Meeting the targets
Broad benefits menu drives growth & profitability gains
By Len Strazewski
If you want to be best in class as a commercial property/casualty insurance agency, employee benefits has to be part of the plan, say executives of TrueNorth Companies, Inc., in Cedar Rapids, Iowa.
Benefits are a critical component of the integrated services commercial insurance customers’ demand in the 21st Century, explains TrueNorth President Duane Smith. And benefits costs—particularly steadily increasing health care costs—are one of the largest risk expenses customers must manage.
But despite the complexity of employee benefit management issues and the challenge of aggregating the plan design, funding and human resource management expertise needed to fully staff benefits services, the growth potential and profitability makes it all worthwhile, he notes.
Today, employee benefits is the agency’s fastest growing business segment and easily its most profitable, Smith says.
TrueNorth was founded in 2001 with the merger of Davis Jones Lamb Insurance, Insurance Services Corporation and Verhille & Associates. The agency now has 165 employees, including 28 in employee benefits and human resource-related services. The company has service offices in Des Moines and Iowa City as well as affiliate and sales offices around the country in Arizona, Illinois, Kansas and Tennessee.
The agency continues to acquire small agencies and attract independent producers to its umbrella operations, Smith says, and, as a result, the agency has grown to 80 separate profit centers and 25 equity owners.
Though one of the predecessor agencies had been marketing employee benefits since the 1990s, sophisticated employee benefits sales and services has been a relatively new business segment. And since the 2001 group merger, the agency has evolved dramatically, and employee benefits has been an important part of that evolution, Smith says.
It started with a corporate retreat in 2006, during which agency leadership examined and defined its future. “What can we do to be best-in-class in what we do? That was the key question we were asking,” Smith says. “We saw what was happening in the insurance industry and sought ways in which we could compete successfully with the largest competitors in the field.”
The result was a commitment to integrated risk management services, including employee benefits, the adoption of a powerful sales orientation and acceptance of a new standard for evaluating performance.
The agency executives agreed to measure four key indicators of performance: profitability (targeted at 25% or greater), growth (targeted at twice whatever the industry standard), revenue per employee (targeted at $250,000) and a TrueNorth “cultural index,” a measure of employee satisfaction measured by an annual employee survey.
Employee benefits became a new agency emphasis as a way of “rounding out” the range of services that meet client needs and allowing producers to cross-sell property/casualty insurance customers. Primarily, executives saw employee benefits as much as a client retention tool as a growth opportunity.
However, since then, benefits has become the fastest growing business segment and the most successful based on the agency’s own measures. Dave Ver Woert, executive vice president of employee benefits, says the employee benefits operation has quickly grown into its own success story and has become a source of completely new business and referrals back to property/casualty insurance operations.
In 2009, the agency reported about $28 million in total revenues, about 25% derived from employee benefits. Property/casualty revenues grew at about 3% last year, yielding a 16% profit margin and $180,000 revenue per employee. Benefits however, grew 10%, yielding a 27% profit margin and $248,000 revenue per employee.
Ver Woert says the success of the agency’s employee benefits division was driven by the agency’s expansion of value-added services and cost control expertise. TrueNorth provides a full range of employee benefits services, including insured group health, dental, vision, pharmacy services, long-term disability insurance, long-term care insurance and consumer-directed health plans with health and wellness programs.
Self-insured client services are also available, including actuarial and funding analysis and plan contract review and benefits captive management services in Vermont.
Employee Benefits Senior Specialist Teri Copler says cost control is clients’ overriding concern. “Group health plan rate increases have become part of their lives, but they can never predict exactly how much their cost will go up. What they want is some stability, some ability to predict and manage their costs over time.”
Copler says clients are also very interested in what their peers are doing to control costs and how they can stay competitive in their business segments. For many, controlling their costs is critical to their ability to compete.
Wellness and health screenings have become important components of cost control strategies, the agency’s benefits experts say. The agency partners with Health Solutions, Inc., in Cedar Rapids and promotes comprehensive wellness and disease management programs modeled after the Asheville Project, an employee health education and chronic disease management program developed by the self-insured city of Ashville, North Carolina, in 1996.
The wellness programs can include health screening programs for employees, health risk assessments, patient management for individuals with chronic care conditions and risk reduction lifestyle coaching. Programs can include health and nutrition education and weight loss and smoking cessation programs.
“It’s all about changing the health culture of an organization and its employees,” Ver Woert says. “There is so much benefit in both the overall health of individuals and the company loss ratio to engaging employees in promoting their own healthy lifestyle and taking the steps that can preempt serious illness.
“Mammograms, colonoscopies and tests such as cholesterol screenings have the potential to not only save huge amounts of medical claims costs but also many lives. The key is to get employees to understand the value and participate in the programs.”
Incentives and disincentives are important in plan design to support wellness initiatives, the benefit experts say. TrueNorth always presents consumer-directed health plan designs such as Health Savings Accounts (HSAs) and Health Reimbursements (HRAs) with renewals, and a growing number of clients are including the plans as options for employees.
The CDHPs create a stronger co-pay relationship with employees, putting more of their own money into their health decisions and creating encouragement to healthful behavior, Ver Woert says.
However, he admits that getting good return on investment data for wellness is difficult, but he says that the agency has had some great client successes, including customers who have built strong incentives for employee participation and reduced rate increases to nearly zero in three years.
Ver Woert says the agency employee benefits clients range in size from 50 to 1,000 employees, but they can be most helpful to customers who can partially self-fund benefits to maximize their sensitivity to claims costs and loss control.
“We have clients with as few as 50 employees that are self-funding a portion of their health care costs. But more typically, clients with 100 or more employees self-fund with some level of stop-loss insurance,” he says.
TrueNorth is a member of United Benefit Advisers, a national employee benefit advisory organization that consists of 140 benefits advisory firms, including agents and brokers. The organization is based in Indianapolis.
UBA provides TrueNorth with more opportunities to offer value-added services to its clients, Ver Woert says, and extends the agency’s ability to provide national competitive benchmarking information.
As a member, TrueNorth offered its clients the opportunity to participate in the 2010 UBA Employer Opinion Survey which queries employers for ideas about four key areas: health plan strategies, benefits philosophy and opinions, health plan management and consumer driven health care.
The survey was conducted from February 10 through March 5 and included responses from 1,510 employers who receive synopses of the responses and a summary of this year’s special report on health care reform.
Ver Woert says the survey results will provide participating employers with critical benchmarks that allow them to compare their attitudes and strategies about employer-provided health care with some of their peers and competitors. The survey results represent all major industry classifications, employee sizes and regions.
“Employers will learn which strategies are actually being implemented rather than just talked about and which ones are really working,” he says.
Preliminary results released in April indicate that health care reform is an important topic for employers, but prior to the passing of the health care reform legislation, they said they believe the reform legislation will not help lower health care costs. More than two-thirds said they expect costs to continue to rise despite reform measures.
“There are still many unanswered questions that we need to pursue for our clients,” Copler says. “Even though the legislation has been passed and discussed in the press, there are still many technical issues unresolved, notably how the legislation will affect ERISA (self-funded) plans and their management.”
Human resource services have also become an important component of the service package for group benefit customers, executives say, and the agency offers employee communication and education services, automated enrollment services and compliance consulting to complete its ability to provide full service.
TrueNorth also provides retirement plan design consulting and administration. Investment advisory services are available from Sunset Financial Services, Inc., in Kansas City, Missouri.