“Our analysis is a comprehensive review of all areas of the employee benefits package, including health, dental, disability, life, voluntary life, 401 (K), regulatory compliance, employee communications and benefits technology,” says Daniel Brooks, MHP and divisional vice president of Doeren Mayhew Risk Management in Troy. “It helps them determine whether they are currently getting the best and most affordable coverage for their employees.”
Smart Business sat down and spoke to Brooks about the importance of employee benefits.
What does employee benefit analysis and design entail?
Employee benefits make up 30 percent of the total employee compensation dollar, second only to salary/wages. Plus, carriers go through peaks and valleys in terms of their rating. We partner with our clients to gauge the competitiveness of all lines of coverage using historical data, industry benchmarking, marketing and forecasting in order to control the employer’s bottom line. In Michigan, we have additional budget demands such as rising raw material costs, single business tax, labor considerations and regulations such as the Small Group Reform Act of 2004 which have sweeping effects and require consideration as part to the review.
Furthermore, new products are being brought to the market of which companies may not be aware. We bring our expertise to the table to determine the feasibility of these new products and riders so that we make the most of our client’s time and premium dollar.
Finally, we make sure that they are not exposed to audit in terms of regulatory compliance.
Is this a new concept used by companies to recruit new talent?
Reviewing employee benefits is not a new concept in recruitment. However, an employer used to be able to afford paying 100 percent of the premium and offer first dollar health coverage with a $5 co-pay for prescriptions 10 years ago.
Today, employers have been forced to adopt cost sharing measures such as employee contribution to monthly premium and higher out-of-pocket expense through co-pays, deductibles and coinsurance. They need to balance these cost-sharing measures based on what their competition is doing, the companies own financial needs and what the candidates are expecting/demanding. We have clients who know exactly what their competition is offering and set their benefits accordingly. Other clients realize that the Michigan job market is tough right now so they have been able to modify their plans without serious concern to the recruitment issue. It’s different for every company.
Is the health insurance landscape still rocky or are rates coming back down to Earth?
We have seen rates stabilize somewhat but most clients are still seeing increases. If you look back at the year 2000, Blue Cross Blue Shield of Michigan was averaging health increases of 25 percent. In 2005, that average had moderated to 10 percent.
We’ve seen Small Group Reform enacted here in Michigan in 2004 requires new rating methodology which has been good for some groups but bad for others. In addition to the rating issues, we are seeing some interesting moves by insurance carriers who commit to Michigan and others who may not stay around (at least not as we know them now).
What are some of the health care industry trends?
The introduction of consumer-driven health plans such as health savings accounts (or HSA’s) has been a hot topic for discussion with most of our clients. These programs introduce a high-deductible health plan with a tax-favored savings account from which to draw needed health care funds. Introduced to stem the tide of medical costs, these programs are not the standard coverage to which most employers and their employees are accustomed. They force members to be better consumers of our health care dollars. In changing habits, the intent is to drive down the costs for all and, thus moderate the annual costs in the long term. However, recent health plan survey projects high deductible PPO rate trends at 12.8 percent which is right about the same trend for the traditional PPO plans.
Modeling is another recent trend. This technology allows employees to go on-line in order to determine which plan fits their needs the best before they sign up. With these programs, employers pre-determine the plans offered and the amount they will spend on the premium so it allows the employee to choose the plan based on their own needs and the needs of their family.
Another trend is closer review of legacy/retiree costs. As we are seeing with the Big Three, companies didn’t anticipate the high cost of maintaining benefits for life when they offered it. We are living longer and the costs of health care continue to mount.
Daniel Brooks, MHP and divisional vice president of Doeren Mayhew Risk Management in Troy. He can be reached at (248) 244-3023.