The education challenge
At risk management business Dyadem in Toronto, HR manager Tushar Pandit has made benefits education a top priority. His perspective is that there’s a limit to how creative smaller companies can get when it comes to plan design, so it’s absolutely critical for employers to get the most value from the plans they have.
Starting this year, Pandit will prepare a benefits statement for each of his company’s 110 employees, outlining what employees pay, what the employer pays and what benefits the employee has used in the past 12 months. “Yes, it takes time. Yes, it’s tedious. However, the value is tenfold,” he says. “We put everything in it because you, as an employee, are not worth only $50,000 to us. You’re actually worth $65,000 to us, and it’s very important for you to see it. Consumerism of healthcare is important in this day and age, and as an employee who pays into the plan, it is important to know the costs and value that are derived from the overall compensation package.”
Pandit also invests about one hour on each new employee’s start date explaining the benefits package, setting expectations and teaching the employee how to be a smart benefits consumer. His benefits consultant, Paul Crossdale, a partner at Morrow, Crossdale & Associates, Inc. in Markham, Ont., hosts educational refresher sessions at Dyadem as well.
Cost-cutting solutions
Fortunate businesses such as Mariner and Offsetters may have been able to enhance their benefits during the recession. However, Janette Nichols, a life underwriter with Janette Nichols Financial Corp. in Woodstock, Ont., has seen a lot of smaller companies struggling under the pressures of a weak economy. Two of her clients had to close down their benefits plans entirely. For others, every opportunity to save has been on the table.
“We’ve had to put on bigger deductibles, rearrange it, change the whole plan, send out letters to the employees and do employee meetings,” she says. “They have no choice. It’s a matter of, ‘Are we going to be able to pay the employees and the heat and hydro, or do we cut those benefits?’”
Yet companies that need to trim their benefits expenses can take advantage of new strategies to build more cost-effective plans. “You can get creative with the underwriting agreement, once you figure out what the employer’s risk tolerance is,” Crossdale explains. “More companies are looking at the ‘refund’ approach to underwriting risk or going to administrative services only (ASO), or going to what I call a modern approach to underwriting risk…on a transaction basis through non-traditional providers.”
Von Sturmer has noticed the trend toward ASO plans, too. It’s not the right approach for everyone, but she suggests that it may be appropriate for companies with a long-standing pattern of claims, so that they have a good idea of what type of claims they can expect. One client with about 100 employees made the switch and dramatically reduced its benefits expenses. “We switched over to ASO underwriting on their health and dental, and they’ve saved thousands of dollars,” von Sturmer adds. “They’re going to bank that money and then eventually use it to fund their HCSA for their employees.”
In some cases, cost-cutting isn’t as important as cost-capping to control future expenses. Denise Richardson, segment manager with Manulife Financial Group Benefits, has seen an increased interest in managing risk by introducing maximums on the most expensive parts of a plan. “Prior to the recession…typically, you’d see an unlimited drug maximum, but most carriers now offer different drug maximums to help cap the cost because it is a costly piece of your extended health plan.” Business owners, she suggests, are “rolling up their sleeves and taking a much closer look at their plans—just because they know they need to count their pennies.”
An investment, not an expense
Tami Scott, executive vice-president of marketing and HR with Spectra Credit Union, acknowledges that smaller companies face certain challenges that larger enterprises do not. For example, she has seen the impact of just a couple of cases on her organization’s 160-employee experience rating. In a larger company, there’s more room for the law of averages to even things out. Still, Scott emphasizes that having a benefits plan in place is “absolutely necessary in terms of recruitment and retention,” adding, “It’s an investment in your staff, not just an expense.”
Experts agree that the best approach is to design an affordable plan that suits your employees, takes advantage of the flexibility available today and positions you well against your competitors. An experienced benefits advisor can be invaluable to a smaller company that doesn’t have an in-house benefits expert, suggests Paul Boundy, vice-president, business development, group benefits, with Sun Life Financial.
“They’ve got a good sense of the marketplace,” he says. “They’ve got a good sense of plan design and flexibility. They know which carriers are strong in what areas and which ones might not be. They can also ideally help in terms of providing the plan sponsor with information about plan designs for other companies in that industry or location.”
Boundy’s colleague, Doug Snyder, vice-president, corporate accounts, group retirement services, with Sun Life Financial, would like to see more smaller companies implement pension plans that support employees post-retirement. “You can establish a pension plan, and we really will look after as much of it as possible for you—in terms of administrative efforts, in terms of supporting you with investment decisions, in terms of supporting you with some of the governance issues that exist with offering group savings products,” he affirms. “We want to keep it simple.”
One strategy that might help is the industry’s push toward legislating multi-employer pension plans, with the goal of making retirement savings plans more accessible to smaller companies. But in the end, it comes down to employee expectations. If your business isn’t meeting them, there are competitors out there who will—and the cost of recruiting and retraining replacement staff may be much higher than the cost of a good benefits package.
“I think employees have come to expect that there will be at least some benefits in place,” says von Sturmer. “Dollar for dollar, it’s a great investment for a small business.”
Alison MacAlpine is a freelance writer in Toronto.
alison@amcommunications.ca
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© Copyright 2010 Rogers Publishing Ltd. This article first appeared in the March 2010 edition of BENEFITS CANADA magazine.