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Shrinking Payrolls

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Dismal economic conditions suggest that worksite benefits marketers may be tested by falling enrollments as businesses lay off staff. Complicating matters, worksite producers report, is that employees who survive downsizings may seek to cut out voluntary benefits to save on costs.

Yet vendors also report finding new opportunities as struggling business owners who have cut core benefits turn to voluntary benefits to help lessen the impact on their workers.

Luke Vandermillen, national director of worksite solutions for Principal Financial Group, Des Moines, Iowa, says one of the biggest challenges producers are facing is getting employers to focus time and attention on benefit issues in light of the other pressing concerns they have in the current economy.

Principal has had some success in breaking through this resistance by offering personal financial counseling sessions to employees, Vandermillen says.

“More than ever, employees need help with financial decisions,” he says. “It’s a good time to offer to help them to assess their personal financial situation and what problems they need help solving.”

Vandermillen advises worksite producers to impress on business clients that employees will remember that their employer went out of its way to help them when times got tough.

Employee attendance at personal financial counseling meetings offered by Principal was up 20% in 2008 over the year before, he reports. Overall last year, participation rates in such meetings were 76% of employees who took part in its retirement benefit plans and 57% among employees who had purchased the company’s voluntary insurance plans.

Barry Zell, a territory vice president for Transamerica Inc. based in Columbia, S.C., notes that in an economy where major medical benefits are dwindling, there are “more and more gaps we can fill with our voluntary benefits.” Try to be creative and find product opportunities employees are looking for,” he advises. “Having a wide portfolio of products helps.”

“Historically, really, our industry tends to be recession-proof,” says William A. (Tinker) Kelly, president, Voluntary Employee Benefits Advisors, Nashville. “The danger is when you’ve got an account that’s going to go out of business or that’s reducing payroll. That’s the biggest fear for worksite marketers. If someone doesn’t have a job, they can’t afford to pay for benefits.”

On the other hand, Kelly says, worksite “has grown to be a more mainstream part of employee benefits over the past few years,” Kelly says. “There is ample room to continue to expand.”

One problem is that some larger employers looking to reduce spending are demanding reductions in broker fees for their core benefits, Kelly reports. To replace these diminished revenues, brokers and consultants need to try to add new supplemental benefits to their large accounts, Kelly reports.

When the economy is depressed, it’s time for producers to partner more closely with employers with whom they have an established relationship, says Ron Agypt, vice president of broker support for Aflac Inc., Columbus, Ga. “Worksite marketers have to be innovative during an economic downturn.”

During challenging times, when both employees and employers are carefully reevaluating their finances, worksite marketers must provide an increased level of quality customer service, he says.

“As more customers and potential customers look for ways to survive the current economy with little to no savings, producers also have a unique opportunity to serve as a solutions provider in an even greater capacity than usual,” he says. “This can be an especially good opportunity for voluntary insurance marketers with products designed to help with everyday living expenses that are often impacted by an unexpected health event.”

Larry Kay, president, National Benefit Systems, Sherman Oaks, Calif., finds that voluntary benefits sometimes sell better during recessions than they do in a flourishing economy. “When employees are making money, they can afford high coverage,” he says. “When there are layoffs and cutbacks, it’s a different story.”

A recession demonstrates why it’s important to sell voluntary benefits “properly” in the first place, says Debra Waldman, president and CEO of Waldman Insurance Services, San Clemente, Calif.

“If you sold them correctly, people don’t want to drop them,” Waldman says. “But when you sell employees on too many ancillary benefits, they’ll want to cut them when times get hard.”

Mike Whitney, CEO of Flexible Benefit Group Inc., Dallas, finds that in the current environment, critical illness and hospital plans offer a way to help employers that have cut health care to deliver a safety net for their employees.

It’s important to remember that employers who have pulled back on health care are still concerned for their employees, Whitney says. They’re not going to like it if think enrollers are too pushy with employees.

Whitney reports one employer that offered employees a benefit allowance of $350 a month. They were given a choice of a low, medium or high-deductible health plan. Those who chose the high deductible would have money left over from the employer’s allowance to buy other voluntary benefits.

The problem arose when the enrollment company, seeking more commissions, pressed hard to get many employees to buy the high-deductible plan, Whitney says. When the employer’s chief financial officer found out about the high-pressure tactics, he fired the broker, refused to honor the enrollments and ordered a reenrollment without the voluntary product.

Whitney believes the broker’s mistake was to rely on commission people who felt no responsibility or accountability for the overall success of the company’s benefit enrollment. “They only wanted to bring in a maximum enrollment,” he says.

Enrollers “need to be salaried and certainly not commission-driven,” Whitney believes. “They need to be advisors, not salesmen. When sold in that environment, you have high employee satisfaction and a profitable enrollment over years rather than a one-year success.”

David Czaplicki, president of Employee Benefit Communications, Hamden, Conn., says his company’s focus on signing up clients in the health care industry, such as hospitals and nursing homes, has paid off because it’s an industry that always does well.

For other industries, company consolidations present a continuing challenge, Czaplicki says.

“We’ve experienced situations where an existing client is purchased by another company that already has a broker relationship for voluntary benefits,” he says. “So we’re constantly fighting to keep these clients, and we don’t win them all.”

One opportunity for worksite sales stems from the fact that many employers are reluctant to throw any more cash on the table to pay for new benefits, says Michael McGrath, executive vice president, Fedeli Group Inc., Cleveland.

His brokerage is looking to rounding out existing accounts that have a solid package of core benefits but who in the past have not signed on to voluntary benefits.

“We are taking a critical look at existing accounts and finding substantial revenue opportunities,” McGrath says. “We also know competitors are looking at our clients, so the more product lines we have with a client, they better it is for us. We are not only cross-selling property-casualty and commercial policies but also critical illness and accident policies to round out services. I think there are tremendous opportunities in worksite.”

Mark Gebhardt, CEO of Aigilis Corp., Orlando, Fla., says the consumer-directed health care programs his company sells have provided solid growth. Wellness and self-care programs also have shown healthy profits, he says.

The biggest obstacle to sales continues to be employees’ concern about whether they will continue to have a job, he says.

“They’re cautious, maybe holding back because they want cash in the bank in case of a pink slip,” Gebhardt says. “All you can say to them for whatever program you may be selling, such as critical illness or cancer, is that it makes sense for them to protect themselves. You have to reach into their hearts, not their minds.”

Employees are exercising extra caution, and that’s bound to have a direct effect on sales, Gebhardt acknowledges.

“Right now, it can be difficult, but keep your chin up and work a little harder,” he advises. “There’s a lot of money waiting on the sidelines. That money will come back, even if it takes couple of years.”