New, replacement employees aren’t nearly as efficient as the employee that left, so productivity drops. (I’m talking turnover, which generally means that the good employees are leaving for greener pastures.  I’m not talking termination of lousy employees – that boosts efficiency and productivity.)

And when turnover is high, not only is productivity low because of less-efficient employees replacing now-gone employees, productivity is off because the “team” has been disrupted.  And generally, there’s a reason for that high turnover … maybe a reason you can correct.  Better yet, maybe a correction you can make at virtually zero cost to you.

The Metropolitan Life Study of Employee Benefit Trends, a decade-long annual study of what’s happening in benefits, that I referred to last month has some interesting items for employers who are willing to pay attention and take action.  And please don’t assume that these findings only apply to larger employers.

Our typical client has somewhere between 1-125 employees.  Many of you therefore think that many of these proactive employment-enhancement activities aren’t made for you, that they’re only for “the big guys.”  Couldn’t be further from the truth.  In fact, you’re more hurt by turnover than are larger companies because one lost employee represents a greater portion of your workforce than it does for those larger firms.

Anyhow, Met defined two kinds of employers, “Progressives” and “Standards.”  “Progressives” (60% of the Met sample) have an optimistic view of benefits’ ability to drive business goals; “Standards” (40%) don’t readily see the opportunity.  Here are some of the findings of the study:

• Employees are less loyal.  That probably doesn’t surprise you.  It’s been a constant trend for the last seven years.  It’s not just disloyalty on the part of employees, however; fear of job losses contributes greatly to the attitude of “me first.”  One-third fear layoffs and benefit cuts even though only 10% of employers were planning them.
• One in three employees expects to work elsewhere next year.
• About half (49%) of employees count on benefits to help them reach their financial objectives.  Specifically, they are looking to augment the traditional medical benefits with non-medical coverages (life, disability, dental, and other financial products).
• Younger employees are more interested in benefits than previously.  Two-thirds of Gen Y employees (born ~1980-1999) are looking to benefits to help them achieve personal goals.
• More are getting benefits via work.  Half of employees believe it’s easier to get benefits at work, and 87% who own Disability Protection get it from work.  For life insurance the percentage is 64%
• They want financial education.  This one surprised me.  Even at younger ages, employees appreciate help from their employer in learning more about investment and other financial matters.

Remember up top how I said that 60% of employers were “Progressives” who agreed that the current economic conditions created a positive opportunity for benefits to improve employee attraction, retention and productivity?  Well, that was the overall percentage.  The percentage drops all the way to 46% for companies with under 50 employees and 49% from 50-500.

So lots of you are missing the boat.  Few plan to reduce benefits – only 7-8% of employers plan to reduce the number of medical, wellness, dental and other voluntary benefits.  In fact, 23% of employers plan to increase the number of voluntary benefits they offer, while 69% plan to keep the number constant.

Here’s another interesting factoid: 70% of those who are satisfied with their benefits are satisfied with their job, whereas only 23% of those who are dissatisfied with their benefits like their job.  Gonna stay with their current company?  Fifty-nine percent of those satisfied with benefits plan to stay with their employer – vs. only 38% of dissatisfieds plan to stay.

So what satisfies employees and makes them want to stay?  That is, what benefits are important to them?  Clearly, salary is – 73% of employees and 71% of employers rank them as important to feelings of loyalty to the employer.  But how about other coverages?

I’ve highlighted three surprising findings, at least to me.  Primarily, look at the striking difference between how important ancillary coverages (life, dental, disability and vision) and Voluntary Benefits are to employees as compared to how employers see their importance.  Clearly, employees want these coverages and are prepared to participate either partially or totally in the cost of the benefits.

So what are YOU doing to make your company more attractive to your current and future people?  The best thing about voluntary benefits is they don’t cost you anything – the employees, and ONLY the employees who want them, pay the full boat.

So tell me again why you wouldn’t want to make your employees more attracted to your company at no cost to you???

The first finding was completely unsurprising – employers want to control costs, attract and retain employees and improve productivity.  Over the last decade there have been shifts in level of importance placed on each, but nothing earth-shaking.

Other things, however, have changed substantially.  Generation Y, the millennial generation (there’s no hard and fast definition of this generation, but by and large they are considered to have been born in 1980-1999, perhaps a few years before or after) was barely in the workforce in 2002, the first year of the survey.

And times have changed since 2002.  In that first survey 33% of employees aged 21-30 were concerned about retirement and running out of money during retirement.  Today, thanks to the seemingly unending recession, 52% worry about that.   Likewise, ten years ago the Baby Boomers were eagerly anticipating retirement … today they’re planning on working past 65.

The explosion of health care costs over the decade has led to some changes in the approaches employers are using to try to help control costs.  By 2005 larger employers were toying with Wellness programs, but today the trend has spread down the size level.  There is still little interest among smaller employers because they tend to be fully insured and thus don’t perceive any value in wellness.  This is, of course, a mistake, as the real profit in wellness is increased productivity and morale and lower absenteeism and turnover.

And there’s a new “benefit” emerging on the scene – “financial wellness.”  In fact, the productivity of your employees is affected by their financial condition, just as it is by their physical condition.  Productivity is improved when employees are financially whole.

Voluntary benefits were rare in smaller companies a decade ago, but now they’re starting to move downward in the size arena.  What has spurred this is, I believe, the recession and the explosion of health care costs.  Employers have less money to spend on benefits, and more of it is eaten by the health plan.  Deductibles, copays and even coinsurance (once unheard of in Massachusetts Group Health Insurance) are emerging and getting larger.

So the need is there.  Employers have discovered that voluntary benefits can help fill the gap.  Accident plans help fund deductibles by providing cash when the coverage is used as a result of accidents.  Employees are more worried about being disabled, and voluntary disability coverage is a crucial protection.  Twenty percent of all purchasers of life insurance purchased it via work in 2011.

And there’s a bonus that few readily see.  Starting in 2004 Met Life found a strong correlation between the level of employee satisfaction with benefits and their satisfaction with their job.  We’re talking turnover here, folks.  Turnover is costly.  Benefits satisfaction improves job satisfaction and reduces turnover.  Voluntary benefits enhance benefits satisfaction – interestingly, employees appreciate benefits that they pay for almost as much as they appreciate benefits they receive gratis.  So logically, voluntary benefits increase productivity and reduce turnover … it really makes a worthwhile consideration for the firm that sees opportunity.

And that’s a key consideration that we’ll discuss next time.  Met identifies what they call “Progressives,” i.e. employers who recognize that an increased focus on benefits can actually drive their growth and survival goals.  Unfortunately, only 60% of employers overall can be called “Progressives,” and that falls to 46% for companies smaller than 50 employees.

If you’re in that smaller arena, this means that if you act creatively and appropriately, you can scoop your competition and get (and keep) the best hires.

But not everyone feels the same way.  Some people have allergies or side effects.  Some doctors believe that the original is the only drug to use, so they prescribe the drug with “no substitutions” or “D.A.W.,” i.e. “Dispense As Written.”

So?  No big deal, right?

Wrong, depending on who your health carrier is and the drug you’re talking about.

I’m the first to admit that the vast majority of drugs are covered by all of the major health carriers in Massachusetts.  Blue Cross, Harvard, Tufts … it doesn’t really matter which one you have.  At least not for the vast majority – but not for ALL the drugs you might be taking.

For example, Lipitor®, which is one of the most widely prescribed drugs in the US, just went generic.  The new generic medication is called by a tongue-twisting name, Atorvastatin.  If your doctor prescribes Lipitor® (or Mevacor®, or Pravachol®, or Zocor®, all of which have similar generic equivalents), and he wants you to take only the brand name, you may have a problem, depending on who your carrier is.

Tufts will cover the generic, but it will be covered at tier 2 copayments.  Tier 2 is generally the level of copayment for “approved brand names,” generally around $30.  However, it’s not that simple with Tufts.  Because it’s a “tier 2 generic,” Prior Authorization is required.  So you’ll have to get some kind of approval from Tufts to buy even the generic.  If you want to have brand-name Lipitor® you’ll have to fill out a Universal Pharmacy Form, which requires your doctor to submit an appeal through the Medical Review process in order to get approval.

Blue Cross is similar but not quite as strict.  They will allow you to fill a prescription for the generic version of Lipitor® without getting approval, but you need to get Prior Authorization to get the brand-name version.

Harvard Pilgrim, on the other hand, has a totally different approach.  They maintain what is called an “open formulary” in which every drug that is prescribable (is that a word?) can be prescribed and will be covered.  There are no excluded, uncovered drugs whatsoever.  Occasionally you may have to jump through some hoops (discussed below), but it’s up to you and your doctor alone to decide on your treatment with minimal bureaucratic interference from a health carrier.

So the generic version of Lipitor® is covered at the generic copay (either $15 or $20, depending on your Rx plan), and the brand-name is covered at the highest copay (generally about $50 or at a 50% coinsurance level, depending on your Rx plan).

This open formulary extends to lots of drugs that are excluded entirely, i.e. not covered at all, by one or both of the other major carriers — Ambien®, Boniva®, Cardizem®, Demerol®, Flonase®, Inderal®, and Nexium® to name just a tiny portion of the drugs that are excluded.

The carriers will tell you that they do that to hold costs in check, and that’s true.  But Harvard feels that it’s important to not allow costs to interfere with the course of treatment that you and your doctor embark on.  So they choose to control costs in other ways.

Although they don’t exclude any drug, they do have a Prior Authorization program, but there are about 60% fewer drugs on them than the other carriers have.  Also, they have an active outreach program to doctors to help facilitate moving a patient to a lower cost alternative; however, there is no requirement for the doctor to participate in the program.

Then there’s a “step therapy” in which other, older, proven drugs are tried first before moving to the newer, more expensive drugs.  If the older drugs don’t work, then the doctor can move the patient up to the preferred medication.  All of the carriers have such step programs, but Harvard has only a fraction of the drugs involved that others do.

Harvard also has dispensing limitations for some drugs (same as other carriers; again with fewer restricted drugs) so as to avoid waste in the event that a “starter drug” doesn’t work out.

In the category of the most expensive specialty and fertility drugs, Harvard has focused their efforts on a limited number of specialty pharmacies so as to keep control over costs.  These pharmacies provide supplemental guidance and personal attention to help the user get the best value.

All-in-all, these steps helped Harvard reduce drug costs by more than 10 percent in 2010, so despite offering easier access and an open formulary, Harvard has been able to control costs without controlling your doctor.

Obviously, the choice of carrier is up to each firm, but law firms owe it to their employees to check out all the alternative carriers, not just the same old same old.

Is your benefits broker keeping secrets from you? (IndUS Business Journal Online – March 21, 2012) – Do you ever wonder if your benefits broker is keeping secrets from you? He or she could be. There are things about your benefit programs that may be more in your broker’s interest than in yours, so maybe – just maybe – he’s not telling you all you ought to know.

You can also go here to see all of my other past published artcles.

I’ve just finished a period where I’ve seen things I haven’t seen in over a decade – specifically, a string of single-digit rate increases – some under 1% – and one actual reduction in rates!  In Massachusetts, of all places.

And no, it’s NOT a result of increased coverage under the mandatory coverage rules.  And no, it’s NOT a result of increased preventive care resulting from the $0-copay requirements.  And no, it’s NOT a result of the Insurance Commissioner keeping those greedy insurance companies from raising the rates.

That last shibboleth is the biggest farce of all those perpetrated by the single-payer crowd.  In the state of Mass, the carriers (BCBS, HPHC, Tufts, Fallon, etc) ALL earn less than 1% and are ALL a hell of a lot more efficient than any government body.  As I’ve often said here before, the cause of healthcare cost increases – and the Mass Attorney General’s Office agrees with me – is PRIMARILY a result of increased pricing from providers: Doctors, Hospitals, Clinics, Labs, etc.

There’s been no reason for them NOT to raise prices unconscionably.  Because there was no outrage by the end user at the prices they charged.  Because there was no difference in what the consumer paid, no matter what he did or what provider he used.  Profligacy was rewarded, or at least not punished.

That changed a couple of years ago, to which I say “Thank You, Blue Cross.”  THEY were the ones with the backbone to attack the high-cost (often mediocre-quality) teaching and other hospitals in the state.  They were the ones who said:

• We’ve sorted providers by cost and quality.
• Those with low quality will cost insured employees more to use.
• Those with high price will cost insured employees more to use.
• And those with low prices and/or outstanding quality will cost insured employees A LOT LESS to use.

In some cases there is a 20-1 cost differential to the patient for using the high-end hospitals and doctors!  That will get anybody’s attention.  It’s the proverbial 2×4 to get the attention of the mule.

Other carriers followed suit, and slowly, slowly the high cost hospitals and docs began to lose business.  And they responded.  This spring they reopened the negotiations with carriers to extract themselves from the penalty networks.

Now, BCBS (and others?? – I’m not sure) are offering what Blue Cross calls Alternative Quality Contracts.  It’s kinda like the old practice of paying a fixed per-head fee to a hospital or physician practice, irrespective of what the patient’s condition is.  It’s up to the hospital to get the patient healthy with the dollars they’re given.

The problem in the past is that the providers simply skimped on treatment, avoiding preventive treatment or appropriate maintenance care for chronic conditions.  They profited by doing less.

That doesn’t work under the new regimen.  NOW the carriers’ payments to the institutions are a function of the quality of the outcomes that the providers achieve.  High quality outcomes: large incentive bonuses.  Low quality outcomes: reduced payments.

For the first time ever, the patient’s, the insurer’s, and the providers’ goals are all aligned: Get that patient healthy in as rapid and as effective a manner possible.

THAT’S the secret to lower costs – but that’s NOT the direction taken under Health Reform.  The politicians are still into “let’s beat down the prices and when the money runs low, we’ll ration the care.”  That day is done for, Boys and Girls.  There’s a better way, and it’s being practiced in Massachusetts.

You can also go here to see all of my other past published artcles.

But in fact I’m not exaggerating.  In a minute I’ll tell you a true story about a client and a broker and the law and lost money, but first here are the typical reasons for clients’ poor broker selections:

• Letting Friendship Replace Judgment.  He’s your friend.  Your schoolmate. Practically family.  That’s how lots of employers select their broker … and find themselves in trouble.  Group insurance is a specialty, and it requires specialized knowledge.  If your friend doesn’t know what she is talking about, you won’t know you have a problem until the IRS or the DOL walk in the front door.  Find yourself a group insurance benefits expert.
• Selecting a Jack-of-All-Trades.  Group insurance isn’t “just another insurance coverage.”  Your Property and Casualty broker may be a whiz who saved you thousands on your Workers Comp.  Your lawyer may rave about your estate planner.  But it’s not group insurance, it’s a specialty. Both P&C and life insurance are their own specialties … and we know enough to stay out of them — those brokers should do the same with group.
• Choosing the “Name Broker.” You surely know that a broker who’s clientele is a fraction of your size doesn’t have enough depth of experience and knowledge to deal with your problems.  Less obvious is the damage you can do by working with a broker whose clients are companies 2-3 time your size.   Yes, they have knowledge, but they lack commitment.  You’re important to them but not consequential to them.

Which leads to the story.  A recent prospect was a professional firm with about 15 employees.  Our service “sweet spot” ranges from 10-125 employees, so the match was good.  Their current broker is a “regional broker” about four times our size.  They’re a terrific broker … for the right-sized client.

For a client of about 200 employees they get as excited as a ten-year-old boy going to his first major league baseball game.  But at 15 lives, not so much.  Do they want the business?  Of course.  But do they give it their all?  Nope.  And that’s what happened here.

The client, an LLC (in which owners are taxed the same way that partners, S-corp owners or sole proprietors are) had a Health Reimbursement Arrangement (HRA).  Under an HRA, employees typically have a deductible, a portion of which is reimbursed by the employer.  So the deductible is $2,000 but the employer reimburses up to, in this case, $1,000 of it.

The employer wins because the $2,000 deductible plan premium is lower than for the $1,000 deductible plan the employees effectively get.  But only some fraction of the employees will incur deductibles, and generally the premium savings exceed the reimbursements the employer pays.  So the employees get a $1,000 deductible plan, but the employer doesn’t have to pay for a $1,000 deductible plan.

So far, so good.  But when we examined it (unlike the regional firm, we thrive on groups this size) we determined that among those being reimbursed were the two LLC owners.

Oops.  That’d be a rule-breaker.

Does the regional firm know that LLC owners can’t be reimbursed?  Yes, but they simply didn’t catch it because this firm just wasn’t “worth” the attention it took to find the error.

What’s more, in their renewal analysis they showed the firm only renewals from the current carrier, saying “all the other carriers are about the same price or more.”

Well, that was just plain wrong.  Another carrier – one of the top three in Massachusetts – had a price 4% lower than their current carrier for a marginally richer plan.  Less money, better plan … but the client was never told about it.

I’m sorry, but it’s not the broker’s job to decide that 4% isn’t enough to justify a change.  That prerogative belongs to you, the client, and that’s where the decision should lie.

So what should you do if you want to weigh your broker’s loyalty to you?  Simple.  Ask your broker what percent of his clients fall in the categories of

• 1-10 employees,
• 11-50 employees,
• 51-100 employees,
• 101-250 employees, and
• Over 250 employees.

Wherever you fit on that scale, the broker’s current clientele should be in your size category and the two categories just larger and smaller.  If too many of his clients are in groups larger or smaller than you are, you’ll either end up with a broker who doesn’t know enough or a broker who doesn’t care enough.

Limited-network plans may offer care you need – for less (Massachusetts Lawyers Weekly – March 1, 2012) – Benefits Package contains advice about benefits that law firms might want to offer their employees. On Feb. 15, the Boston media was abuzz with the just-released news about the Retailers’ Association of Massachusetts making available a health plan to its members that was “20 percent cheaper.” It was a tempest in a teapot — and not the …

Lured by the Group Captive By Dave Lenckus (Risk & Insurance March 1, 2012) – “No group captive is guaranteed to succeed. Benefits broker Jim Edholm — who typically places coverage for employers with 30 to 130 employees, including a handful that self-fund — does not like the idea of group captives.”

You can also go here to see all of my other past published artcles.

If this index is correct, obesity, high blood pressure and diabetes may be leveling off in the adult population.  Maybe, just maybe, we’re starting to listen to folks who tell us that our cost of health care is largely within our own ability to control.

We routinely hear about the “obesity epidemic” in the US, and we all probably intuitively know that it costs money, but I had never run across a hard number on the cost it adds to our healthcare.  Well, now I have.  Obesity adds incremental costs to health care, according to Gallup-Healthways, to an incremental cost of $1,429 PER PERSON PER YEAR.  That’s $120 a month, folks …

In 2009 the percentage of obesity in the US was 26.5% (yes, ONE IN FOUR of us is fat, too fat).  But in 2010 that percentage rose to  26.6%. but in 2011 it dropped to 26.1%.  As the old saying goes, “one robin doth not a spring make,” but it appears to be meaningful.  After years of rising, it leveled in 2010 and dropped for the first time in a while in 2011.

Within certain subgroups obesity is even higher.  Middle aged Americans have the highest level – 30.8% for those from 45-64 (maybe it’s dropping off because those folks are dropping off as they die prematurely from their obesity?).  Among African-Americans it’s 40.1%, Hispanics 34.5%.  Asians have the lowest rate at 8.9%.  Maybe more egg fu yung for the rest of us would be in order?

Employers can make this trend into a more impactful movement.  The carrier you use – Blue Cross, Harvard, Tufts or any of the others here in Massachusetts – all offer incentives for healthy lifestyles.  But employees don’t know about it unless you tell them about it.  It’s up to you to promote it, and if your broker isn’t suggesting ways to take advantage of it, you’re not getting the service you deserve.

And it will pay you dividends.  Increased wellness results in reduced absenteeism – and I’m sure you have some paid sick days.  Wouldn’t you like to have to pay for fewer of them.  Increased absenteeism means greater productivity; greater productivity means increased profits, greater stability of earnings, more money in your pocket.