Most employee benefits plan sponsors use the services of a benefits broker, consultant or advisor. Most do so either because they feel they want the specialized expertise, they do not have time to do many of the related tasks internally, or they look to partner with someone to create a more effective program. However, how many plan sponsors actually work with an advisor looking for them to provide “tough love”? Perhaps it is time they should!
Benefits advisors have rarely sat on the plan sponsors’ side of the table, actually working to attract, retain, and engage key talent to run the business. Instead what advisors most often bring to the table is external perspective, benchmarking information, perspective on possible problems, potential solutions for consideration, or facilitation skills to help clients reach their own conclusions. One of the missing elements for advisors is often “tough love”, the courage for an advisor to push back on their client, the plan sponsor, when need be. Most advisors shy away from this part of the job because they do not want to upset their client relationship but is this in the plan sponsor’s best interest?
The time has come for “tough love” to be a key element in any advisor-client relationship. In particular, here are just some illustrative areas for consideration where advisors could be bolder and more proactive:
- Reduce Coinsurance – According to most Canadian benchmarking surveys, 100% reimbursement for extended health and dental claims is still the most prevalent market practice (about 40% prevalence) so plan sponsors shy away from not being market competitive. However, with increasing inflation 100% coinsurance is not a sustainable plan design provision as there is no consumerism. Employees are not engaged in buying their benefits and often do not understand the impact of their purchasing decision. Plan sponsors need to consider creative ways to engage employees in plan management decisions but still provide them with personal protection. Plan sponsors need to move away from the benchmarking pack – but do not worry as the pack will be moving your way pretty soon.
- Eliminate / Reduce Benefits – Benchmarking surveys also indicate that life insurance benefits are equally split between one and two times annual earnings as the most prevalent plan designs. However, should plan sponsors be spending money in this area if employees rank this benefit amongst the lowest in terms of value? And should plan sponsors be taking care of their employees’ end of life and estate planning needs? And should plan sponsors continue to provide Accidental Death & Dismemberment benefits if most employees do not even understand them and do not value them? Plan sponsors also need to determine if they believe that it makes sense to effectively pay double the death benefit in the event of an accidental death versus, for example, a long battle with cancer. Plan sponsors need to challenge historical plan designs and better align the plan with where employees see value.
- Decide on Lifestyle Versus Health Benefits – There is no firm agreement on which benefits are lifestyle benefits versus health benefits. Arguably an employee can buy glasses for $150 that address optical health issues but they usually cannot buy enhanced lenses or designer frames. Arguably massage therapy is essential for health issues related to muscle damage and fatigue but plan sponsors need to confirm whether there are tangible health benefits to “feeling good” every couple of weeks after a massage. Plan sponsors need to challenge themselves as to whether their benefits plan is there for health issues and/or lifestyle issues (note there is no one right answer) and then understand and accept the financial consequences of that decision.
- Determine What Level of Choice to Provide – Undoubtedly employees see value in choice in their employee benefits plan but providing that choice usually comes at a cost. The easiest solution is to slap a Health Care Spending Account onto a traditional benefits plan but you need the money to do it – a $300 annual HCSA account for 100 employees typically works out to about $20,000 per year in costs after factoring in utilization assumptions and expense charges. If plan sponsors want to find that budget within the existing benefits plan, there may be difficult decisions of what benefits to eliminate. More importantly, plan sponsors need to confirm that employees would truly understand and value this benefit rather than just accepting this type of plan design concept from the advisor and/or insurer community? Plan sponsors need to assess their current business culture and limitations, and confirm their benefits philosophy rather than simply buying an off-the-shelf solution.
There are obviously risks to being proactive and giving your clients “tough love” and perhaps the client relationships that truly will stand the test of time are those that can handle this type of interaction. Advisors need to strive to recognize those times when to be courageous and give that tough love, to be patient when it is not warranted or will not help the situation, and to continue to learn to recognize the difference between these two different situations.
Each organization’s needs are unique and warrant a customized solution. We would be pleased to discuss your specific situation with you to identify the best strategy with respect to your employee benefits program. Should you have any questions on the above, please don’t hesitate to contact me or a member of our team.
At ZLC Financial we are not the world’s biggest benefits advisor but we are large enough to have the best people, resources and clients in Western Canada. Our goal is to work with you to find a better way for your employee benefits plan. We provide this value to you by leveraging one of the most skilled benefits teams in the city – almost 250 years of experience within our team of 12 employee benefits specialists. We have been working with businesses ranging from 4 to over 7,000 employees for the past 30 years.
