Reaping the benefits

Larry Hazzard is Vice President of Marketing at MassMutual. He is responsible for disability income insurance marketing and web development, in addition to continued focus on e-worksite solutions. Prior to joining MassMutual in 1999, Larry was Director of New Business Development, responsible for managing and expanding a product portfolio, and developing and implementing an e-commerce strategy. Before that, he was a brand manager, influencing double and triple-digit sales growth, and has also been responsible for building database and direct marketing capabilities.

Bill Evans is President of GatesMcDonald, part of the Nationwide family of companies. In this role he brings focus to GatesMcDonald’s integrated disability management and total absence management efforts for large companies. GatesMcDonald is the nation’s leading provider of total absence management solutions, while Nationwide, based in Columbus, Ohio, is one of the largest diversified insurance and financial services organizations in the world with more than US$148 billion in assets.

Chris Capone is Assistant Vice President and Director, Affinity Marketing for Liberty Mutual. Chris joined Liberty Mutual in 2002 as an internal Strategy Consultant responsible for multiple business unit growth and profitability initiatives. Within the commercial lines national accounts division, Chris developed the business strategy to launch a new WC and Business Auto service product, as well as deployed quality initiatives to improve retention of key accounts. Chris also served as an Integration Manager during Liberty Mutual’s acquisition of certain elements of Prudential’s personal lines property and casualty operations.

The full impact of the ageing workforce issue is yet to be felt by a large majority of organizations. What challenges does such a scenario present to companies in terms of their provision of employee benefits?

BE. Because of the aging workforce, employers are dealing with employees’ chronic conditions on a more frequent basis. High cholesterol, hypertension and respiratory problems from smoking are just some of the risks that will manifest into greater economic burden for employers. This may very well result in higher absenteeism, escalated disability episodes and increased monetary claims on benefits.

Employers need to get their employees engaged in their own health. While it’s good to start with employers instituting health programs (health promotion, health education, disease management, etc.) and encouraging active involvement, employers need to have the target groups voluntarily change their behaviors. The key for employers in gaining active participation is by offering incentives to their employees. Providing monetary rewards, varying levels of employer-paid benefits and account balance plans that incorporate fully covered preventative care are some effective incentives. Companies with employees that are engaged in their own health, regardless of age, will also have healthier bottom lines.

LH. A large number of agents and brokers tend to look at the multi-life world as a static sale – not recognizing the changing nature of employees’ lives. As a workforce matures, it tends to move from higher risk investment products to a mindset of protecting their wealth, their retirement funds and certainly, their remaining income-earning years. Effectively using life events can help employees identify what their new needs are. Once you are able to identify specific needs of various groups of employees within your company, one way in order to achieve an appropriate balance (and also manage your bottom line) is through a reliance on voluntary benefits. The key, however, to a successful voluntary benefits portfolio is the ability to effectively engage and educate your employee on their options so that you can be sure they are taking advantage of the custom solutions that are available to them.

CC. According to the Kaiser Family Foundation, 10 percent of the nation’s largest employers eliminated future retiree healthcare benefits in 2003, and 20 percent said they would follow suit by 2006. At a minimum, nearly all expect to increase retiree contribution requirements this year.

As a partial solution to this trend, voluntary benefits emerged in the mid-1990s and early 2000s as a cure for these paid-benefit ills: give employers more ‘stuff’ that would cost them little or nothing at all and employees hopefully won’t smart as much from the healthcare bite. Of this growing menu of offerings companies can put into their benefits package, only one will benefit the majority of employees: auto and home insurance.

Employees that drive cars – who, safe to say, are most – need auto insurance. And mortgagors require homeowners to have home insurance. A voluntary group auto and home insurance program arguably provides more value than any other voluntary benefit – it saves employees money (potentially hundreds of dollars) on something they need to go out and buy anyway.

What strategies will they need to implement to deal with issues such as disability coverage and long-term care? What considerations need to be taken into account regarding this?

LH. The overarching theme is education and awareness. From MassMutual’s experience of selling disability income (DI) at the worksite, we have found that the companies who emphasize education in conjunction with the process are the most successful. Supplemental DI is not an intuitive product. Many employees believe it will never happen to them and that even if it does, they’ll rely on their coverage through work to get them through their period of disability. What they don’t realize is that typically, their group coverage will have limitations and many times an employee is left with about ½ of their income in the event they do become disabled. In our service model, MassMutual leads with education and then follows up with empowerment. Once we have done our part in helping an employee understand their particular needs, we empower them to make a decision that’s right for them – whether that be by taking advantage of our flexible technology and selecting a benefit amount specific to their needs, or in some instances even deciding that they do not have a need for supplemental coverage.

BE. Employers simply need to get creative. They have a myriad of choices to make, but in the end they’ll more than likely need to accept a broader range of working environments and conditions than what we see today. Modified job duties and hours and narrower job scopes might be some of the situations they will need to explore. If employers can be flexible and can accommodate what employees can bring to the table then, ultimately, they will be the beneficiaries.

According to the latest available data from the Department of Labor, 1.3 million workers in 2003 experienced illnesses or injuries that required time away from work to recuperate. How can HR departments reduce benefits costs through the use of better absence management programs?

BE. The basic premise for absence management is that it eliminates employees consuming multiple benefits at the same time. With an integrated program, absence management coordinates benefits such as FMLA and disability, and knows when to move from one benefit to the next benefit.

Both the direct costs of absenteeism (such as hiring replacement labor) and the indirect costs (which include lost productivity) can have significant financial effects on employers. Absence management programs that can reduce the number and duration of absences have positive effects on the corporate bottom line. Using effective tactics such as having a common intake to report absences, or having shared nurse case management for all applicable absences allows for effective claim management.

The absence management process passes on various types of employee data to the applicable benefits administrator when the employee notifies the employer of their absence. This allows benefit administrators to intervene much earlier than they normally would, and early intervention is remarkably important in reducing employers’ overall benefit costs.

An effective absence management program helps employees return to work more quickly. Consequently, there is less downtime, employers incur less replacement labor costs and fewer benefit dollars are paid out. Employees typically report greater satisfaction with absence management programs, especially when combined with leave administration plans. Reporting time off is a fairly simple process for employees, and they’re comforted by the knowledge that the appropriate type of benefit will be paid to them. Absence management programs also make good sense for employers. They make sure all personnel, including organizations with multiple locations, are applying consistent policies and procedures. Absence management plans offer considerable assistance to companies to avoid adverse effects – monetary or otherwise – that come with non-compliance. And absence management programs tend to provide vast quantities of information that clever companies can use to design and monitor their benefit programs.

Absence management programs are vital to businesses trying to manage their benefit payout. The hallmarks of good programs are that they will deploy effective case management and return-to-work philosophies across benefit programs. And the truly excellent programs will also result in higher employee participation in programs, such as health promotion and disease management.

LH. As a disability income insurance carrier, we deal with the concept of providing benefits to employees during a significant period of illness or injury resulting in a considerable period of absence from work. In our claims management processes, we offer a variety of programs to assist employees back to work whether it be through income to subsidize returning to work on a part time basis or support and training if it’s necessary for the employee to enter into a new career field.

Recently, however, MassMutual took action to provide assistance to employees even before a disability occurs. We now offer a program called Guidance Resources to all of our DI policyholders – whether they are on claim or not – that offers employee assistance on a variety of ‘life balance’ topics including health and wellness, family and relationships, childcare assistance, and legal services. The service also helps with earlier detection of potentially disabling events. Having these types of resources at their fingertips will eliminate time away from the office as well as provide proactive care that will have a positive impact on employee productivity.

Do you think benefits programs rank highly enough on the employee agenda? What can be done to improve employees’ awareness of the importance of the right benefits package?

CC. Of all of the metrics available to measure program success, participation rates may be the most telling. Simply put, if employees are enrolling, it’s working. Most voluntary benefits generate single-digit participation rates even after four or five years on the menu, and for a variety of reasons. Lack of interest by or applicability to a sizeable portion of the employee base may be the most common. Another may be an ineffective or nonexistent worksite-marketing program to make the participation needle jump.

Employer-sponsored auto and home programs are no less immune to potentially modest participation levels, so how do companies ensure their auto and home program will outperform expectations? With the right insurance partner and employer support, first-year participation rates can approach 10 percent and five-year participation levels can score between 25-35 percent. Here are a few tips to choose one that puts companies in prime position to succeed:

Think for a moment about your own buying preferences. If you like to transact face-to-face you might be less inclined to do business over the phone. Or if you don’t need or want the human touch in the process, you might shy away from buying from a company that makes it necessary. So to remove the ‘channel barrier’ as a possible deterrent to participation, offer companies a program from an insurance partner with multiple sales options. Giving employees the choice of how they wish to obtain a rate quote or enroll – through an on-site representative of the insurance company at the work location, by visiting with an insurance representative at his/her local office, over the internet or by calling a toll-free number – makes them more empowered in the process, and more likely will heighten interest.

LH. We have found that certain components are high on an employee’s benefits agenda – healthcare, retirement planning, and vacation. I think these priorities reflect the human resource priorities of the company. The key to employee awareness is effective communication – not just from a vehicle perspective – but also from a strategic perspective. It is something that should be a constant flow of information, not just during annual enrollment activities.

Think about it. During an open enrollment period, employees are barraged with a high volume of communications. And, combined with the stress of meeting deadlines, the overall value and comprehensiveness of the program may get lost. When working with our clients on enrollment options, we always advise that a voluntary DI enrollment should take place ‘off cycle’ from annual benefit enrollment activities. We have found that educating employees on the need for DI is best done when employees are able to focus and take the time to evaluate their personal needs. In addition, our renewal capabilities enable us to educate employees year over year. This includes targeted education to existing policyholders regarding buy-up opportunities to align with their current needs, coverage options for those who may have declined DI in the past but based on life events that they may have encountered need the ability to reconsider, as well as new employees considering their benefit options for the first time.

BE. Benefit programs in general do not rank particularly high on the employee agenda because they are too focused on one benefit – group health. Consumerism will ultimately affect the way employees view other benefits, as their choices have a direct bearing on their expenses. We, as employers, need to provide incentives for people to make healthier choices.

What role can cost-effective and creative benefits and compensation programs play in the recruitment, retention and motivation of top staffing talent?

CC. Lots of insurers boast of the savings they can deliver to employees. The value in group auto and home is a given: employees save money on a necessary product. But progressive employers will be keen on the value-add a particular program brings to the table, thereby fostering the recruitment, retention and motivation of top talent.

Two things generally come to consumers’ minds about auto and home insurance: 1) how much does it cost; and 2) will the company quickly and fairly settle my claim? Since every insurer will compete on both of these concerns, companies should look for one that stands out on a third: helping workers and their families stay safe in their cars and homes. Ask about the worksite educational programs (teen driving, child passenger safety, home fire safety, identity theft) an insurer can offer employers.

BE. With the battle going on for recruiting and retaining quality employees, providing creative benefits and compensation can play a substantial role. It seems, however, that appreciating the benefits an employer provides is largely influenced by the demographic of the employee. Age, family status, economic level and spousal benefits play a considerable part in what the potential employee looks for when seeking a job. In general, though, employees do a poor job of taking advantage of all the benefits an employer provides. So many times it falls back on the employer to educate and re-educate their associates about what benefits are available to them.

LH. We deal with a lot of companies looking for enhanced protection solutions for their top-level employees. It really comes down to recognizing that different group of employees within your company will have different benefit needs. Employees are no longer willing to settle for ‘one size fits all’ solutions and your benefits program should reflect that.

Regarding supplemental DI specifically, executives, due to their high-income levels that surpass long-term disability (LTD) thresholds and also have substantial levels of incentive income not typically covered by LTD plans, are probably your employees with the most significant exposures. Introducing targeted solutions illustrates that you are thinking about their individual needs.

Looking ahead, what do you think will be the biggest drivers behind the growth of the employee benefits market over the next few years? What trends are you getting excited about, and do you have any concerns?

LH. Technology – hands down – will be the biggest driver. MassMutual constantly relies on technology to create more efficient ways to meet our clients’ needs.

The other key driver will be understanding and meeting the needs of our younger consumers. They are more independent and skeptical than the Boomers ahead of them, and as a result, it will be essential to shift our methodologies and solutions into this new frontier.

What’s exciting about these two dynamics is that the two can be blended for larger potential – using technology to provided targeted solutions that align with their specialized needs from both an educational and transactional perspective.

CC. Aspirin-free administration will be key. Employers and HR/benefits managers don’t have the resources or patience to manage a new voluntary benefit, nor budget to get it up and running. Liberty Mutual would advise imagining a benefit that saves their employees money, yet costs the company nothing; a benefit that gives employees the convenience of participating through payroll deduction or automatic checking account withdrawal, yet requires no monthly maintenance by the HR department; and lastly, a voluntary benefit that can be tailored to fit their existing payroll systems, without the need to pigeonhole them into the vendor’s. Then we present them with an auto and home program that delivers the picture of the paradise already painted.

In addition, unlike company-paid benefits like health and dental coverage, people generally do not make auto and home insurance decisions during open enrollment season. Many employees will shop once or twice a year – when their current car or home policy is up for renewal – but in the auto and home world, that once or twice a year comes up every day. Select an insurance partner that will create (and even implement) a strategic, 12-month communications program for companies to ensure consistent visibility of the program. This might include program endorsement in the employee newsletter, materials in new hire orientation packets, direct mailing to employees at home or ‘desk drops’ at work, displaying informational posters in employee break rooms or cafeteria, and inviting the insurance company’s sales reps on-site to answer employee questions or to complete enrollment applications.

BE. There are so many trends emerging out there right now, and many of them have great potential to affect the employee benefits market. Outsourcing programs such as leave administration and absence management, as well as the evolution of consumerism, are two of the trends that are going to be exciting to watch in the upcoming years.

With regard to concerns, the advent of consumerism results in people not taking preventative measures. That’s why it is so important to have account balance plans that include preventative care measures. And, employers must also be able to provide enough information to employees to help them make informed choices about their healthcare.