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BENEFITS AGENCY Smart strategy specialists New York firm's Employee Benefits Management Group generates
By Len Strazewski Collect the employee census, pick a plan design, and choose a deductible. Then ask the health insurers to make their best offer. Do it again next year. Twenty-five years ago, that was the extent of employee benefits services provided by most agents and brokers. But evolving employer strategies, consolidation of the group health insurance marketplace and dramatic changes in federal regulation have completely remade the employee benefits business, says Robert Kuelzow, CLU, RHU, REBC, CEBS, senior vice president of Rose & Kiernan, Inc., based in East Greenbush, New York. "Benefits have been changing at breakneck speed," he says. As costs steadily increased over the past three decades, employers pressed their agents and brokers and group health insurers for more tools and plan alternatives that would allow them to get better control over their future costs. As a result, employers have been seeking more hard data upon which to base their decisions and more strategies for long-term change. Self-funding has become more common and employers expect more sophisticated negotiation from their agents and brokers. Kuelzow says this trend has also changed his agency's approach to employee benefit management, creating more specialization among its services, greater transparency in its compensation and much more frequency in its interaction with clients. Gone are annual meetings—replaced by monthly updates, almost daily contact with client managers and other specialists and long-term "stewardship" plans of three to five years during which the agency and its clients track performance on several levels. "We are as busy with our clients in mid-year as we are during renewals," he says, "and we work every day to find new ways to provide value to our clients beyond the sale and purchase of insurance." Rose & Kiernan has a long history in the region, founded in 1869 in Albany, incorporating in 1914 and becoming an employee-owned corporation in 1987. Employee benefits is a relatively recent addition to agency business, says Kuelzow, who joined the agency 17 years ago, when the agency made a serious commitment to the employee benefit marketplace, as a complement to commercial property/casualty insurance and risk management.
The agency now has about 200 employees in 12 offices in New York, Rhode Island and Connecticut. The Employee Benefits Management Group (EBMG), which Kuelzow leads, has 38 employees divided by service responsibilities, including 17 client managers, seven benefits administrators, seven sales professionals, two underwriting specialists, two marketing directors, and three management staff. Client managers specialize in a particular market segment by client size. Benefits administrators support the administrative services provided to clients, which include cafeteria plan administration, COBRA administration, and enrollment and billing. The agency also provides staff and employee communication support and dedicated wellness consulting. Employee benefits revenue has grown from $250,000 in its early days to over $14 million today, with its growth split relatively evenly between internal new business and acquisitions. The EBMG now manages about $750 million in premium volume and about 40% of total agency revenues.
Group medical benefits continue to provide the largest portion of revenues, but the agency provides a wide range of other employer-paid and employee-paid benefits including group dental insurance; group life and accidental death and dismemberment insurance; long-and short-term disability insurance, and vision care. The agency works with a wide range of insurers, including Aetna Health, Cigna Health and Empire Blue Cross/Blue Shield in New York and other BlueCross/Blue Shield affiliates in Connecticut and Rhode Island. Some employers choose to offer various benefits as employee-paid voluntary benefits as well as additional benefits including critical illness insurance, travel accident insurance, veterinary insurance and individual property/casualty coverages such as homeowners and personal auto insurance. Executives also note that Rose & Kiernan was the first agency in its region to carve pharmacy benefits out from group health coverage by offering pharmacy benefit management consulting. The agency provides cost reduction strategies, benefits design strategies and benchmarks for Pharmacy Benefit Manager (PBM) selection. The exclusive RKRx drug purchasing alliance with Express Scripts—developed 20 years ago in response to rising drug costs—has more than 30,000 participants and has provided millions of dollars of rebates, the agency says.
In addition to benefits products, services and consulting, education has become a key differentiator, adds Vice President Robert J. Ranieri Jr. As client contact has increased from the annual or six-month meeting, the client relationship has become "a year-long conversation." And with the passage of the Patient Protection and Affordable Care Act, that conversation has evolved into a steady flow of information and training about employer responsibility and options under the new law. "The law has provided a whole new set of regulations and requirements, and many employers are frightened about their future and accelerating expenses," he says. For the past several years, Ranieri says, smarter strategies have reduced premium increases to under 10%, but most employers expect a return to double-digit increases next year as new requirements and marketing structures such as health insurance exchanges take effect.
To prepare their clients, Rose & Kiernan has initiated a steady stream of seminars and Webinars designed to educate employers about requirements and opportunities under the law. "Agents and brokers have now become educators as well as everything else for their clients. We do our best to prepare them," Ranieri says. Vice President Dan Colacino has been a lead presenter on Affordable Care Act education. He has nearly 40 years of benefits experience, holds a Registered Health Underwriter (RHU) designation and is past president of the New York Health Underwriters Association, focusing for the past several years on state and federal regulations. He says employer fears are unfounded for the most part and many may have already absorbed their share of cost increases. "The arrival of 2014 won't have a big impact on employer costs. Much of the expense has already been baked into the cost structure over the past few years as various regulations have been implemented," he explains. Increases in the scope of coverage, increased access to dependents, and the elimination of coverage caps have already become part of existing benefits and their costs reflected in underwriting, he notes. However, employers will still have to grapple with the access requirements for part-time employees who may qualify for health care if they exceed the equivalent of 30 hours of work per week in a given year. The impact will be felt most seriously by colleges and hospitals that rely on adjunct faculty and part-time employees on an irregular basis.
Health care providers and local governments may also have to cope with expensive and difficult changes. The management impact on providers has yet to be quantified, he says, and reductions in Medicare benefits "will have to be made up somehow," by state governments, possibly with some cost shifting to private insurance. Keith Dolan, vice president within the Employee Benefits Management Group, oversees insurance company relations, including marketing and negotiation with group health plans, and is a member of the Governor's Health Benefit Exchange Regional Advisory Committee in New York. He agrees that the next wave of change in employee benefits won't be catastrophic. He foresees more change for employee benefits administration next year, including more choices for employers and their employees and some modifications to plan design—but not the rate explosions that others fear. "I am not very worried about the impact on our clients. We have done a pretty good job educating and preparing them for the future," he says. Rose & Kiernan client employers will have access to a state-operated exchange in New York as well as a private exchange developed by the agency. Small employers with 20 or fewer employees are the most likely candidates for exchange-provided health coverage and taking advantage of tax credits built into the new law, he says. But large employers with 200 or more employees are likely to continue as they have been with possibly some changes in plan design or self-funding structure. "No one expects that rates will be reduced with the new exchanges, though there may be some cost relief for individuals," Dolan says. However, some uneducated buyers may struggle with their expectations about how to manage their costs into the future while complying with new mandates. Some employers may also look to a defined contribution model for group health benefits, he says, allowing employees to choose from several plan designs while applying a stable single cost allocation. The design is similar to the section 125 cafeteria benefit plans that became popular in the 1980s and 1990s that allowed employees to spend a defined budget on a range of benefits. "It's been the buzzword and we are examining its application with our private exchange operations to make the design available to our clients," he says. However, while the defined contribution approach allows employers to stabilize their costs, it will probably not lead to cost reductions. "Employers may have to pay slightly more on a unit cost basis, but given choices, employees are more likely to buy down (choose less expensive benefits and higher deductibles)," he says. And higher levels of choice usually lead to greater employee satisfaction. "It's not a silver bullet," he says, but it is a solid tool that can work within the available benefit systems. The author 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.
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