Capitalizing on Benefits
Strategic approach to benefits planning
Howalt-McDowell's long-term mindset drives growth and customer satisfaction
By Len Strazewski
In an era of steadily rising health care costs, the rate of the next renewal matters plenty to cash-conscious clients—but the cumulative effect of the next three to five years matters much more.
That’s why Howalt-McDowell Insurance, Inc., in Sioux Falls, South Dakota, takes a longer-term, more strategic approach to employee benefits planning and health care plan design, says Steven Vlk, executive vice president, employee benefits.
“With health care costs increasing every year, the pain for the employer has been in the health insurance premiums,” notes Vlk. “Based on trends, that is not going to change very much in the near future. Employers generally can expect increases of some sort at every renewal.”
However, employers can do better at deriving value from their health plans and receiving better return on investment from their health spending, Vlk says. And that has become the focus of the Howalt-McDowell employee benefits practice.
Processing the annual group health insurance renewal is only part of the service that the agency provides, Vlk explains, and a relatively small aspect of a broader employee benefits consulting approach the agency has developed over the past few years.
“We attempt to engage our clients in a strategic planning process that looks at their future over the coming three to five years,” he continues.” We ask them what they know about their employees and their health issues and how they can better control their costs over time.
“We try to design a real plan for the future of their employee benefits that includes value-added health and preventive programs from their health plans and administrative support from our agency specialists.”
The approach works, Vlk says, and has been driving steady growth and client satisfaction.
Howalt-McDowell was founded in 1946 as a property/casualty specialist but expanded its services into employee benefits in 1991 with the hiring of a single producer. Today about one-fourth of the agency’s 80 employees are involved in the employee benefits practice which generates about one-third of the agency’s revenues. The employee benefits practice is divided into three departments:
—Employee Core Benefits, including group medical insurance, consumer-directed health plans, group life, disability, dental and vision insurance.
—Voluntary Benefits, including life, disability accident, cancer and identity theft insurance via payroll deduction.
—Executive Benefits, including supplemental life insurance, long term care insurance, annuities and business succession planning.
Clients range from small firms of 25 to 50 employees to large employers with up to 3,000 employees.
Though about five health plans compete for business in the South Dakota, Minnesota and Wisconsin business area, the agency concentrates volume with a local carrier, Sanford Health in Sioux Falls and Medica in Minnetonka, Minnesota. Both health plans offer strong community networks of health care providers and a full range of wellness and preventive programs, Vlk says.
Vlk says the agency has an employee benefits client retention rate approaching 95%. “It’s all about the service,” he says. “We tend to be staffed about three to four employees deep at each benefits function, much more so than most agencies.”
Sheri Snyder, employee benefits operations manager agrees. She says the agency also tends to offer broader and more complex services to its clients than most agencies, including educational luncheons under the “Howalt-McDowell University” title and regular strategic planning meetings with client human resources departments.
“We try to guide our clients through an analysis of their own company’s needs,” she explains. “We can help them form wellness committees, create employee benefits communications and assist with employee meetings to facilitate enrollment.”
Snyder says that most human resource departments are so engaged in day-to-day management functions that they appreciate support in the details of employee benefits management.
“They are looking to us for both advice and administrative support in helping them make the most of their employee benefits spending, and we have to be prepared to provide the resources they need,” she says.
The agency also applies its service philosophy to its own employees. In 2006, the agency was named one of the year’s winners of The Principal 10 Best Companies for Employee Financial Security. An independent panel of business leaders and employee benefits experts lauded Howalt-McDowell for its dedication to its employees as demonstrated by an outstanding package of employee benefits, notably its health insurance plan, wellness program and retirement savings benefits.
The nationwide competition is sponsored by the Principal Financial Group and recognizes employers from five to 1,000 employees that excel in protecting their employees’ long-term financial security.
“At a time when many employers are challenged to maintain strong employee benefits, Howalt-McDowell Insurance has gone the extra mile to give its employees an edge on their financial futures,” notes Renee Schaaf, vice president of the Principal Financial Group in Des Moines, Iowa.
Howalt-McDowell employee benefits experts expect the agency’s book of business to grow in diverse ways. Consumer-directed health plans, including Health Savings Accounts (HSAs) and Health Reimbursement Accounts (HRAs) have not caught on in Sioux Falls—probably because health care costs have not escalated at the same explosive rate as in larger urban areas, notes Vlk.
However, the agency continues to educate its clients about the new plan designs as part of its strategic analysis, he says. Eventually, local employers will need to consider the plan designs as their costs continue to increase beyond their tolerance and ability to redistribute costs to employees.
“Employees must have skin in the game if they are going to make good consumer decisions about the use of their health care dollars,” Vlk says. “If we don’t get control over the costs and utilization trends, we have no hope in the future of managing the finances of health benefits.”
Technology will also be an important consideration in the near future, agency executives say. The agency has yet to commit to a single online employee benefits portal system but is reviewing available options for a decision later this year.
“Most of the health plans provide an online presence for their plan participants and those systems are becoming more and more sophisticated, providing a broad set of administrative and educational resources,” Vlk says. “However, employers seem to want a single presence that represents the total of their benefits and their corporate image.
“There are still some employers who prefer a paper records base, but most are moving toward a paperless environment,” he continues.
Snyder agrees that the agency needs to consider Internet-based technology for the future from its own administrative perspective. “It’s time to decide how we can provide a single online enrollment platform that helps to manage the administrative process. However, we still need to consider how such a system will relate to our carriers and the systems they already provide.”
The agency also looks to a steady increase in voluntary benefits—employee-paid supplemental coverages available at a group discount through payroll deduction. Howard Boote, CLU, ChFC, RHU, vice president of voluntary benefit sales and one of the agency’s most senior employee benefits producers, says voluntary benefit plans are one positive response that employers can make to their rising health care costs.
“Benefit cutbacks may indeed be necessary to help your company weather today’s weak economy,” Boote tells clients. “But if not carefully implemented, such a strategy can backfire. Employee benefits help recruit and retain qualified individuals—a key competitive advantage in any economy.”
But when employers cut back on their contributions to group medical benefits with higher deductibles and coinsurance, they quickly lose the employee goodwill associated with employee benefits.
Voluntary benefits can help soften the blow of group medical cutbacks and give employees something they treasure—choice, Boote says.
“Employees appreciate the opportunity to decide how to spend their money on benefits that they know will make a difference in their lives. Voluntary benefits offer that opportunity as well as a group discount and a sense of security. Employees know that the benefits they choose have been vetted by their employer and will provide a good value.”
Employers used to shun payroll deduction programs, fearing a flood of additional paperwork and administrative responsibility. But Boote says better payroll management technology, voice recognition systems and efficient call centers have eliminated the sting for employers—leaving all the advantages.
Boote says he expects voluntary benefits sales to double over the next five years as employers discover the goodwill value of the benefits and employees realize the benefits of worksite enrollment.
Supplemental life insurance and short-term disability insurance accounts for about half of the agency’s voluntary benefit sales, followed by accidental death and dismemberment insurance, cancer and critical illness insurance, and identity theft insurance.
The agency also offers long term care insurance in the voluntary benefits package but has not yet seen broad-based interest in the coverage, Boote says. “Though we continue to offer it, we have come to the conclusion that long term care insurance does not fit particularly well in our voluntary benefits practice, but really is a personal coverage appropriate for our Executive Benefits.
“I think it will become more popular in the future but, for the present, the purchase of long term care insurance is more of a family security decision than an employee benefits decision,” he says.