CAPITALIZING ON BENEFITS
Taking control of health risks pays off
New health care law not viewed as a deterrent to growth
By Len Strazewski
Not this year—and maybe not for a few years. But eventually employee benefits revenue will surpass property/casualty insurance revenue at his firm, says Brian Long, president of Seubert & Associates in Pittsburgh, Pennsylvania.
That doesn't mean that property, liability and workers compensation insurance sales and risk management consulting are in decline; rather, employee benefits and related services such as employee wellness and regulatory compliance are skyrocketing, he explains. And they are likely to continue growing as health reform laws go fully into effect in a couple of years.
Employers are only starting to recognize the link between employee benefits management—something with which they all struggle—and other concerns, he says. "All employers are interested in better management of their employee benefits programs. But they are just starting to understand that there is a direct connection between employee health and workers compensation costs—among other employee expenses."
The agency has about 85 employees, including 16 in employee benefits. It provides insurance and employee benefits management for about 2,000 clients ranging in size from 50 to 1,000 employees and generates about $150 million in premium volume. About 32% of revenues now come from employee benefits premium and services, but Long, also an agency principal, says that proportion is growing. And he expects it to change even faster after health reform—even though the new laws allow employers to opt out of offering health insurance to employees.
"Some employers may choose to stop providing health benefits—particularly very small employers. But most employers will realize that they actually manage better with employee benefits. Their employee benefit plans provide a platform by which they can influence the health and productivity of their workforce as well as provide health insurance benefits."
Long says the agency focuses on managing the total risk of their clients, and health issues are a major component of that financial risk—linked not only to group health insurance claims, but also workers compensation costs, safety and employee productivity and performance.
The Seubert approach is not based on just risk management theory. One of the Healthiest Employers of Western Pennsylvania, the agency has a long history of developing health strategies internally before rolling out strategic solutions to clients. The agency's own health and wellness program led to the introduction of plan design incentives for healthier lifestyles for Seubert employees and now has become a platform for clients that involves health awareness, claims analysis, self-funding and comprehensive education and plan design.
Long explains that the agency has had great success in reducing its own health care costs and improving overall employee health with a program of biometric screenings and education to build awareness of key health measurements, including body mass index, cholesterol and blood pressure.
Once employees understood that these indicators could be influenced with behavioral change, they became open to employer-sponsored incentives to improve their metrics and, as a result, their overall health. Long says the agency then reinforced those activities with financial incentives and disincentives linked to the agency's account-based consumer directed health plan (CDHP). The agency has a wellness director on staff, who works with employees and client employers.
The Seubert Health and Performance Enterprise (SHAPE) program was rolled out to clients seven years ago and provides an organized approach that Seubert producers can introduce to their clients as a platform for addressing health care costs and "the sustainable skills that employers and employees need to provide continuous health improvement," Long says.
John Check, an agency principal and vice president of the employee benefits division, admits that costs, not necessarily health philosophy, are the most critical issue for Seubert clients; and small employers with 100 or fewer employees can do little to influence community rating by the commercial health plans.
However, larger employers have the financial wherewithal to self-fund all or a portion of their health risks and take more aggressive control over claims costs and the health issues that lead to them.
Check says the agency can present SHAPE as a series of strategic options that can help the company get better control of its costs and identify issues that can be improved with incentives and behavioral change. "Statistics indicate that about 75% of health claims costs are the result of lifestyle decisions. If employers can change the unhealthy lifestyles and behavior of their employees, they can effectively influence those costs," he says.
Check notes that HIPAA regulations for employee benefit plans allow up to a 20% variance in premium contributions based on factors such as smoking and obesity, which allows employees to experience the financial impact of their lifestyle decisions. The variance jumps to 30% in 2013, increasing employers' options for building incentives and disincentives into plan design.
The SHAPE approach has demonstrated a proven return on investment, Check notes. Seubert reduced its own health care costs trend to single digits over time, and, he says, committed clients have reported similar improvements. About 21 employers are committed to the SHAPE program. Employers can begin by developing wellness committees, health promotions and competitions, and then work with their employees to prepare them for tighter health standards and more aggressive targets that can lead to overall better health. Health plans can assist with the process. Check says local health plans are improving their own wellness resources and can more effectively participate in supporting SHAPE-related strategies.
Doug Moore, an agency principal and director of the benefits, says the SHAPE program is more than a label for a licensed service or product. "SHAPE is really an overall strategy by which employers can understand, analyze and address the health of their employees and the costs that are related. We don't have cookie cutter, one-size-fits-all products. We work with the client, their executives and eventually employee health committees to develop programs that conform to their needs and culture."
But Moore says SHAPE does lead clients through a process of health awareness—understanding the health issues of their group and each individual, with biometric testing and health screenings. Then it builds engagement as participants address their health issues with treatment, activities and lifestyle changes. Eventually, the program focuses on accountability and builds in plan design incentives for healthy lifestyles and disincentives for known unhealthy lifestyles such as obesity and smoking.
Regulatory compliance is also an important issue linked to employee benefits management. The agency has a state and federal regulation expert on staff to advise clients on how to navigate the ever-evolving regulatory landscape. The agency also sponsors an annual employee benefits seminar for present and prospective clients that focuses on current employee benefits issues.
A third annual health reform seminar is scheduled for September 2012 and is likely to draw about 200 attendees who want to prepare for coming changes in employee benefits strategy and plan designs, Moore says. The agency will also be developing print publications and Webinars to provide timely technical information. "Understanding regulatory compliance becomes crucial with health reform," explains Moore, a past president of the Pennsylvania chapter of the National Association of Health Underwriters. Assuming that health reform survives a review by the U.S. Supreme Court, employers will have to re-examine their employee benefits policies in light of the federal regulations and the choices that are available under the law.
The Court will specifically be reviewing whether federal law can require individuals to buy health insurance if it is not provided by their employers. The individual insurance mandate is the cornerstone of a series of regulations that will affect employer choices.
If the individual mandate is sustained, "pay or play" regulations will require employers to decide whether to continue to provide employer-paid health benefits or pay a contribution to employees who will then seek personal health insurance from the marketplace or state-operated insurance exchanges. Moore says the agency's larger clients will confront this choice and may be tempted to opt out of providing health insurance and let their employees pursue personal coverage, "but it is incumbent upon their agent or broker to explain the issues involved and help them make their decisions." For these decisions, the agency addresses C-level executives who can make strategic decisions that extend far beyond health insurance renewals and premium charges.
Moore agrees with Seubert President Long that employers need to understand the link between employee health and an employer's total cost of risk in making that decision. "If employers choose not to provide employee health benefits, they lose some of the costs associated with group health insurance, but they also lose the ability to influence a broad range of issues and costs associated with employee health."
The agency also assists clients with other compliance issues, which may not be as dramatic as health reform, but are still challenges for overworked human resource departments. These include COBRA compliance and administration, FMLA leave administration, Form 5000 retirement plan filing, and HIPAA document privacy management.