Capitalizing on Benefits
D.C.-area agency devises employee benefits plans that cater to diverse workforce
By Len Strazewski
Rich health benefits. An accelerated retirement plan. A
37-and-a-half-hour work week. It's not easy for private employers to compete
with federal agencies, but building competitive employee benefits plans is part
of the job at Early, Cassidy & Schilling, Inc., in Rockville, Maryland.
The Washington, D.C., area is famous for its rich and traditional
employee benefits plans, explains agency principal Andrew Cassidy. And private
employers in Maryland, Virginia and the District of Columbia recruit and retain
employees in a competitive environment driven by federal employment and its
"The federal government is a huge presence in this region," he
explains. "Until employers experience it in their hiring, they don't realize
that an employer's ability to attract skilled employees relates to their
expectations. Everyone in the area has friends or family who work for federal
agencies and compares what they are being offered with what the government
Principal Timothy Schilling, CPCU, CIC, agrees. While many
agencies around the country are in familiar territory in presenting increased
cost-shifting to employees and reduced benefits to offset rising health care
cost trends, Early, Cassidy & Schilling must tailor its plan designs not
only to the national trends but also to the regional competition and its
distinctive employer groups, ranging from law firms, lobbyists and trade
associations with enormous executive payrolls, to construction companies whose
workers maintain the area's infrastructure and blue-collar service firms with
laborers earning lower wages.
However, the agency has plenty of experience managing its
balancing act. Founded in 1929, the present principals have been part of the
firm since the 1970s when the agency made its first foray into employee
benefits sales. Messrs. Schilling and Cassidy assumed ownership in 1989.
Today, the agency has 53 employees, including four employee
benefits producers and four benefit services managers. The agency also has an
office in Reston, Virginia. Employee benefits accounts for about 30% of agency
revenues, Schilling says, but could easily increase to 40% or more, depending
on the changing regulatory environment.
Impact of health care reform
The agency has just begun a five-year plan to increase its
employee benefits revenues, he explains, but much of its strategy depends on
the future of health plan delivery under the evolving federal legislation that
still remains to be reviewed by the U.S. Supreme Court.
"It all depends on the outcome of health reform," Schilling says.
"Will we be dealing with health insurance exchanges? Will our clients be
expecting employees to purchase individual insurance? There is still plenty
that remains to be decided."
However, the principals expect that the agency will still have
some role to play, regardless of the outcome. "How we deliver health care as an
employee benefit is a critical question, but I have to believe there will
always be a piece of the business for agents in providing guidance for their
clients in managing and complying with the future regulations." Cassidy says.
"Insurers do a pretty good job in being the risk bearers and the
claims payers, but they have never been particularly good at advising
policyholders and helping with strategic services. Our strongest role has
always been as an advocate for our clients and that is unlikely to change," he
A member of the executive committee of the Council of Insurance
Agents and Brokers, Cassidy has personally lobbied federal legislators on
health reform issues and watched the movement grow into a complex jumble of
rules and procedures. He laments the "lack of rhyme or reason" in the way
health reform has evolved and the burden it is likely to place on employers.
"As the federal government increases its involvement in health
care delivery, private employers and their employees are likely to need more
advice on how to operate within the new guidelines. Otherwise, I am afraid they
will be left holding the bag," he says.
Early, Cassidy & Schilling clients range in size from two to
1,500, but the majority of local employers are somewhat smaller with varying
benefit needs. Trade associations, lobbying firms and law firms served by the
agency tend to range from 50 to 500 employees and demand a richer mix of
"Cost issues are universal," explains employee benefits producer
Paul Phelan, CFP. "All of our clients are concerned about increasing costs."
Health insurance premiums increase 12% to 15% annually, comparable to other
regions, but the pressure to contain those increases with benefit cuts varies.
Small employers with 50 employees or fewer have few options.
Small employer health plans are community rated and have less access to plan
design tools that can reduce or shift costs. Larger firms have the ability to
manipulate their costs somewhat with consumer-directed health plan designs and
full or partial self-funding.
The agency works with several health plans in providing fully
insured health benefits, including Aetna, Carefirst BlueCross/BlueShield,
Cigna, Coventry and Kaiser Permanente. Cigna also provides administrative
services for partially self-funded plans. The agency also partners with
third-party administrators Loomis Companies and GBS for some self-funded plans.
However, the white collar employers that compete with government
agencies are under some competitive pressure not to reduce their benefits,
Phelan says. "Many of these employers have reduced salaries in the past few
years but have found themselves giving back the cuts in benefits in order to
retain their top performers."
The blue collar employers—construction companies and
property management and service firms—range in size from 100 to 250
employees and generate less premium volume but have some flexibility in design.
About 40% of the agency client base is in construction and related fields,
providing an opportunity to address property/casualty insurance and employee
benefit issues with a comprehensive strategy.
"We have no trouble getting to the table to quote on our clients'
entire risk management and employee benefits business. As a result, we often
have the opportunity to craft a single multi-year plan that addresses total
risk management and employee benefits costs," Phelan says.
This strategic approach has helped the agency reduce annual
health care cost increases to 6% to 10% in some cases, he says.
Team sales success
Schilling notes that team-selling is an agency hallmark, part of
a comprehensive approach to client service.
"Cross-selling is key," he says, and it is the rule rather than
the exception that property/casualty producers and employee benefits producers
work together. Agency producers target total client spending that may cross
lines between insurance and risk management and employee benefits.
As a result, Schilling says, the agency has made a point of
adding bright sales people on both sides of the fence. "Actually, we have
increased our sales staff with a new generation of cross-trained producers. We
have hired individuals for whom there is no fence—just a comprehensive
approach to service," he says.
In addition to health benefits, the agency also administers
enrollment for other group and voluntary benefits, including dental and vision
insurance plans, life, and disability insurance products. Voluntary benefits
paid all or in part by employees, offer a huge potential for the agency,
Regardless of health reform, voluntary benefit programs are
likely to grow in size and diversity as employers seek to fill in coverage gaps
without increasing costs. In the past two years, the agency has introduced
voluntary benefit programs underwritten by UNUM and Colonial Life Insurance Co.
that provide optional life and disability insurance coverage, as well as
supplemental health coverage. Long-term care insurance, a traditional laggard
in the field, is also growing, executives say, as employees come to understand
Voluntary benefits programs also allow the agency to capitalize
on its enrollment expertise, Phelan notes. "One of our strengths has been our
ability to bring benefits enrollment directly to employees. For example, for
our construction industry clients, we often conduct enrollment at their
worksites, eliminating the disruption of pulling employees off the job to meet
in corporate offices," he says. "Many of our client companies have a small or
single person human resources department, and by assuming responsibility for
enrollment, we have become a valuable extension of their HR function."
The agency also provides employee benefits communications
support, including benefit statements, summary plan descriptions and online
services, as well as state and federal regulatory compliance assistance.
Bilingual enrollment services have become a key differentiator
for the agency, principals say. A large percentage of the local construction
and service industries' workforce is Spanish-speaking and reluctant to enroll
in voluntary programs about which they are not clear. "By communicating with
employees in their first language, we have been able to provide our clients
with a faster and more effective enrollment process," Phelan says.
The agency plans to expand its bilingual enrollment services and
is actively recruiting bilingual producers and service managers.
Retirement benefits may also be a growth area for the agency as
the national workforce ages and becomes more reliant on private retirement
plans. Schilling says the agency has producers who are licensed to sell and
administer defined contribution retirement plans and supplemental executive
benefits. However, he says the field is particularly difficult to enter and
takes a sustained effort which the agency is beginning to mount as part of its