Horngren’s Financial & Managerial Accounting, 7th edition by Miller-Nobles so...
Wa vbis-2012-0508
1. Buck Voluntary Benefits Integrated Solutions (VBIS)
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. Buck Voluntary Benefits Integrated Solutions (VBIS)
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
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3. Buck Voluntary Benefits Integrated Solutions (VBIS)
Setting the Stage
A Couple of Underlying Premises Before We Get Started…
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4. Buck Voluntary Benefits Integrated Solutions (VBIS)
Measuring Financial Impact of Benefits
Establishing the Scale
How successful are your What is your investment in your
benefits in attracting talent? Expense
benefit program in terms of:
• Added financial security Talent • The cost of premiums, claims or
• Savings for employees insurance
• Favorable employee • The cost of communication and
perception of employer engagement
• Time-saving convenience • The cost of administering your
plans
• The cost of consulting expenses
Favorable Benefits ROI = retention of talent outweighs the expense of the benefits
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5. Buck Voluntary Benefits Integrated Solutions (VBIS)
Measuring Financial Impact of Voluntary Benefits
Using the Same Scale
How effective are the voluntary How can voluntary plans
plans in attracting and retaining Lighter actually reduce your benefit
Expense
talent? Heavier expenses?
Talent
• Added financial security • Medical plan design modification
• Savings for employee to reduce claims or premium
expense
• Favorable employee perception
of employer • Drive positive medical plan
selection
• Time-saving convenience
• Subsidize communications,
administration or consulting
expenses through permissible
channels
Employer $ Impact = Higher Retention Employer $ Impact = Lower Expenses
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6. Buck Voluntary Benefits Integrated Solutions (VBIS)
Voluntary Benefit Marketplace
Complicated Matrix Plans and Delivery Options
Voluntary Plans / Products Representative Carriers VB Outsourcers (Examples)
“Worksite” Carriers “Worksite” Enrollment Firms
• Interest Sensitive Whole Life
“Worksite” Plans
• Universal Life • Aflac • Allstate • Univers
• Individual Term • Colonial • Transamerica • EOI
• Critical Illness • Unum • Lincoln Financial • BCI
• Accident Insurance • Trustmark • Prudential • BenefitVision
• Cancer Insurance • Guardian • Humana • Hodges Mace
• Hospital Indemnity • ING • UHC • Farmington
• Individual STD • AIG • Aetna (Allstate) • Winston Financial
• Individual LTD • Colonial
• “Hybrid” (Acc, CI, Perm Life) Employer’s enrollment system
• Group Supplemental Term
• Group Auto/Home Insurance “Platform” Carriers “Platform” VBO’s
“Platform” Plans
• Group Critical Illness
• AIG • ARAG • Metlife
• Group Disability
• MetLife • AYCO • Beneplace
• Group Long Term Care
• Unum • Cigna • YouDecide
• Legal
• Aetna • Hyatt Legal • Motivano
• Financial Planning
• MetLife • The Hartford • Marsh
• Vision
• Travelers • Prudential • Perkspot
• Dental
• CNA • VPI • Empowered
• Identity Theft
• Aetna • VSP
• Discount Malls • Liberty Or employer-to-carrier direct
• Limited Medical Plans
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7. Buck Voluntary Benefits Integrated Solutions (VBIS)
Commission Structure of Voluntary Plans
Employer Be Aware, not Beware
Commission as a Percent of Policy Premium Dollars *
Year 1 through Year 5
100%
Too Good To Be True??
Commission % of Premium
80% Front-loaded commissions can
provide permissible subsidies for
services that support the more
60% strategic initiatives through:
• Communications
• Consulting
40% • Administration
20%
0%
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
Pro-active Plan Commissions Re-active Plan Commissions
(Worksite Products) (Platform Products)**
* Illustration of Voluntary Benefit Commission
** You can remove all commissions from most “Platform” plans
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8. Buck Voluntary Benefits Integrated Solutions (VBIS)
Employer Financial Impact of Voluntary Plans
The Possibilities
$ Impact
Plan
The ‘What’ The ‘How’ Type Raise Lower
Retention Expenses
1 More aggressive med plan cost shifting Filling gaps with voluntary plans WS YES YES
Launching voluntary plans through your Carriers offer rate concessions on core
2 WS YES
major med carrier plans
Soften the perceived ‘blow’ of high-
3 Increase ‘favored’ health plan participation WS YES YES
deductible plans with VBs
Subsidize communications, consulting or Permissible redistribution of VB
4 WS YES
admin costs commissions
Stronger retention through selected WS/
5 Measure success with participation YES
voluntary plans PF
Legend:
WS – Worksite or Hybrid Plans
PF – Platform Plans
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9. Buck Voluntary Benefits Integrated Solutions (VBIS) 12345
Medical Plan ‘Remodeling’ to Save Money
What
• Reducing cost through more aggressive plan modifications
- 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
How
• 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
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10. Buck Voluntary Benefits Integrated Solutions (VBIS) 12345
Medical Plan Remodeling With Supplemental Medical
Illustrative Example Only
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11. Buck Voluntary Benefits Integrated Solutions (VBIS) 12345
Integrating Supplemental Health Plans
Create more aggressive plan changes (shifting cost)
Increased employee deductible and coinsurance cost
VB Supp. Employee or
Health Hospital Accident Critical
Employer
Plan indemnity plan illness plan
Paid
“Buffers”
Lower Employer Health Care Cost
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12. Buck Voluntary Benefits Integrated Solutions (VBIS) 12345
Redefining Voluntary Plan Replacement
The Old: Silos of Benefit Delivery
Benefits administration Enrolled through carrier or Aggregated through a VBO or
enrollment system enrollment firm 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
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13. Buck Voluntary Benefits Integrated Solutions (VBIS) 12345
Saving Money on Core Health Plans
What
• Major medical carriers are getting into the VB business
- 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
How
• 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
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14. Buck Voluntary Benefits Integrated Solutions (VBIS) 12345
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
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16. Buck Voluntary Benefits Integrated Solutions (VBIS) 12345
Subsidizing Employer Fees Through VB
What
• Reducing or subsidizing employer plan expenses through voluntary plan
commission redistribution, potentially funding H&W:
- Communication expenses
- Consulting expenses
- Administration expenses
How
• 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
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17. Buck Voluntary Benefits Integrated Solutions (VBIS) 12345
Reduced Turnover with Stronger Communications
Weaker Plans Better Plans
Benefits BELOW Industry Benchmark ABOVE Benchmark
Poor Strong
Decreased Turnover
Decreased Turnover
Communications Communications
17%
12%
Higher 8%
Employee Lower
Turnover Lowest
Employee
Employee
Turnover
Turnover
Do the math:
5% lower turnover – assuming cost of turnover ~ 30% of salary
better communications, NOT
– Average salary of $35,000
better plans
– Cost of losing 1 employee = $10,500
– 5,000 group x 5% impact = 250 ees
Savings from 5% retention = $2,625,000
Watson and Wyatt – 2004 Study
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18. Buck Voluntary Benefits Integrated Solutions (VBIS) 12345
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 “Companies that are highly effective
communications is a leading communicators had 47% higher total returns to
indicator of financial shareholders over the last five years compared
performance and a driver of with firms that have the least effective
employee engagement.” communications.”
According to the Towers Watson, 2009 / 2010 Communication ROI Study Report
* Source: “Benefits 101: Would Your Employees Pass the Course?” 3007
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19. Buck Voluntary Benefits Integrated Solutions (VBIS) 12345
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?
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?
How
• “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
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20. Buck Voluntary Benefits Integrated Solutions (VBIS)
Employer Financial Impact of Voluntary Plans
The Possibilities
$ Impact
Plan
The ‘What’ The ‘How’ Type Raise Lower
Retention Expenses
1 More aggressive med plan cost shifting Filling gaps with voluntary plans WS YES YES
Launching voluntary plans through your Carriers offer rate concessions on core
2 WS YES
major med carrier plans
Soften the perceived ‘blow’ of high-
3 Increase ‘favored’ health plan participation WS YES YES
deductible plans with VBs
Subsidize communications, consulting or Permissible redistribution of VB
4 WS YES
admin costs commissions
Stronger retention through selected WS/
5 Measure success with participation YES
voluntary plans PF
Legend:
WS – Worksite or Hybrid Plans
PF – Platform Plans
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21. Buck Voluntary Benefits Integrated Solutions (VBIS)
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. Buck Voluntary Benefits Integrated Solutions (VBIS)
Questions
Amy Hollis
National Practice Leader, VBIS
amy.hollis@buckconsultants.com
770.403.8777
Jim Lowder
Director, Health and Productivity
james.lowder@buckconsultants.com
312.846.3363
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