Making Voluntary Benefits an Employer Benefit

Transcription

1 Making Voluntary Benefits an Employer Benefit Buck Voluntary Benefits Integrated Solutions (VBIS) A Buck Consultants Webinar Amy Hollis, National Practice Leader, VBIS May 8, 2012

2 VBIS Objectives Objective #1: Overarching employee focus complement and enhance plan design and delivery to attract and retain talent Objective # 2: Strategic employer focus lower overall benefit spend, while adhering to Objective #1 VBIS Mission Statement To ensure and maintain our presence as the nation s preeminent Voluntary Benefit practice by: Responsibly and creatively crafting employer Voluntary Benefit solutions that support our clients overall benefit and corporate objectives Maintaining the highest level of business integrity with full disclosure Focusing on long-term, sustainable relationships with our clients Working to support the financial well-being of our employer clients and their employees 2

3 Setting the Stage A Couple of Underlying Premises Before We Get Started 3

4 Measuring Financial Impact of Benefits Establishing the Scale How successful are your benefits in attracting talent? Added financial security Savings for employees Favorable employee perception of employer Time-saving convenience Talent Expense What is your investment in your benefit program in terms of: The cost of premiums, claims or insurance The cost of communication and engagement The cost of administering your plans The cost of consulting expenses Favorable Benefits ROI = retention of talent outweighs the expense of the benefits 4

5 Measuring Financial Impact of Voluntary Benefits Using the Same Scale How effective are the voluntary plans in attracting and retaining talent? Added financial security Savings for employee Favorable employee perception of employer Time-saving convenience Heavier Talent Lighter Expense How can voluntary plans actually reduce your benefit expenses? Medical plan design modification to reduce claims or premium expense Drive positive medical plan selection Subsidize communications, administration or consulting expenses through permissible channels Employer $ Impact = Higher Retention Employer $ Impact = Lower Expenses 5

6 Platform Plans Worksite Plans Buck Voluntary Benefits Integrated Solutions (VBIS) Voluntary Benefit Marketplace Complicated Matrix Plans and Delivery Options Voluntary Plans / Products Representative Carriers VB Outsourcers (Examples) Interest Sensitive Whole Life Universal Life Individual Term Critical Illness Accident Insurance Cancer Insurance Hospital Indemnity Individual STD Individual LTD Aflac Colonial Unum Trustmark Guardian ING AIG Colonial Worksite Carriers Allstate Transamerica Lincoln Financial Prudential Humana UHC Aetna (Allstate) Worksite Enrollment Firms Univers EOI BCI BenefitVision Hodges Mace Farmington Winston Financial Hybrid (Acc, CI, Perm Life) Employer s enrollment system Group Supplemental Term Group Auto/Home Insurance Group Critical Illness Group Disability Group Long Term Care Legal Financial Planning Vision Dental Identity Theft Discount Malls AIG MetLife Unum Aetna MetLife Travelers CNA Aetna Liberty Platform Carriers ARAG AYCO Cigna Hyatt Legal The Hartford Prudential VPI VSP Platform VBO s Metlife Beneplace YouDecide Motivano Marsh Perkspot Empowered Or employer-to-carrier direct Limited Medical Plans 6

7 Commission % of Premium Buck Voluntary Benefits Integrated Solutions (VBIS) Commission Structure of Voluntary Plans Employer Be Aware, not Beware 100% Commission as a Percent of Policy Premium Dollars * Year 1 through Year 5 Too Good To Be True?? 80% 60% 40% Front-loaded commissions can provide permissible subsidies for services that support the more strategic initiatives through: Communications Consulting Administration 20% 0% Yr 1 Yr 2 Yr 3 Pro-active Plan Commissions (Worksite Products) Yr 4 Yr 5 Re-active Plan Commissions (Platform Products)** * Illustration of Voluntary Benefit Commission ** You can remove all commissions from most Platform plans 7

8 Employer Financial Impact of Voluntary Plans The Possibilities The What The How Plan Type Raise Retention $ Impact Lower Expenses 1 More aggressive med plan cost shifting Filling gaps with voluntary plans WS YES YES 2 Launching voluntary plans through your major med carrier Carriers offer rate concessions on core plans WS YES 3 Increase favored health plan participation Soften the perceived blow of highdeductible plans with VBs WS YES YES 4 Subsidize communications, consulting or admin costs Permissible redistribution of VB commissions WS YES 5 Stronger retention through selected voluntary plans Measure success with participation WS/ PF YES Legend: WS Worksite or Hybrid Plans PF Platform Plans 8

9 Medical Plan Remodeling to Save Money What Reducing cost through more aggressive plan modifications How - Stronger cost-shifting or cost sharing to reduce employer plan costs through higher deductibles, co-pays and coinsurance, etc. - Most specifically in health plans, but can apply to Disability as well Filling the financial exposure gaps with supplemental health plans - Indemnity, schedule-based, lump sump benefits for medical evens, paid directly to employee - Most voluntary plans are not coordinated with the health plan (exception Aetna & UHC plans) - Sometimes employee perception is that they have equal or better coverage, even though the employer-paid plan coverage has been reduced 9

10 Medical Plan Remodeling With Supplemental Medical Illustrative Example Only 10

11 Integrating Supplemental Health Plans Create more aggressive plan changes (shifting cost) Increased employee deductible and coinsurance cost VB Supp. Health Plan Buffers Hospital indemnity Accident plan Critical illness plan Employee or Employer Paid Lower Employer Health Care Cost 11

12 Redefining Voluntary Plan Replacement The Old: Silos of Benefit Delivery Benefits administration enrollment system Enrolled through carrier or enrollment firm Aggregated through a VBO or employer links to carrier system Annual Core Enrollment Worksite VB Benefits Platform VB Benefits The New: Integrating the Plan Placement and Decision Process Annual Core Enrollment 12

13 Saving Money on Core Health Plans What Major medical carriers are getting into the VB business How - Primarily viewed as supplemental medical plans, like Critical Illness, Accident or Hospital Indemnity plan designs mirrored after worksite supplemental medical plans - Aetna (through Allstate), UHC, Humana Filling the financial exposure gaps with supplemental health plans - Agreeing to offer their supplemental medical plans may avail an employer to provide concessions on the core medical plan - Some are coordinated, some are not depends on the carrier - Usually the carrier will require an active enrollment environment to secure core plan concessions they are after participation in the supplemental medical plans, but so are you 13

14 Increasing Participation in Favored Health Plans What Integrating the supplemental medical plan delivery assists with the decision process Plan placement and communication strategy establishes medical and supplemental medical plans as a package How Critical Illness, Accident or Hospital Indemnity plans fit well with HD plans, offering additional financial security within the perceived unknowns of HD plans Requires an appropriate medical plan contribution strategy Possible to bundle the contribution of the major medical with the supplemental medical into a single plan decision 14

15 Creating Positive Plan Selection 15

16 Subsidizing Employer Fees Through VB What Reducing or subsidizing employer plan expenses through voluntary plan commission redistribution, potentially funding H&W: How - Communication expenses - Consulting expenses - Administration expenses Usually requires pro-actively enrolled voluntary benefits with front-loaded commission structure, but some plan commissions can be levelled out Usually requires acceptance/waiver of voluntary plan(s) with certain percent of employee population Must follow both ERISA and state insurance guidelines for permissible services 16

17 Decreased Turnover Decreased Turnover Buck Voluntary Benefits Integrated Solutions (VBIS) Reduced Turnover with Stronger Communications Weaker Plans Benefits BELOW Industry Benchmark Better Plans ABOVE Benchmark Poor Communications 17% Strong Communications Higher Employee Turnover 12% Lower Employee Turnover 8% Lowest Employee Turnover Watson and Wyatt 2004 Study 5% lower turnover better communications, NOT better plans Do the math: assuming cost of turnover ~ 30% of salary Average salary of $35,000 Cost of losing 1 employee = $10,500 5,000 group x 5% impact = 250 ees Savings from 5% retention = $2,625,000 17

18 Linking Employee Communications to Company Financial Performance What Communications are crucial, more so now than ever, but expensive - 85% agreed that one of their biggest challenges is getting employees to understand their benefits.* - Over 75% agreed that a well communicated benefits program leads to reduced turnover.* - 65% stated they do not have the HR staff to effectively communicate the benefits.* Effective employee communications is a leading indicator of financial performance and a driver of employee engagement. Companies that are highly effective communicators had 47% higher total returns to shareholders over the last five years compared with firms that have the least effective communications. According to the Towers Watson, 2009 / 2010 Communication ROI Study Report * Source: Benefits 101: Would Your Employees Pass the Course?

19 Impacting Retention through VB Offering Isn t Enough What Back to original premise How effective are the voluntary plans in attracting and retaining the employee, beyond the pay check? How 1. Improving employees overall financial security? 2. Providing savings opportunities only available through their employer? 3. Making their lives a bit easier in some way? 4. Impacting employees perception of why they should work there? Eye-candy vs. creating true employer-employee affinity - If the employee is not participating in the voluntary plan, the answer to questions 1-3 is NO - If they see that it is offered, the answer to question 4 may be YES, but if the plans are not used, the reaction may not be sustainable - Eye-candy may help attract employees in comparing job opportunities, but will not help retain the employee, unless they are using the plan 19

20 Employer Financial Impact of Voluntary Plans The Possibilities The What The How Plan Type Raise Retention $ Impact Lower Expenses 1 More aggressive med plan cost shifting Filling gaps with voluntary plans WS YES YES 2 Launching voluntary plans through your major med carrier Carriers offer rate concessions on core plans WS YES 3 Increase favored health plan participation Soften the perceived blow of highdeductible plans with VBs WS YES YES 4 Subsidize communications, consulting or admin costs Permissible redistribution of VB commissions WS YES 5 Stronger retention through selected voluntary plans Measure success with participation WS/ PF YES Legend: WS Worksite or Hybrid Plans PF Platform Plans 20

21 VBIS Objectives Objective #1: Overarching employee focus complement and enhance plan design and delivery to attract and retain talent Objective # 2: Strategic employer focus lower overall benefit spend, while adhering to Objective #1 VBIS Mission Statement To ensure and maintain our presence as the nation s preeminent Voluntary Benefit practice by: Responsibly and creatively crafting employer Voluntary Benefit solutions that support our clients overall benefit and corporate objectives Maintaining the highest level of business integrity with full disclosure Focusing on long-term, sustainable relationships with our clients Working to support the financial well-being of our employer clients and their employees 21

22 Questions Amy Hollis National Practice Leader, VBIS Jim Lowder Director, Health and Productivity