Ten Thoughts On Hiring A Benefits Broker

Engaging a broker to assist you with solving your benefits issues be they cost, communications, enrollment or problem solving with existing vendors can be a difficult task for business owners and professionals faced with the task. Here are some critical considerations to assist you in that task.

1. Do you desire a transaction or a relationship with your broker rooted in performance over time?
2. Do you want to work with someone who sells to you or someone who problem solves on your behalf? Its easy to separate the salesman barraging you with requests to quote your business its far more difficult to find the professional who proactively proposes solutions to your problems after asking a lot of questions. Professionals do not quote your business they are engaged upon being hired as they simply do not need the practice.
3. Google is your friend.Google the brokers name. What does it tell you about that individual? Are they published? What is their background professionally? Do they offer valuable professional insights and opinion on the pressing matters of the day like health care reform?
4. Are they independent? By that I mean do they represent multiple insurance companies?
5. What is the brokers business model?  Are they focused on revenue generation or the service of existing customers?Will you as the business owner or benefits owner deal with someone who is an experienced professional or will you deal primarily with an account manager or service prepresentative who works for the broker? If the latter why not just hire your own clerk? Who you deal with routinely is a good insight into the business model a broker utilizes.
6. Does the broker specialize in benefits? Property & Casualty and Employee benefits are fundamentally different businesses with different markets and completely different risk dynamics. Dealing with the benefits department at a P&C shop is like buying fine wine at a convenience store; you may geta bottle but you may not savor the experience. People who are experts at everything tend to lie about other stuff too.
7. Can the broker interface effectively and educate and train your staff to effectively manage benefits through vendors or will you have to go through the broker for every trivial issue? The best brokers align competent vendors who can deliver for their clients based on clearly defined expectations and get involved quickly when the vendor stumbles. In the era of HIPAA relying on your broker to solve every issue is a recipe for delay and frustration but some brokers like to control their clients in this manner always blaming the carriers.
8. Who called whom? In other words are you giving a shot to someone who has been begging you for years to quote your business or are you contacting a broker whom you were referred to by someone whose opinion you respect? Think about this carefully.
9. Do you really want to deal with an employee about employee benefits? In other words as a business owner or the principal  at your firm charged with handling employee benefits do you want to deal with someone who receives a paycheck for doing a job or someone whose compensation is based on performance and your ultimate satisfaction? In America the best professionals work for themselves because they can its really that simple.
10. Bigger is not necessarily better. You want someone you would easily refer to a family member or best friend needing assistance with employee benefits. If you do not feel this way about your broker it may be time to shop for a new broker.

Dangerously Out Of Touch

Despite the debt induced meltdown which occurred in Greece President Obama asked G20 leaders recently to spend more only to be rebuffed by European leaders. Yesterday President Obama in the face of 9.5% unemployment figures for June told the American people we need comprehensive immigration reform before our border can be secured. On Wednesday the courthouse in El Paso was fired upon by Mexico and Texas' Attorney General begged President Obama for help;

Yesterday, gunfire from the cartels pierced that threshold and struck City Hall in El Paso. Fortunately no one was injured or killed. But that good fortune was not the result of effective border control - it was mere luck that the bullets struck buildings rather than bodies.
Luck and good fortune are not effective border enforcement policies. The shocking reality of cross border gunfire proves the cold reality: American lives are at risk.

In case your interested in the magnitude of the illegal problem in border states perhaps you might check out gamecam pictures from south Texas ranches where instead of deer photo's you are just as likely to find illegal immigrants who are increasingly carrying backpacks filled with cocaine and methamphetamine.

 CBO has weighed in on the stunning magnitude of America's debt time bomb and Obamacare has not even kicked in yet except in the form of massive rate increases to fund the Obamacare taxes as well as to boost reserves for dependents with pre-existing conditions as well as the coming days when the uninsured and all their costs must be absorbed with community rates. Small group health renewals of 30%-40% are common due to declining membership, risk pools that no longer include the young and healthy who are now unemployed, Obamacare taxes, a provider feeding frenzy of utilization driven by plans to accelerate retirement before reimbursement drops further and the certainty that the future holds no hope for improvement.
 
The harsh reality is that President Obama is in a race to secure a permanent reliable majority Democratic voting block. He needs a recipient class of reliable voters. Already almost 47% of Americans pay no income taxes and almost 49% approve of the IRS so providing 10-20M illegals a path to citizenship will be a game over strategy.

There was a time illegal immigrants traveled by night through South Texas and slept by day. We have reached a point to day where they travel by day with well armed coyotes carrying backpacks laden with drugs through well planned routes painstakingly planned by narcotics cartels.

As pointed out on this blog previously the uninsured in Texas create a significant tax burden on citizens through property taxes to fund their free healthcare. Now if Democrats succeed in passing immigration reform the rest of the counry will get to pay for their free Obamacare tax credits.Medical trend will accelerate as providers cost shift to private payers to close their reimbursement gap. Barack Obama is the shamwow salesman in a suit.

Prescription Drug Non-compliance

WSJ Health Blog has an interesting piece up on just how prevalent non compliance for prescription medicines is today that will be of interest to those benchmarking pharmaceutical compliance. This is a coachable moment for wellness advocates as 1/3 of americans do not adhere to their prescription routine.

If you misrepresent this plan We will call you out

What is the deductible?
What is the out of pocket maximum?
Who is in the network?
What is the co-pay, if there is one?
What are the coinsurance levels?
What does the plan cover?
What is excluded?
What does it cost?
Does my HSA go away?
What coverage is available for prescription drugs?

"While there are some difficult issues to be worked out...If you misrepresent this plan We will call you out"

How could someone possibly misrepresent the plan? There is no plan. There is only the expectation a newly created government bureaucracy free from any political pressure will create an insurance exchange that will define a plan options that will reduce out of pocket costs for all Americans while expanding coverage to the uninsured allowing everyone to retain coverage they like, with the doctor they like, without rationing, while preserving Medicare and not adding a penny to the deficit  while simultaneously bending the cost curve down on Medicare spending. Call me a skeptic, hell call me out Mr President but just how you propose to do these things would interest many Americans. Do tell. Americans who ask the questions above deserve answers and by the way it coarsens the national debate when David Axlerod goes on television and suggests they are wrong for asking the basic questions anyone purchasing healthcare would ask. If you are going to sell health care reform you need to have answers for basic questions about costs and benefits or else your're just asking Americans to trust you and congress to get it right. We trust you, Nancy Pelosi & Harry Reid like the Shamwow salesman on cable TVwho you increasingly resemble except that shamwow guy at least covers costs and benefits. The shamwow guy does not pretend to be anything but a salesman, a charlatan and a snakeoil salesman. You could learn from him.

FMLA Nightmares

Ouch!

Hurricane Ike: Houston We Have A Problem

My family was blessed with no loss of life and no major damage from Hurricane Ike. Many of my neighbors and fellow Texans were not so blessed. The magnitude of the damage is mindboggling.

Spend a few minutes watching the local streaming news feeds from 4 houston TV local TV stations.

If you are trying to reach someone in Greater Houston there is currently a 75% chance they have no power. There is a high probability their cell service is sporadic and their internet access is limited. The best way to communicate is by text message. Ask any teenager for help in this department.

Our community is coming together to face this crisis and we are a resilient bunch who will bounce back.

If you need to reach me please text me. More when I can get to an internet connection.

In the interim here is a site who can provide a window into what we are dealing with here in South Texas.

http://ktrh.com/main.html

Nice Press

Some nice press in Employee Benefit News is here

Ironic that answering your phone and returning your calls can be considered high tech but such is the current state of service in the era of the iphone.

Failure To Communicate

I'm a big movie fan and Cool Hand Luke is a classic. Its amazing to me how frequently communication between vendors and their clients is hindered by a genuine failure to effectively communicate but the results are very predictable--the vendor gets slapped back to reality and reminded who is really in charge of the relationship. In many cases account managers are put in impossible positions by the service models that are setup to support their customer base with discrete levels of face time. Big Mistake.

In an age when many vendors and carriers have most of their interaction with a client via email and phone calls while trapped in service models which often do do not support frequent and regular face to face contact and effective communication as a matter of routine a reckoning eventually comes from a client that has other options. While the vendor may be stunned and feel slapped around when the inevitable termination letter winds up getting faxxed or emailed in it should come as no surprise. I always think about the Strother Martin as The Captain in Cool Hand Luke; "Some Men You Just Can't Reach". Indeed. Some vendors as well Captain.

How does that work? I don't understand

In an announcement May 5, 2008 The Tennessee Department of Commerce and Insurance released a report documenting the results of a multi-state settlement concerning disability claim practices by Unum and its subsidiaries since 2004 and the results are fascinating; 45.1% of group LTD claim decisions were reversed resulting in an additional $558.6M of additional benefits either paid or reserved for future benefit payment.

When you reverse 45.1% of your group LTD claim decisions on appeal you have a fundamentally flawed claim process. Keep in mind the majority of these contracts were likely to be ERISA plans.

Just for fun lets take a look at a portion of the transcript from the oral arguments in the Metlife vs Glenn case argued recently before The US Supreme Court as the justices attempt to discern the standards required to trigger a de novo review when an insurers behavior stemmed from its own self interest creating a conflict in exercising its discretionary authority as both decisionmaker and financial payor under the group LTD policy.

JUSTICE KENNEDY: Does it have to be just 12 the specific decisions? Suppose that
the company does 13 not have clear rules of, what do you call them, 14 firewalls
between the profit side and the claims
processing side. Would that be enough
to cause a 16 greater, more searching standard of review, say de novo? 17 MS. POSNER: I don't think it
would ever 18 result in a de novo review. I think what it is is a 19 factor that
should be weighed with all the other factors
that go to the actual benefits
decision. 21 JUSTICE KENNEDY: So then you're saying, A, 22 the fact that there
is a potential conflict is not 23 enough; B, the fact that there are no
procedures in the 24 company to ensure that the conflict doesn't affect the
judgment, that is not enough either.

1 MS. POSNER: No. I'm not saying that. I'm 2 saying that
if -3 JUSTICE KENNEDY: I'm positing. Does the 4 fiduciary at least have the, the
burden of production to
show that it has established clear lines of
demarcation, 6 firewalls, whatever you call them, within the company? 7 Does it
have at least that obligation going forward? 8 MS. POSNER: No, Your Honor, it
does not, 9 and as the United States -
JUSTICE KENNEDY: Well then, I don't
know 11 what effect you're giving to the fact, as the earlier 12 questions have
indicated, that there is a structural 13 conflict. 14 MS. POSNER: That's a
structural conflict
that ERISA anticipates and, as the United States said in
16 its brief to this court in Pegram v. Herdrich, that 17 ERISA tolerates this dual role and this level of 18
conflict in order to keep these plans that are so vital 19 in our country's
economic interests in underlying the
employee's well-being -21 JUSTICE
KENNEDY: You want us to write an 22 opinion to say that it's irrelevant that a
company does 23 not have procedures to insulate the profit section from 24 the
claims processing section? I'll use those terms.
MS. POSNER: No, Justice
Kennedy, absolutely
7
1 not. But what we are saying is that if there were
such
2 a fiduciary that factor must be weighed, but it doesn't
3 change
the abuse of discretion standard.
4 CHIEF JUSTICE ROBERTS: How does that
work?
I don't understand. You go through, you've got a
6 decision,
whatever, it's a health insurance decision
7 that this procedure -- to
determine that this procedure
8 is not covered under the, the plan, that the
fiduciary
9 has the discretion to make that determination. But you
say,
aha, he's got a conflict of interest, so that's a 11 factor we take into
account. Well, how does -- what 12 does that mean? 13 MS. POSNER: It means again,
remembering 14 that these are claims under 29 U.S.C. 1132(a)(1)(B) for
benefits due under the terms of the plan, it's very 16 important that the
courts remember to look at the terms 17 of those plans -18 CHIEF JUSTICE
ROBERTS: All right, you've 19 got two cases, one where the person does not have
a
conflict of interest under a particular plan, the other 21 where he does.
It's the same decision: We're not going 22 to cover this procedure. How is the
review different in 23 each of those cases as a practical matter?

Of course it is relevant that a company have procedures to insulate the profit section from the claims processing section. That was the impetus behind Unum reorganizing its claims department as a condition of its multi-state settlement. One should keep in mind Unum reversed 45% of its claim decisions while operating under the deferential arbitrary and capricious standard of Firestone

Somehow in these oral arguments Metlife's counsel manages to baffle each and every Justice asking a question and the central issue before the court is Whether an ERISA plan administrator that both evaluates and pays claims operates under a conflict of interest that must be weighed on judicial review of benefit determinations. Metlife showed up with a knife at a gunfight.

Wal-Mart Expands $4 Generics Program

Wal-Mart has expanded its $4 prescription drug program it include a 90 day supply for $10 and OTC drugs have been added. Lot of drugs are included here folks.

I wonder when PBM's are going to figure out their business model is in trouble?

Fire Up That BBQ Pit

It seems that researchers at Texas A&M University have found BBQ Beef Brisket is loaded with a very health variety of fat.

So fire up that smoker and pop a top. Its all good.

By the way ground corn fed brisket makes the best burgers as well.

Houston We Have A Problem

Yesterday, The Houston Comical ran an editorial chastising insurance companies for being unwilling to sell health insurance policies that did not provide the margins they desired. I guess that makes sense if your business model is in decline or you're a closet Marxist out of touch with the news reported in your own paper.

For instance

Here we learn the following from Elena Marks who is Houston Mayor Bill Whites Director of Health and Environmental Policy;

...the swelling ranks of the uninsured are severely stressing local hospital emergency rooms and driving up medical costs for those with insurance.

The census bureau reported yesterday that Texas leads the nation in the growth in its Hispanic Population.

This blog reported last year on some key facts about the uninsured in TX as noted below;

The Texas Health Institute, a nonpartisan health advocacy group, described them this way in a report that was released in January:
• They work. At least 72 percent live in households where one or more family members work full time.
• They are young. Twenty-three percent are children, and an additional 36 percent are between 18 and 34.
• They are not all poor. Forty percent of families without coverage have incomes of $40,000 a year or more.
• Geography matters. Almost half of the uninsured live in Texas' five largest urban centers, and Harris County leads the pack with about 1.1 million, according to state estimates.
• Ethnicity matters. Hispanics are three times more likely to be uninsured than whites; blacks are twice as likely.

So lets break this down for the Marxists at The Houston Comical Editorial board who could not even wait for May Day to bring us that observant editorial yesterday.

1. We have a growing population of uninsured Houstonians.


2. Our uninsured population has learned they can access free care at Houston Hospitals. Why pay a premium for health insurance when you get services for free at the ER?


3. The number of Hispanics in Houston is growing and they are three times more likely to be uninsured.

Insurance carriers have been offering low cost limited medical benefit policies for several years to allow for basic health coverage for a premium equal to two hours of weekly wages. Many employees still do not enroll. Why? See #2 above

The price of year around baseball

It's spring time in America and acrooss our nation many families are spending evenings at the baseball fields. For many kids in the greater Houston area baseball is a 12 month sport involving spring, fall, summer and select teams. Houston is a mecca for baseball talent due primarily to a temperate climate and the abundance of talent that develops with good coaching. Yet this comes at a cost.

The Houston Comical has reported one of the consequences of year around baseball has been a seven fold increase in Tommy John surgery since 1996. Kudos to Sam Khan on a well written piece that needs more scrutiny as kids are pressured to play ball year around.

While rates on UCL surgery are not tracked nationally, some of the area's and country's top surgeons said they've seen a significant increase in the number of high-school-aged players having the procedure.
"I would say over the last five to seven years, (the rate) has doubled," said David Lintner, an orthopedic sports medicine specialist who is Eovaldi's doctor and also serves as the Astros' team medical director. "And it goes up steadily every year."
Dr. James Andrews, one of the nation's most respected orthopedic surgeons, has also seen a spike in the number ofhigh school pitchers he has performed the procedure on.
In a three-year span from 1996-99, Andrews performed Tommy John surgery on 164 pitchers, 19 of whom were high school aged or younger. From 2004-07, that number had jumped to 588 pitchers, 146 of whom were high school or youth league players — a seven-fold increase.
"Without a doubt, it's an issue," said Glenn Fleisig, the Smith and Nephew Chair of Research at the American Sports Medicine Institute, which was founded by Andrews. "The numbers are staggering in adolescents. More and more high-school-aged kids are having the surgery."
The big question: Why is a procedure once used mostly on college and professional players becoming more prevalent in kids who can't legally vote?
There are many factors, including how much a pitcher throws, what type of pitches he throws and whether he has good mechanics. But one factor stands out as the main culprit.
"Without a doubt, the No. 1 statistical cause (of UCL injuries) is overuse," Fleisig said. "In our studies, when a pitcher regularly threw with arm fatigue, he was 36 times more likely to be in the surgery group as opposed to the non-surgery group. That's the strongest statistical correlation in any study we've ever done."

Let's keep in mind Tommy John was 39 years old and had been pitching in the major leagues for 19 years when he had his UCL surgery.

We Want You To Know

It must be ok for me to post this true story on the web since AETNA wants us to know. A small group client selects AETNA to insure their health for 3/1/08. AETNA approves the group on 3/10/2008. The group hires a new employee and submits an enrollment form to AETNA on 3/25/2008 for the employee to be covered on 4/1/2008. AETNA informs me that since a new employee was added in the 1st 30 days they are increasing the rates by 67% retroactive to 3/1/2008 as this is their long established policy when enrollment changes in the 1st 30 days. If AETNA really wanted us to know would not their proposals reference such a rule?

So now I understand the AETNA logo. The human figure is a business owner throwing his AETNA policy in the air in utter frustration upon learning his raes were not locked in for a full year. I want you to know.

Rat Race

Commuting to work on crowded roadways is a daily task I do not miss. Working a short distance from home has added two productive hours to my workday. Working for myself affords me the ability to set appointments to avoid peak traffic congestion most of the time.

Yet driving around a major city provides the opportunity to observe far too much road rage.

• The evening news is full of traffic fatalities.
• Tailgaters are everywhere.
• Why some drivers seem to accelerate to a stop is beyond me but I see cars speed up to get to the redlight where traffic is clearly stopped.

It can be very reasonable for employers to consider a business travel accident policy that offer coverage for commuting to and from the office. The daily commute is the most dangerous task many workers undertake. Perhaps the hours I have spent with my teeenage daughter and her learning permit recently have made me appreciate the danger of a sressed out driver in traffic. The risk increases with annoyance and other distractions.

Save The Baby When You Toss The Bathwater

Its amazing to observe how often companies will decide to replace a vendor without considering an existing carriers capability to provide similar services or products much less the flexibility in pricing a long term relationship affords an insurance carrier.

Often brokers and consultants who are revenue and acquisition driven pursue make recommendations to change vendors when it serves their interest not their clients. Where service or problem solving skills fall short at a brokers firm the path of least resistance is often to change carriers or vendors.

Here are a few key points for employers to consider before changing carriers;

1. Ask who benefits from the sales pitch as its detected. You need consultative problem-solving skills from an intermediary not pitches.


2. Meet with your incumbent and price the same alternatives.


3. If you have built up a track record with a health insurer and matured your run out changing insurers will result in another first year renewal where you are again facing both trend and a mature adjustment. It will be tough to negotiate that down with a new carrier but with your incumbent its far easier.


4. Continuing to change carriers will limit the markets who will consider you in the future and limit your options. Carriers just decline companies that shop and change annually.


5. Try to resolve issues directly with the incumbent before leaving them. Counseling is always cheaper than divorce. If your broker cannot or will not setup a meeting with the people who can resolve a problem that should be a telling signal to you that perhaps you need a new intermediary.

I spoke this morning with a client who had entertained a pitch from a competing broker suggesting a carrier change. The client has been with their health insurer for 4 years and has been treated very well and we were successful in negotiating a 13% renewal down to 4.5%. All of the plans being suggested are available through the incumbent without a carrier change. Yet that did not prevent a recommendation that the baby be tossed with the bath water which is never a good idea.

Ask for Lower Rates 12 months after Quitting Tobacco

Many Texans buy life insurance and file the policy away without an annual review. Those who have quit tobacco who were issued smoker rates can reapply for a safer risk classification and receive a lower premium.

John and Melissa are clients in their mid 20's who quit smoking 6 months ago. Since they smoked cigarettes within the last 12 months they qualify for preferred tobacco rates and their monthly premium outlay is $155. In 6 months they will be tobacco free for a year and can apply for standard non-tobacco rates which would drop their monthly premium outlay to $95. A 39% reduction in premium will save this young couple $720 annually. Over the remaining period of their 30 year term policy the savings totals $21,240.

It pays to re-evaluate your life insurance policy annually.

Lose or Limit Sickdays to Boost Productivity

Yesterday I met with a bright CFO who was considering how to balance being the employer of choice to attract and retain the very best professionals via benefits with a slowing economy reeling from sub prime woes that is slowing new contracts as financing gets squeezed. This firm gave employees 7 sick days annually. Sick days used to be use them or lose them but this led to a very unproductive November and December as employees used them all up during the holiday season. This led to a policy which allowed sick days to accumulate up to 14 days maximum along with a carryover.

When times get tough look closely at the design of your sick pay plan and ask some hard questions. Here are yesterdays questions and answers for a group with 250 employees and an average salary of $60,000

1. What did the sick days/personal days cost in 2006 and 2007? What was the year to year trend? Not sure of the cost but the trend went from 7 days used to an average of 6 days.


2. How many sick days/personal days do employees receive and how many do they use on average? 6 days was average use.


3. What type of return on labor is targeted in your industry? 3-1 is goal.

A $60,000 annual salary equates to $5,000 monthly.

There are 21 working days in the average month excluding weekends and 2 weeks vacation.

$5,000/21 working days = $238.10 as the direct cost of a sick day.

Since the company is seeking a 3-1 return on labor they are actually out the $238.10 in direct costs plus the value of a days pay to the firm which is 3 times the daily wage or $714.30

So the actual cost of a sick day to the firm is $238.10+$714.30 or $952.40.

250 employees using an average of 6 sick days generates an annual cost of $1,428,600
$1,428,600 is 9.5% of payroll.

A reduction for this firm of one sick day represents $238,100 annually or $952.40 per employee. Folks that's enough to buy major medical for an entire family in my market.

What is truly sad is that this employer like many believed they had insured the real risk which was long term disability which has a cost of less than 1% of payroll. Not to mention there is a gap between day 14 when sick days end and day 90 when LTD benefits begin.

Some may say there is no way to get a reduction of one sick day without taking away benefits or the cost of sick days is not a real expense since its buried in payroll anyway. Really? This is the black hole of STD I have previously written about. I would point such naysayers to what innovative and truly lean companies do to reward perfect attendance. Did you know Toyota employees with perfect attendance can win a free car?

The reality is that sick days are an entitlement. You do not manage entitlements. You do limit their scope and put into place incentives to drive the behavior you are seeking. It helps to have a benefit design aligned with your business objectives and that's precisely where our firm assists employers. We will assist this employer with a design that not only lowers costs but eliminates benefits gaps.

Could Have Should Have, Would Have...Too late

I had a call recently from a client I recently acquired. In reviewing their benefits package I had proposed $50,000 of employer paid group term life insurance and also pointed out the exposure the business had relative to several key people. Like many closely held businesse's this client stays very busy and procrastinated on a decision despite costs that looked very reasonable.

The sudden death of a key employee last week leaves a family with no life insurance and the company scrambling to fill the shoes of a key employee. Most life lessons are tough but life insurance lessons can be brutal.

A Few Good Fish from last week

Left-My son Brian with a 24' 5.5 lb Speckled trout

Right- My friend Steve with a 27" 6lb Speckled trout.