying business and risk management needs—anything but insurance products at this early point in our relationship.

“Our customers look to us to be experts with the ability to address their problems and concerns. That requires research and exploration.”
Cost control is still an important concern for most employers, but containing costs is just a component of a broader human capital strategy that the agency experts can develop, he says.

Garber calls the process HR 365®, a name derived from the agency’s Risk Management 365 branded approach to property/casualty risks. The number represents the agency’s year-round engagement to identifying and mitigating risk and measuring the success of strategic approaches, he says.

“We have abandoned the old model of the spreadsheet, bidding out the health benefits and ancillary benefits coverage once a year and tweaking employer and employee contributions.

“There’s only so much vanilla and strawberry the industry can consume. We have all come to the stage at which employers need custom solutions that take into account a set of comprehensive needs.”

Small and medium-sized employers, in particular, have recognized their own increasing needs, he says. Many of them have reached out to their agents and brokers and said, “We need help,” Garber notes.

Some agents and brokers have taken small steps in that direction by adding communication services that can provide employee handbooks and benefit documents and assistance with regulatory compliance, he explains. But many of those programs do not go far enough and do not extend to strategic issues such as long-term staffing needs, productivity and performance measurement and work/life matters.

What’s the new model? Scott Addis, CPCU, CRA, president of The Addis Group, says a contemporary approach to human capital management depends upon a commitment to education and communication as a way of supporting new strategies, such as consumerism in employee benefits—the use of high deductible health plans that require employees to make more and better choices about their use of health care.

“That’s really the future,” Addis says. As employers seek to understand the patterns that influence their costs and identify the root causes of behaviors that undermine employee health and performance, they are moving quickly toward account-based, consumer-directed health plans that require a firm foundation in employee education.

And in order to make a successful switch to consumer-directed benefit plans and other new plan designs, they also need to prepare their employees to use the new plans wisely and make appropriate choices with a new set of technology tools.

“Employers are looking for a knowledgeable advocate to assist them in obtaining the resources they need to fuel these programs,” Addis explains. This requires a much higher level of service.

“We need to partner with our customers and become a year-round extension of their business. Employers are also looking for great service and high touch delivery that is accountable for the success of its strategies.”

Bill Purvis, CBC, MBA, vice president of employee benefits, takes the lead in delivering new employee benefit models that can help execute broad-based strategies. “The Affordable Care Act expanded access to health insurance for many individuals, but it has also raised more questions for employers,” he points out.

Some employers may opt out of providing group health insurance completely, but Purvis believes that most employers will continue to feel a duty to their employees to provide health benefits, and a need to use those benefits to support their human capital strategies, keep them competitive in their industry’s human resources marketplace, and maintain healthy lifestyles.

Small employers with fewer than 50 employees have limited options and will be subject to community-adjusted rating if they continue to provide group benefits, but larger employers with 100 or more employees may have a wider range of options in their use of levels of self-funding, captive insurance companies and private exchanges.

Purvis predicts greater interest in a defined contribution model for health benefits, supported by private exchanges that can be established by agents and brokers or their health plans.

“The defined contribution plan design allows employers to stabilize their costs over time and allows employees to choose from a range of coverage designs. Most employees are likely to choose less robust, less expensive plans that may have a downward pressure on costs and provide incentive for better health care decisions,” he says.

Employers can supplement the employer-paid coverage with employee-paid voluntary benefits that can fill in gaps or provide for special needs, he says.

“I am very excited about the opportunities this presents,” he 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.