Where do we go from here?
Bolton and Company responds to challenges in
dynamic employee benefits field
By Len Strazewski
The great wasteland. That's the way some agents and brokers see the employee benefits business if health reform survives legal challenges later this year. Employers may back out of providing health insurance, individuals may turn to state-operated insurance exchanges and group health plan commission income may disappear.
But Bolton and Company in Pasadena, California, isn't intimidated by an evolving industry. Already a leader in health benefits sales in Southern California, the brokerage has been developing a broad range of benefits administration and human resource support services for the past several years that will continue to drive new employee benefits business—as well as cross-sales in property/casualty insurance, executives say.
Chief Operating Officer Mike Morey says the firm has consistently stayed ahead of changes in the benefits business—focusing on comprehensive risk management strategies that cut across the traditional boundaries between property/casualty and health benefits and the services that support those strategies.
"We always knew that we were positioned for growth in employee benefits," he explains. "We knew we had great growth opportunities. But what changed for us was our big picture—our understanding that our real strength was in bringing total solutions to the table, not just selling insurance."
Founded in 1931, the employee-owned Bolton has grown to more than 110 employees and over $200 million in premium volume. The employee benefits staff numbers about 28, including seven benefits producers. Employee benefits now generates about 40% of revenues or about $8 million in annual revenues, up from less than 20% only five years ago, Morey says, and the business continues to grow.
Fostering benefits growth
The first step in building the business was hiring account executives with deeper benefits expertise, Morey says. Working with property/casualty and risk management producers, the employee benefits producers have been able to expand the range of approaches available to Bolton clients. The teams quickly cross-sold existing property/casualty insurance clients, he says, and began to generate new clients seeking more comprehensive solutions to rising costs.
Today, about 75% of new business is derived from accounts that include employee benefit services. Bolton has about 1,200 corporate and institutional clients but focuses on ones that range in size from 50 to 5,000 employees.
Morey expects benefits and related revenue—including human resources support services, compliance consulting, wellness management and other services—could top 50% in two to three years.
Bolton provides traditional benefit program reviews and analysis and has strategic relationships with both regional and national health and ancillary benefits insurers and provider networks. But the firm also provides plan design consulting and financial benchmarking, alternative funding strategies such as self-insurance and captive insurance companies, actuarial analysis, human resource technology systems and consulting, dependent care audits, and employee communications project support.
The brokerage also provides online enrollment services, wellness programs, and health fairs to support health benefits strategies, as well as executive and retirement benefits consulting. The firm will also launch its first employee benefits captive insurance company in June and expects to launch more captives for its clients within 24 months, Morey says.
"The days when a customer would ask two brokers to build spreadsheets and bid out the premiums for health plans are over. More of our business now comes from clients with whom we have broker of record letters who are seeking comprehensive approaches that are consistent with their business strategies," Morey says.
Leslie Pearce, senior vice president of benefit sales, agrees. "It is so not about buying and selling insurance. What we are and what we are becoming continues to evolve, and how we manage risk for our customers is much different than it was five years ago," she says. With nearly 20 years' experience in employee benefits consulting, Pearce has seen dramatic changes in the field.
Plan design issues such as deductibles and coinsurance levels continue to be factors in addressing short-term costs as employers look to get maximum value from their existing health plans. But long-term cost trends continue to be the most important issue, and employers are mostly focused on strategic plans that reduce the drivers of cost over extended periods of time, she notes.
Bolton account executives generally prefer to meet with C-level executives who can provide broad understanding of their company's needs and exposures, but they also continue to work directly with human resource directors and risk managers for whom they can provide administrative support as well as brokerage services, executives say.
Small employers—still an important business niche for Bolton—often rely on a single professional to manage human resources and employee benefits, Pearce notes, and may need additional support to manage enrollment, benefit communications and daily administration issues. When account executives have identified client strategic needs, they focus on the components of their cost problems, including the short- and long-term drivers of cost that can be identified and analyzed with health claims data management.
California health plans can pose some problems in developing this data, Pearce notes. From a long tradition of health maintenance organizations (HMOs), many California health plans still feature capitated provider payments that can obscure some of the fundamental trends.
"It will be interesting to see how managed care plans will evolve in the next five years under health reform," she says.
Largest health plans in the region include Kaiser Permanente, Anthem, BlueCross/Blue Shield of California, Aetna, Cigna and Healthnet; but Bolton also relies on a stable of independent claims, wellness and benchmarking data vendors to provide data and services for their clients who are engaged in alternative risk funding and self-funding of benefits.
These relationships include the Integrated Benefits Institute in San Francisco, a health and productivity research organization; Benefits Advisors Network, a national consortium of independent benefits advisors; and ThinkHR, a human resources consulting hotline in Pleasanton, California.
The firm also has business relationships with ADP Major Accounts in Roseland, New Jersey, for human resources, payroll services and HRB, their human resource information management platform.
Bolton addresses long-term cost drivers with a sophisticated approach that looks at costs in a more comprehensive way, Pearce says. "We have moved well beyond simple measurements of return on investment for plan design changes. We are addressing employee health as a contributor to workers compensation costs, absenteeism and other expenses that are not generally considered part of health claims costs."
Executive Vice President Ryan Fridborg, who joined Bolton six years ago after five years in corporate human resource management and county government, predicts continued growth in human resource services both tied to and separate from employee benefits management.
No crystal ball
"Everyone's vision of the industry is changing and we can't know how the U.S. Supreme Court will rule on health reform," Fridborg notes. "But it is clear that the health insurance field will continue to change. Everyone is wondering if the employee benefits insurance business will remain viable.
"I am certain it will remain viable and we will continue to add value to our client relationships that will make us important partners in the future. But we will need to be closer to our clients through a broader range of value-added services that extend beyond insurance marketing."
Fridborg says Bolton has identified five critical areas for the next three to five years: cost control, which can include alternative risk-funding techniques; compliance support for human resource functions; communications services for human resources and employee benefits education; wellness and health management services; and technology platforms for human resources and employee benefits.
Wellness, he says, "is here to stay" and drives a range of new activities for employers with 300 or more employees who are experience-rated by their health plans or who self-fund health benefits. But services that do not directly relate to health claims, such as communication and education, regulatory consulting and human resource information management technology, will also grow rapidly.
Fridborg expects that California brokers will continue to be compensated by commissions and may continue to deliver value-added services as part of their overall service package. However, as the range of services grows, fees may become a more important method of compensation. Until then, it is incumbent upon brokers to communicate to their clients how their services contribute to the overall value of their relationship, he says.
Morey agrees that employee benefits and human resources administration has been a growing new area of business and notes that it points to an increasing need for more integrated support in more areas of human resource management. In June, Bolton expects to introduce a corporate recruiting department to assist clients with attracting and screening new employees, acquiring temporary professional employees and consulting on recruitment and retention issues.
Bolton is also open to acquisitions, Morey says, and executives see growing opportunity for combinations with small agents and brokers with a strong client base but not the advanced services to support their future needs.
"There are many one- and two-person shops out there that lack the depth of resources to provide service for their continuing clients. By joining with Bolton, they will be able to continue to develop their business relationships with a broader, more sophisticated base of solutions and services," he says.
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.