Employee benefits 2013: Consulting in king
A top P&C agency guides clients through health care reforma
nd HR challenges
By Len Strazewski
Phoenix and Indianapolis may be more than 1,600 miles apart and even further separated by politics, demographics and economicsóbut they share similar employee benefits challenges. To address those challenges, one independent employee benefits agency and advisor, MJ Insurance, Inc., serves both cities.
Anxiety over the final implementation of the Patient Protection and Affordable Care Act, concern over rising health care costs, and the need to comply with a growing body of state and federal regulations are universal concerns, say executives of MJ Insurance, the largest locally owned, privately held agency in Indiana, with offices in both Indianapolis and Phoenix. (MJ Insurance was honored as the Rough Notes Agency of the Year for 2009.)
Rather than struggling to mount effective responses using traditional insurance programs and limited carrier resources, MJ Insurance is tackling the challenges by taking a consultative and analytical approach and by providing independent health resources, says Chief Executive Officer Michael H. Bill.
The agency emphasizes expertise rather than price and market access, he explains, and it has developed an approach to both employee benefits and property/casualty insurance that is built on a systematic, analytical review of employer history, culture and business goals. The techniques cut across regional differences and generate employer-specific solutionsóregardless of local cultures.
"Employee benefits has always been an important part of our relationship with employers in our market areas," says Bill; and in recent years, employee benefits services has become the fastest growing contributor to agency revenues. The growing complexity of benefit challenges will continue to create opportunity in the future, he says.
"The long-term outlook for employee benefits is strong, even while the health benefits environment is changing," Bill says. "Health care reform and all of the regulatory and marketing changes it is driving play perfectly into our focus on consultative resources."
Jon E. Loftin, president and chief operating officer, agrees. "Health care reform will create additional complexity in the area of benefits. But our clients will continue to benefit from our consultative approach; and as a company, we will benefit from our ability to respond to the new challenges. No matter what happens, we will be able to adapt and respond."
MJ Insurance was founded by Michael M. Bill (Mike H.'s father) and James B. Ritter in 1964 as a property/casualty insurance specialist. In 2005, the agency changed its focus and investment strategy for its employee benefits practice, which literally transformed the firm, stimulating unprecedented compound growth as its reputation for unique employee benefits strategies grew.
In 2005, the Employee Benefits Department was growing at a compound rate of about 2% each year and accounted for about 15% of total revenue. Today, executives say the Employee Benefits Department is growing at an annual rate of 15%, and accounts for more than 40% of revenue. The agency has some 125 employees, about 30 of whom work in employee benefits.
Bill says he looks forward to employee benefits growing to 50% or more of total revenue, and he is confident that the agency will continue to succeed in marketing its analytical approach to benefits management to employers in both of its office locations.
"As we continue to diversify our business into employee benefits consulting and human resource consulting, I think we can expect their contribution to revenue to move steadily toward a 50/50 balance," he says.
Growing in diverse markets
MJ Insurance also expects balanced growth from its two market areas, according to the employee benefit partners in both offices.
Andy Vetor, employee benefits partner in the Indianapolis office, says Indiana employers are concerned about their future under health care reform. "Everyone is trying to understand its implications. Their strategies are all over the map, from considering a total revamping of their health benefits to abandoning health benefits altogether."
Vetor says MJ Insurance is helping its clients prepare for full implementation in 2014, and the strategies vary according to employer size and industry niches. The agency's clients in the Indianapolis region are medium- to large-sized, mostly more than 100 employees, but ranging to as large as several thousand employees. As a result, most clients self-insure some or all of the cost of health benefits, with stop-loss insurance for catastrophic claims.
Once health care reform has been implemented, Vetor believes that most clients will continue to offer health benefits to employees, although plan designs may change as regulations evolve, "with small tweaks and adjustments."
Some kinds of employers may make significant changes in their benefits plans, Vetor comments. For example, retailers that have many hourly employees may choose to eliminate health benefits or shift to staffing companies that specialize in contract or part-time employees.
"One thing is clear," he says: "Everyone wants control over their own destiny, and they are willing to do what it takes to get that control."
Steadily rising health care costs will be a factor in developing any new benefits strategy, Vetor adds, but local employers have stopped reporting the double-digit group health premium increases that plagued businesses in previous years.
"Costs are continuing to increase, but the trend numbers have begun to moderate," he explains. In 2003, for example, health care costs for most employers were growing at 14% to 15% per year. Today costs are increasing at about 6% to 8%, a sign that cost control plan designs are working.
Many employers have instituted consumer-driven health plans featuring Health Savings Accounts (HSAs) or Health Reimbursement Accounts (HRAs) and have used self-funding as a platform for claims analysis and targeted wellness strategies, including on-site clinics.
Self-funded employers work with local third-party administrators or purchase Administrative Services Only (ASO) contracts from the leading health plans in the area. The largest health insurers in Indianapolis include Aetna Health. Anthem Blue Cross/Blue Shield, Cigna Health, and United Healthcare.
John Harvey, an employee benefits partner in the Phoenix office, paints a somewhat different picture of local employee benefit concerns. Most of his clients have 150 to 200 employees; the range is from fewer than 50 employees to more than 1,000. In contrast to their counterparts in Indianapolis, employers in the Phoenix rely more on fully insured programs and services provided by health insurers.
Leading health plans in the area include BlueCross/BlueShield of Arizona, Cigna Health, Healthnet, Humana, and United Healthcare.
Like business owners in Indianapolis, employers in the Southwest are concerned about health care reform, Harvey says, but more are considering abandoning employer-provided health benefitsóeven if that means paying a penalty under the Affordable Care Act.
Health care costs also seem to be less of a concern in Phoenix than in Indianapolis, Harvey observes. Costs in Phoenix are moderating or starting to trend downward, he says, adding, however, that costs are likely to rise with implementation of health care reform.
Many employers could self-fund all or some of their health plan costs, but fewer choose to, Harvey says. "There is generally less tolerance for self-funding in the Southwest," he says, "but that pattern is changing."
The growth of consumer-driven health plans has introduced more employers to claims analysis and self-funding techniques, Harvey comments; and, as a result, the cost control technique gap between the two regions is shrinking, he says.
Employee wellness has come to the forefront in both regions, executives say, as employers recognize the need to moderate or reduce health claims over the long term. MJ Insurance has developed its own wellness strategy.
"Wellness means something different to every employer, and programs range from comprehensive health screenings and health incentive programs to health education programs and employee communication programs," Vetor comments. Whatever the plan type, he notes, "measuring return on investment is extremely difficult over the long term."
Vetor often recruits outside vendors to provide wellness and screening services, and he recently contracted with vendors to provide on-site health services. MJ Insurance encourages employers to establish on-site clinics as a cost-effective means of promoting wellness and controlling the delivery of affordable care.
A combination of consumer-directed health benefits and an on-site clinic, Vetor says, allows employers to both provide access to care and direct employees to the appropriate level of care, thus reducing the costs of inappropriate tests and treatments.
CEO Bill describes this strategy as "loss control for the benefits side," noting that employers have used worksite clinics for many years to manage workers compensation costs as well as health care costs.
Employers with 1,200 or more employees usually can afford a clinic that provides full-time, five-day-a-week service, Vetor remarks, and smaller employers can offer services on a lesser scale that still allows them to control access and the appropriate range of care.
On-site clinics also are gaining momentum in Arizona, Harvey says, although employers are more likely to look to insurers to provide wellness and health screening services.
Another key priority for MJ Insurance is meeting the evolving and expanding needs of its clients' human resources managers. The agency provides resources to assist with HR consulting, including training and development, benefit audits, document development and employee communications, and special projects.
The agency also operates human resources and employee communications online portals licensed from Zywave.
The HR Connection employee portal provides client employees 24/7 access to employment and benefits information, hosts commonly used employer forms, and gives employees access to internal communications and information about career opportunities.
The Mywave portal provides legislative guides for COBRA, HIPAA, FMLA, IRS Section 125 and other compliance-heavy regulations.
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.