The days of being able to survive selling employee benefits by relying on product spreadsheets and service to make the sale are diminishing. Not that there won't be cases where this type of strategy will be a useful tool but to compete in a consultative environment will require the broker to acquire or be able to access more detailed knowledge in a broad variety of subjects.
So if you are relatively new to the business, find a mentor and develop strategic alliances. You may have to share the case but joint work with a veteran broker on a case can be a marvelous learning experience. You may also want to check out NAHUs Young Associate of Health Underwriters "YAHU" group. This is just another of the many benefits of membership in NAHU. If you are an experienced veteran, become a "mentor" for a YAHU member. Check it out within your local chapter.
OK, so now you have gotten some basic benefits information from a prospect or client. How do you use it to separate yourself from the competition and make the sale?
I've got it! Let's take a look at an actual Case Study. The names and locations have been change to protect the innocent but this is a real case that we worked with a broker recently. The following facts and information were obtained from the one page "Discovery Form" seen below.
So, let's have some fun and test your consultative acumen. Before reading the rest of the article take a few minutes to look over the company's benefits information and write down your observations on compliance risk exposure and benefit enhancement opportunities. Then continue reading the article to see the compliance issues we identified and strategies we recommended for further evaluation.
In this case, the significance of the compliance problems and unaddressed opportunities enabled acquisition of a Broker of Record "BOR" at the presentation of the Benefit Strategies Proposal. And, this was accomplished mid-plan year, without showing a spreadsheet or discussing products.
This is another benefit of a consultative strategy; in many cases mid-year plan modifications can achieve significant benefits for the employer.
Always remember, the purpose of preliminary analysis is to identify potential risk exposure and strategic planning opportunities that should be evaluated further. There is no need for product discussion or recommendations at this point in the consultative process.
The primary objectives to be achieved in the Benefit Strategies Proposal are two-fold:
- Identification of risk exposure and benefit planning strategies to be evaluated
- To sell the employer on the importance of employee engagement in their benefits
Nip-Tuck Compliance Risk Observations:
Employees carve out requirements: It is acceptable to cover employees by classification as long as the insurance carrier allows it (that is until the PPACA changes to §105(h) are enforced). Classification of employees by bona fide business criteria such as hourly or salaried employees, corporate officers, union or non-union, length of service, age, income level, hours worked are commonly used criteria. However, to define a classification of employees to include only one nurse would at best be difficult if not impossible. Plus, it would require proper corporate documentation (usually provided in the group contract) to provide special benefits for that class of employees.
Group contract violation: Nip-Tuck is paying 100% of the employee premium for medical and dental coverage. Depending on the insurance carrier's group contract, it is likely that the group carrier requires all employees to be covered by the employer. In this case, you don't have sufficient information to be sure. The current broker may have submitted the master group application with a 99% employer contribution to allow for waivers. In some cases, the carrier may allow such waivers if the employee provides proof of group coverage through a spouse. This will of course require further analysis.
"Constructive Receipt" problem: This one is a bit more of an insidious risk and can be a lot more destructive. IRS regulations do not allow an employer to make "opt out" payments to employees for waiving group benefits.....unless there is a properly drafted Section 125/Cafeteria Plan in place. In the absence of a Section 125 plan, when an employer compensates an employee for not taking a group benefit, a "constructive receipt" tax liability is incurred. Constructive receipt, simply put, means that the amount of compensation that employees "opting-out" of benefits are given, is also taxable to all those covered by the benefits. Caught in an audit, this would not only cause additional taxes and penalties to the employer and employees but would also require the preparation of amended W2's and tax returns for all effected years.
COBRA compliance – good faith compliance rules: Though it is very difficult to be certain without further information, it would appear that at least one of the good faith requirements laid out in 1988 in a Report of the Committee on Finance, United States Senate (Report 100-445) is not being met. One good faith requirement, as stated in that report, is "the extent to which the operation of the compliance program is monitored by auditors, taking into account the safeguards established to assure the independence of the auditors". This is a marvelous opportunity to introduce your COBRA TPA and establish your credibility with the client/prospect. Outsourcing COBRA compliance is very inexpensive liability insurance for the employer.
No Employee Handbook: You may or may not want to address this one depending on the level of HRIS support services that you have available. However, proper communication of employee policies can be a very big issue in HR even with small employers (under 10). We recently had an attorney speak at our San Diego Luncheon meeting and he made it very clear that any employer with "common law" employees should have a written and regularly updated Employee Handbook. This item could also be presented as an opportunity to improve employee communication and education.
Well that's about all that I came up with on risk and compliance issues. Please let me know if you identified any others.
Nip-Tuck Benefit Planning Opportunities
This portion of the analysis is to identify opportunities that need to be studied and evaluated more fully. You are not making recommendations for change at this point in the process.
Multiple Medical/Dental Options: Our research and employee surveys we have done over the last 25 years have been very consistent on at least one issue. Employees want more choices in their benefits. Offering a carefully selected group of between 3 and 6 medical plan options and at least 2 dental options can do a great deal to enhance employee perception of benefits. Evaluating the benefits of a Consumer-Driven Health Plan "CDHP" option should also be addressed.
Defined Contribution: This one is probably the most under-utilized strategy in our arsenal. When properly designed, this employer contribution method helps control costs and enhances the employees' ability to use employer money much more effectively. Here again the key to this is employee education and engagement. The employees are required to actually think about their benefit decisions.
Implementation of a Section 125 Plan with FSAs: Again, employee surveys we have done over the years indicate that most companies employing 10 or more employees can save enough payroll taxes to make this an excellent benefit to consider. It also is a terrific recruitment and retention tool when properly communicated. Oh, by the way, it is also one of the biggest opportunities to find money (employee income tax savings) to drive new business.
Voluntary benefit options: WOW! Here is the opportunity to expand your product and revenue base. It will also increase the value of benefits to the employee and help the employer control cost and save money.
There are two platforms for voluntary, group and individual, so feel free to start with what you are most familiar with and grow it. With employee input and engagement, it is easy to make a strong case to the employer financially. Usually you can show a $2.00 to $5.00 Return on Investment "ROI" to the employer when offering voluntary benefits. To achieve this ROI, however, requires the employer to embrace the importance of employee engagement and provide the necessary time for employee education.
Three types of voluntary benefits that consistently draw good results are disability insurance, supplemental accident & hospitalization and life insurance. I can count on one hand the number of companies that we work with that don't include disability insurance in their benefits. It may be voluntary but we normally get 70% or more to participate.
I will be dealing in greater detail with these and other compliance risk and benefit enhancement opportunities in future articles. At this point, suffice it to say that you need to continually work to expand your knowledge base. Start working on a professional designation (RHU, CEBS, ChHC, etc.). These courses will give you the knowledge base you need to get started. My goal in these articles is not to build your technical knowledge but help you learn how to effectively apply that knowledge in a constructive, creative and PROFITABLE fashion that will truly differentiate you from your competitors.