Survey finds focus shift to 'total cost of benefits risk'.

It is no surprise that gaining control of health care costs is at the heart of employer concerns. "Controlling health care benefits costs has been at the top of every survey we've seen over the last six years, and you really don't need another survey to verify that," says Dennis Rainey, VP Employee Benefits Services of ABD Insurance & Financial Services. "What our Service Re-Engineering survey accomplished was to identify and prioritize the areas of service that our clients need in order to address and control those costs. The results are very interesting."

While ABD maintains a client retention rate of over 95%, they do not take for granted that their services meet the unique needs of their clients. Accordingly, last year ABD undertook an extensive client services survey in order to validate and prioritize the services they provide. The survey solicited input from four different groups: client finance and HR representatives, insurance carriers and vendors, and ABD's own service teams. Each was asked to rank, in terms of importance, ABD's core benefits services offerings.

One of the surprises of the survey was that HR and finance--traditionally groups with different benefit issues and needs--prioritized their benefits needs with unprecedented similarity. ABD's results yielded several other key findings and insights as well.

Each employee benefits service provided has a definable and relative hard- or soft-dollar savings;

* Employer needs, even within the same industry, are vastly different and require different unique combinations of services to meet their objectives;

* The top four rated service categories significantly outweighed the rest, indicating that concentrated emphasis in these areas is critical to helping clients realize goals;

* Employers are looking less at isolating health care cost control and focusing more on how benefits can be used to positively effect and maximize the company's overall performance, thereby reducing their overall cost of risk. Areas where this strategy would apply, for example, are reducing employee turnover and reducing Workers' Compensation costs.

"At the end of the day, it is the complete picture of what the company is spending, and saving, that is the most important," said Ron Frady, Chief Financial Officer, Target Logistic Services

Employers will soon be facing a precarious balancing act between achieving growth and cost control at the same time. The good news is that the economy appears to be improving and both state and local unemployment is at a four-year low. Unfortunately, CFO's in a recent survey reported that the largest cost increases expected in the next twelve months are health insurance costs. And employers are dismayed to learn that the Society of Human Resource Managers (SHRM) recently reported that 83% of employees indicated they would look for a new job as soon as the economy strengthens.

Now more than ever, benefits are critical to employers in attracting and retaining employees. With fewer workers on the sidelines in a tight labor market, a company's ability to grow will ultimately be determined by their success in luring skilled labor away from other employers. The 2004 Economic Benefits Research Institute (EBRI) survey reported that 79% of respondents would base their decision to accept or reject potential employment on a company's benefits programs.

As a result, after five years of employee cost-shifting and benefits plan reductions, one of the most important challenges now facing employers is designing and providing a 'competitive' benefits program. With that pressure mounting, the ABD survey found that clients were anxious to discuss strategies to balance growth and cost control.

"It is a cyclical business and we've been here before," Rainey states. "The most recent cycle dates back to the late 1990's, when tech employers enhanced and expanded the definition of 'benefits' to lure employees away from other employers." This tactic forced many other employers to increase the value of their total benefits program to ward off predatory employers. If history is an indicator, employers may be looking at similar challenges in the foreseeable future.

In order to meet those challenges, ABD's new service categories are:

Strategic Benefits Planning

A formal process that combines a complete employer needs analysis, education, forecasting, program design, and delivery plan, focusing on the employer's total cost of risk for a 3- to 5-year strategic plan.

Aggressive Cost Control

A custom designed process that incorporates quantifiable employer savings in a number of areas, ranging from market and negotiation expertise to control of preventable chronic health claims to discounts of outside administrative vendors to strategies that reduce skilled employee turnover.

Employee Education & Advocacy

A process that improves employees' understanding and perception of benefits by working directly with employees on claims issues, providing face-to-face and written employee education about their own benefits and emerging trends such as HSA programs, and training to make employees and dependents more efficient, better informed health care purchasers.

Efficient Benefits Administration

A process anchored by dedicated day-to-day personalized assistance that includes proactive state and federal compliance support, administrative design assistance and outsourcing, and performance monitoring of carriers and other vendors.

Information for this article was provided by ABD Insurance & Financial Services--the largest full-service benefits broker headquartered in the Western United States. ABD's Southern California regional operation is located in Torrance. For more information, contact ABD at 310-543-9995.

Employer's Top 12 Employee Benefit Needs

1. Negotiate Health Plan Renewals With Insurance Carriers

2. Designing a Competitive (Affordable) Employee Benefits Plan

3. Reliable Health Plan Costs Forecasts

4. Assistance for Compliance with Laws and Regulations

5. Resolution of Employee Issues

6. Managing Insurance Carrier/Vendor Relations

7. Enroll and Educate Employees on Their Benefits Package

8. Expert Assistance for the HR Team

9. Frequent Client/Broker Communication

10. Industry/Competition Benchmarks

11. Effective Administrative Systems/Leveraging the Internet

12. Information on Industry Trends and Innovation

Source: ABD, 2005