Benefit Trends

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The Enrollment Challenge

Retirement readiness decisions are a daunting task for most employees. According to a 2012 Participant Engagement Study conducted by Lincoln Financial:

  • 41 percent of employees are only somewhat engaged or fully disengaged from any retirement plan
  •  7 percent of employees only are fully engaged and interact with their retirement plan on a regular basis.

Plan communication and education can provide people with the financial knowledge needed to better understand their employee benefits and make better enrollment decisions to achieve better outcomes.

Communication Is Key

The U.S. Employee Benefits Security Administration’s ERISA Advisory Council published a key report in 2010 on how plan communication practices and design options impact participation and contribution rates. They researched strategies for tailoring communications to different subgroups of employees through direct communication, and their effectiveness in influencing participants of diverse demographic market segments, including segments categorized by income level, household status, generation, gender, and ethnicity.

The report then provided recommendations of best practices for enrollment that are statistically proven to be effective, including education to plan sponsors on specific proven techniques and communication practices. In evaluating what communication methods are most effective in encouraging participants to save for retirement, the following considerations were made:

  • Cost: an effort was made to balance the need for comprehensive plan communications against cost.
  • Delivery: A variety of methods were explored including the use of current and emerging social media.
  • Plan Design: The study reviewed how plan designs relate to increasing participant enrollment and savings. In particular, the Council studied the use of automatic features. Automatic enrollment plans automatically choose the employees’ contribution percentage and enroll the participant in an investment vehicle. This raises participation rates to close to 90 percent. However employees enrolled at low contribution rates of 3% or less tend not to deeply consider or increase their contributions.


9 Recommendations and Best Practices

The Council found that effective plan communication and education can provide people with the financial knowledge needed to understand their employee benefits, make better financial decisions, and achieve better outcomes.

Given that the most successful plan communications make use of many channels from print to external websites, online tools, social media, and creative marketing, the Council highlighted best practices that balance personalized, targeted content to help employees evaluate benefit offerings with cost efficiency. They highlighted specific techniques and communication practices that have been statistically proven to be effective in increasing the involvement of employees in saving for retirement. The following are 9 recommendations:

  1. Communications tailored to particular segments drive results
  2. One-on-one or small group meetings increase participation
  3. Immediate “on the spot” communication is most effective
  4. Short, simple and focused communication drives participant response
  5. Multiple “touches” with various creative formats increase participation
  6. Increased technology use is effective and cost efficient
  7. Behavioral economics and “social norming” can increase participant involvement and savings
  8. Incentives given by sponsors and “gamification” help trigger participant involvement
  9. Responsive marketing principles may assist plan sponsors in improving communications

Here is a brief synopsis of these 9 practical recommendations and some best practices:

1. Communications Tailored to Particular Segments 

tailored-skill-development-imageThe Council found that communications that target participants based on their interests, background, and/or economic status were more successful than the “one size fits all” approach.

Understanding the culture and background of the workforce being targeted is key. For instance, since Hispanics will soon constitute one-third of the US population, Council member Donna MacFarland of Lincoln Financial Group stated that in her experience education materials typically are translated from English to Spanish, whereas she recommended that sponsors design the material using the reverse approach, developing  materials first in Spanish to address specific cultural needs and language differences.

Human Resource professionals also have found that allowing employees to map out an action plan rooted in realistic scenarios is an extremely effective tool. Some plan sponsors have successfully used a “three-pronged” approach to reach out to their participants by combining simple income replacement projections, behavioral finance strategies and a personalized message. For example, JP Morgan developed 36 different personas based on three age groups (younger than age 30, age 30-50 and older than 50). The firm also targeted participants based upon their regional median income (e.g., Kansas’ median income is $30,000 while in New York City it is $70,000). The basis for this approach was to enable these groups to compare themselves against their peers and take the appropriate action toward saving for retirement.

By narrowly tailoring their target audience on behalf of the plan sponsors that retained them, JP Morgan subsequently monitored whether employees opened their email communications and took action toward saving for retirement. If the individual took action, that person was considered “active,” while someone who opened the email but did not take action was considered “interested.” Based upon the action taken by the individual, the participant received specifically targeted information. This technique resulted in three to four times the response rate of participants who were not targeted.

However, some witnesses advised that there is a general concern regarding the use of targeted communications because complex data collection may provide gender or ethnic identification. Thus, there is concern over whether specific segments identified based upon race or gender could raise discrimination or deferential treatment issues. The Council heard testimony from Donna MacFarland of Lincoln Financial and Thomas Ryan of Fidelity that the use of particularly sensitive demographic information causes concern among plan sponsors. There are also practical concerns about housing information technology. Nevertheless, the overwhelming opinion received during testimony was that targeted communications work.

Branding helps targeting through the use of communications that include a unique positive image that is the group can relate to.

Here are some best practices of participant-centric communication methods:

  • Best Practice 1 – The Power of Example: Trustees of the Elevator Constructors 401(k) Plan used materials featuring the story of three employees who made different savings decisions during their careers. The narrative of the three employees was used throughout one-on-one sessions with printed materials to demonstrate how a 401(k) contribution would benefit participants in a variety of circumstances including temporary layoffs, hardships and early retirement. As a result, plan participation rates increased from 26.56 percent to 29.82 percent in 2011. The plan also experienced an 85 percent increase in plan activity from meeting attendees.
  • Best Practice 2 – Employer/Employee-Centric Content: M.A. Mortenson Company, an international construction firm, employed construction-related themes in its financial education to engage participants and foster pride in the company. Financial education was made mandatory and workshops were divided by career stage, age, and gender. The plan sponsor focused on participants’ preferences by surveying them after the workshop and making recommendations based on their feedback to yield desired results.
  • Best Practice 3 – Bilingual: Consolidated Citrus Limited Partners wanted to 1) increase attendance at plan educational meetings, 2) increase plan participation, 3) increase deferral rates and 4 encourage participants to maximize their match. Ninety percent of the workers spoke only Spanish, and the majority of their day was spent in the orange groves. An in-language campaign was initiated. The company’s Spanish speaking leaders met with small groups in the orange groves. Straightforward collateral in both Spanish and English Collateral were available on site, including announcement posters. By bringing the meetings to the employees, 95 percent of the targeted group attended the meetings. Plan participation increased from 40 percent to 75 percent and deferrals expanded from 4 percent to 8 percent.
  • Best Practice 4 – Branding: The Animation Guild 401(k) Plan was implemented for artists working at Southern California animation studios. The sponsors worked with the Guild’s representatives to obtain insights and develop a branded communication urging participants to remember to enroll. The response rate increased over eight percent from the previous year, with 135 new enrollees. Another employer cited in the research increased participation by 30 percent by keeping the message fun, simple and “cool” to target younger workers.
  • Best Practice 5 – Multicultural: The Four Seasons 401(k) Plan needed to convey an important plan change to an employer profit sharing employer matching contribution. The sponsor obtained feedback from bilingual meeting presenters in designing the campaign, and provided materials tailored to Hispanics and presentations also were created in Spanish designed to be culturally and linguistically accurate. As a result, the average deferral rate of the targeted group rose from 2.9 percent to 5 percent, and significantly increased beneficiary designations.

2. One-on-One or Small Group Meetings 

OneonOneAfter a study by Lincoln Financial found that 66% of participants prefer one-on-one guidance, Lincoln made it a component of its financial education model. They found that the need for individualized information is particularly acute for groups with low participation rates, including women and minorities.  Various studies have shown good enrollment and contribution results when employees request in-person group workshops facilitated by financial experts.

  • Best Practice for One-on-One Meetings:In 2012, MassMutual representatives spoke with 150,000 employees in face-to-face meetings. Forty-six percent of these individuals took action to improve their retirement readiness and, in one-on-one meetings, 75 percent of employees took action.
  • Best Practice for Small Group Meetings: Costs and timing may prevent plan sponsors from providing one-on-one meetings, but small group meetings and audience segmentation have also been successful. The FINRA funded Nurses Investor Education Project had small group meetings for well-educated nurses interested in taking action toward their retirement. They found that generally, the nurses’ lack of basic knowledge, or their perception that they did not know enough to attend these sessions, prevented them from attending their plan sponsor’s meetings. As a result of using small group meetings as a forum, the nurses perceptions changed and attendance at their employer’s retirement plan sessions improved.

3. Immediate “on the spot” Communication 

onthespotThe ability for participants to take action at the time they are thinking about retirement savings is more effective in increasing enrollment. For example, having computers in the room at the time employees are learning about the plan would allow them to sign up and take immediate action.

  • Best Practice: A US Army mandatory financial management course found that providing the enrollment forms for the Thrift Savings Plan during the financial management course resulted in a sizeable increase in participation, with soldiers signing up for the Plan before leaving the classroom.

4. Short, Simple, Focused Communication 

focusedBehavioral studies show that the most effective communications use simple, straightforward language specific to a participant’s personal situation.

  • Best Practice: Time constraints mean that any impediments to action should be identified and mitigated. For example, on a website, any extra step, such as the need to retrieve a PIN, may prevent employees from taking action. Solutions include sending the PIN directly to their email account or a mobile number, or mailing a postcard with the website’s uniform resource locator (URL).

5. Multiple Touches With Various Creative Formats 

profileConsistent, continuous and on-going meaningful communication can be achieved by repeatedly sending out simplified mailings. Social media can help alleviate the cost of additional touch points, and yet, few companies use social media channels for retirement information.

  • Best Practice: The Council’s Professor Madrian cites a company in which the third mailing of a simplified reply form requiring the checking of a box to enroll doubled enrollment from 22 percent to 45 percent of non-participating employees.

6. Cost Effective Technology 

advancement-of-technologyEvery demographic group is now using the Internet as a preferred source of information, via home computer or mobile devices. In addition, electronic media provides the ability to track responses, which is unavailable when the communication is sent through printed materials and regular mail. Another cost effective technological advance is Dynamic Page Publishing,  reviewed at the conclusion of this article.

A Deloitte study in 2012 that found:

  • 93 percent of Americans place Internet access as the most valued household subscription;
  • 54 percent of Americans own smartphones, and the rate is increasing 29 percent annually.
  • One of three Americans over age 50 has downloaded an application to a smartphone, and 28 percent access their bank accounts via smartphone.

Engaging Millennials: Electronic media is the most effective method of communication to engage younger generations in retirement planning, including Generation X (born between 1965 and 1979).  In order to combat inertia caused by competing financial priorities, such as student loan debt, it is important for this group to be engaged through “YouTube” videos, Facebook forums, Twitter, email and mobile delivery, including providing “one click” transactions and incorporating elements of “gamification.”   Millennials also demand simple, personalized, and action-oriented communications, and prefer human contact for complex tasks.

  • Best Practice – Email: Thomas Ryan of Fidelity Investments testified to the Council that Fidelity makes all channels of communication accessible, and finds that email communications have generated higher response rates than direct mail.
  • Best Practices for Engaging Millennials – Fidelity: Fidelity has studied the preferences of Generation Y, or “Millennials”  for using electronic communication, and found that this group tends to rely heavily on the Internet to interact with representatives from Fidelity, although they appear to be the least engaged when it comes to the frequency of contact. Millennials serviced by Fidelity have the lowest 401(k) participation rate, at 58 percent, compared to 67 percent for all other populations. Design changes made to simplify online interaction with Millennials resulted in a 40 percent increase in web utilization by this group.
  • Best Practices for Engaging Millennials – Putnam: Lori Lucas of Callan Associates discussed Putnam’s roll out of a plan primarily for Millennials that encouraged participants to bring their tablets to an nteractive meeting to log on to the benefits website. As a result, 40 percent of attendees increased their deferrals within 90 days after attending the meeting.
  • Best Practices for Engaging Millennials – MassMutual:: Offering enrollment and savings increases using iPod Touch devices in group meetings resulted in action rates of 85 – 90 percent among those attending. The use of targeted and tested mail and email campaigns resulted in $150 million in new deposits over three years and a 3.9 percent increase in action rates.

7. Behavioral Economics and “Social Norming” 

choiceThe way certain information is presented can have a resounding impact, including the way choices are presented to the participant, a method referred to as “anchoring”

Presenting options in a different order or with a higher default percentage has increased deferral rates. While communications traditionally list contribution percentages in ascending order from one to five percent, studies have shown that reversing this order so that the first option shown is five percent markedly increases enrollment in the five percent option. This method is referred to as “placement.”

 “Social Norming” reflects the fact that people tend to benchmark themselves against their peers. Statistics from the Bureau of Labor Statistics show that participants tacitly compete against peers in similar socioeconomic conditions.

8. Incentives and “Gamification” 

carrotThe use of games (gamification) is an effective tool in reaching  individuals who may not be easily engaged in retirement decisions (“non-savers”). Gamification can be used to reward people if they engage in the correct behaviors. Plan sponsors may also use incentives to provide rewards to participants with who exceed a certain benchmark contribution amount. Other techniques include raffles.

  • Best Practice 1: The NFL’s “Play 60” campaign  incorporates the use of the NFL brand to incentivize children to play a game for at least 60 minutes a day.
  • Best Practice 2: A rug manufacturer in northern Georgia had a series of meetings for people working multiple shifts, giving away lottery tickets to encourage attendance, and experienced standing room only for the meetings.

9. Six Marketing Principles Improve Communications

Communications that are uninspiring and difficult to undmarketing-300x200erstand leave employees confused, bored and unmotivated. The communicator’s “curse of knowledge” is a bias in which the communicator’s knowledgeability makes it difficult to demonstrate it from the perspective of lesser-informed people. The Council highlighted six principles of communication that plan sponsors should consider when drafting documents or presenting to their participants that will inspire action:

1. Show Empathy

empathyTo  determine the relevance of a message to an audience, it is necessary to engage them and ask questions that the content of the presentation or the communication should then be tailored to answer. For example, an energy company developed a program to help consumers understand and lower their energy bills, using this computerized question:

Can I help you with your bill?

  1. Yes, help me understand my bill.
  2. Help me save money.
  3. Both of the Above.
  4. I’m Here for Something Else.

By showing empathy to what the consumer cared about and giving information and tips to help them feel more in control, these questions presented helped raise consumer satisfaction.

2. Use Metaphors and Analogies

analogCommunications also reference a metaphor or visual picture to help the recipient relate to the message. For example, when Ridley Scott presented the screenplay for Alien to his producers he used the popular movie Jaws as a reference, and the metaphor “it’s like Jaws in space,” to frame a concept that the producers easily understood

3. Use Storytelling

icon-storytellingPeople tend to forget facts that are presented but usually remember a story. Stories are easy to absorb when people are overwhelmed with information. They also eliminate extraneous facts to capture the recipient’s interest and relate to him on an emotional level.

4. Use a Conversational Voice

conversationalUsing overly technical information, compliance or legal jargon can loose an audience. For example, it is difficult to convey the benefit of voluntary life insurance individual and spouse buy-up options in which election of coverage for a spouse can equal up to half an individual’s buy-up,  depending on the desired level of coverage. An effective way of communicating this is as follows:

“The company is going to buy life insurance for you. If you want, you can buy extra life insurance. Whatever extra life insurance you buy for yourself, you can also buy up to half that amount for your spouse. Now, depending on how much additional insurance you’d like, one or both of you may need to answer some questions about your health to see if you qualify for it.”

5. Surprise the Recipient

boxing-glove-surpriseUnexpected methods of engaging the recipient get the individual’s attention when a subject is ordinarily challenging and abstract. The use of humor, as shown below, can be considered an example.

6. Use Humor

humorUsing a little humor in the message will keep the audience engaged and make the message easier for audiences to relate to.


Plan Design Considerationsicon-design

Automatic Enrollment

A study by Brigitte Madrian and Dennis Shea shows that automatic enrollment increases average participation rates from 65 percent to 85 percent. It is particularly helpful for low-income workers with annual wages under $20,000, where participation increased from 27 percent to 82 percent. Average participation for employees under age 30 doubled from 41 percent to 82 percent, and the best improvements have been among the segments that had the lowest participation rates.  This was corroborated in as presented in the testimony of Lori Lucas.

Mandatory Contributions and Automatic Escalation

Defaults that are too low can  impact workers who would otherwise have contributed more. Since studies have shown higher default contribution rates have not increased opt-out rates, employers should consider recommending higher default contribution rates.

One solution is a stretch match (increasing the maximum amount of pay that can be matched and decreasing the percent matched, to keep the employer’s costs flat.

Another way to increase savings is automatic escalation in which sponsors automatically increase a worker’s contribution rate by one to two percent  of salary at each pay anniversary until a cap, such as 12 percent of pay.

Best Practice – TIAA-CREF: David Richardson of TIAA-CREF found that 403(b) plans typically have much higher contribution rates, ranging from 10 percent to 15 percent of pay compared to 5 percent to 7percent for all 401(k) plans, due to mandatory contributions from both employers and employees as a requirement of employment.  The 403(b) plans TIAA-CREF administers experience much higher annuitization rates — 40 percent compared to 4 percent for all 401(k) plans.

 Conclusions and Implications

red pencilThe Council found that continuous, simplified, personalized communication using multiple channels, connected with humor and empathy, are effective ways to communicate with plan participants to encourage participant engagement.

Benefit Program Marketers seeking to increase employee plan participation need to be more flexible, customizable and responsive than ever to introduce, present, promote and clarify the particular offerings and choices the employer has agreed to sponsor. Dynamic Publishing platforms are becoming a key tool in executing this strategy DPP is a way of designing publications in which layout templates are created which can contain different content in different publications. In cases where the same content is being used in multiple layouts, the same layout is being used for several different sets of content, or both, dynamic page publishing can offer significant advantages of efficiency over a traditional system of page-by-page design. Future articles will explore Dynamic Publishing in greater depth.

Related Blog Article:


Benefits Are More Costly – But More Important


Employers are struggling with employee benefit decisions.

In addition to the challenging economic  and competitive environment, employers now face three key difficulties


  • healthcare reform, 
  • precipitously rising benefit costs,  and 
  • a less loyal workforce.  

The conundrum employers face is that employee loyalty has been steadily declining, while employees are demanding benefits more.  The ninth annual MetLife Study of Employee Benefits Trends, respectively, showed that employees reported:

  • a 12% decline in “strong loyalty” to employers from 2008 to 2011.

Voluntary Life Benefit Programs Help Bridge the Gap

There is renewed interest among employers in voluntary benefits as a means of  promoting loyalty and retention while curtailing benefit costs. And the eleventh annual MetLife Study of Employee Benefits Trends reports that employees are keenly interested in them as well:

  • 61 say benefits meeting their individual needs would make them more loyal.
  • 51are willing to bear more of the cost to have more benefits to choose from.

Voluntary life insurance benefits are highly valued.  A special advantages of life insurance benefit programs is the flexibility that they provide employers in structuring a plan to meet their needs:

  • Avoids complicated reporting and nondiscrimination requirements, giving employers control over whom to reward. 
  • Costs and benefits can be split among employer and employees to fit the needs of the business. 
  • Employers can control the incentives by designing their plan with or without “strings.” 

Here are 3 popular ways that employer-sponsored life insurance benefits are  offered to select key employees

1. Split-dollar – for Cost and Benefit Sharing

RestrictedAccessBenefits: The costs and benefits of a policy are shared between the employer and a select key employee.

During employment: The employer and a select key employee each pay an agreed percentage of the premium.  This could be called a “consumer-directed plan” because it allows the employer to provide an executive with a life insurance benefit with low outlay.

At death: A tax-free death benefit is paid to the employee’s beneficiary,  and a portion goes to the employer to recoup it’s contributions.

At separation from service:  the policy’s cash value may reimburse the employer for his share of the premiums and allow the employee to purchase and keep the policy.

According to National Underwriter, this  continues to be a vital and popular planning tool.

Anticipated Results: Costs and benefits can be split according to the employer’s needs. The “rollout” of the benefit to the employee upon separation of service can be used to tie the employee to the company for a long period, encouraging loyalty and retention.

2. Deferred Compensation – for Executive Retirement

quote_executivesBenefits: Non-qualified Deferred Compensation plans can create tax-leveraged financial security for key employees by allowing them to defer a portion of their income into a cash value life insurance policy. The plan can provide benefits in lieu of or as a supplement to a qualified pension plan.The employee elects to receive less current compensation and defers receipt of that amount to a future tax year.

  • The cash value can provide supplementary retirement benefits, even if the employee is already receiving the maximum benefits under the company’s qualified plan.
  • The employer gets a tax deduction when the employee receives the compensation.  
  • The employer can avoid the cost and administration of a qualified plan and the cost and complexity of covering all employees.
  • The death benefit can allow the business to recover costs.

Anticipated Results: The deferrals provide a way for employees to save for retirement. The employer can select who receives benefits, when they receive them and how much they receive, and there are fewer administrative issues than under unlike tax qualified plans –  since the Department of Labor has ruled (Advisory Opinion Letter 90-14A) that this arrangement is not subject to Labor Regulations Section 2510.3-102, which requires participant contributions to an ERISA pension or welfare plan to be held under a formal trust arrangement.

3. Executive Bonus – for Trusted Key Employees

exe_bonusBenefits: The employer provides additional monthly compensation to the employee, and receives an annual tax deduction.

The bonus pays for the premiums of a life insurance policy owned by the key executive – a valued personal asset  giving the employee access to the cash values and providing a death benefit for his/her beneficiaries.

Anticipated Results: A Section 162 Executive Bonus Plan is one of the simplest and most transparent plans. For a more personal organization, it provides transparency and trust. It’s tax deductible to the employer, and provides a fully paid, fully vested life insurance benefit for a particularly important and trusted key employee.

A Good Broker/Benefit Specialist Is Key

Given the flexibility of these plans, it is important to have a qualified benefits specialist or broker, knowledgeable in life insurance planning to:

  • help the employer select the implementation strategy that fits its specific needs and objectives.
  • provide a prototype agreement for plans that require one.
  • promote participation and appreciation for the employer’s sponsorship.

Research indicates  that 68% of employees spent little time or effort in making their benefit selections; however,  employers who provide outstanding communications are more highly effective in enrollment and are more likely to report that their employees are highly satisfied with their benefits (82% vs. 61%.)

Voluntary Life Insurance Benefits can help give employers an edge in retaining valued, qualified key employees –  who are often the engines of growth for a business or practice. Retaining superior key employees also means retaining a superior benefits broker who can help with the planning, the implementation and the communication.

Related Posts:

The further up the pyramid, the greater the need for values based (consultative) selling

Consultative Transactional Quotient

Consultative salespeople are different in their behaviour from Transactional salespeople. It is important to analyse and determine what type of sales approach better fits your business – a transactional sales approach for one-off, commodity type sales, or a consultative approach for your more complex, longer-lead time sales?

Value selling, or consultative selling, occurs where the customer doesn’t know precisely what they want to buy but knows what they want to achieve. The sales person’s role is to work with that customer collaboratively (or ‘consultatively’) to create a solution to their problem. Inevitably, this type of selling requires building relationships, sometimes over a long timespan and so that ability to build and nurture customer relationships is a critical skill for the consultative sales person.

Customers who are looking for a solution to their problem are likely to be less price-sensitive than customers who know what they want to buy.

The flip side of value or consultative selling is transactional selling, where the customer knows precisely what they want to buy and therefore the sales person’s role is to communicate the value of the product or service. This is often a shorter sales cycle as it will be made up of a series of transactions and there is less need to build relationships.

The Great Market Potential of Voluntary Benefits

To understand the potential of the voluntary market, consider that, according to a 2011 analysis by McKinsey & Company cited in Benefits Selling magazine:

  • Voluntary premiums are growing as much as 10 times faster than employer-paid premiums.
  • Voluntary benefits are estimated to contribute more to industry profits than employer-paid plans by 2015.
  • Furthermore, according to LIMRA, the marketing research arm of the insurance industry, 30% of U.S. employers are considering adding a voluntary benefit within the next two years.

Given the uncertainty over health care revenues and the economy, more benefits brokers today see sales of voluntary – employee-pay-all – products as key to their future success.

Selling voluntary, however, is new territory for most brokers. According to a survey conducted by Eastbridge Consulting Group in March 2012, over 70% of benefits brokers said voluntary sales account for less than 10% of their total revenues.

Top brokers say that taking a consultative vs. a transactional approach to selling can help.

What is Consultative Selling?

In his book, “Rethinking the Sales Force,” Neil Rackham explains that a fundamental shift has occurred in the marketplace:

As customer choices have increased, both as a result of competition and because products and services are increasingly customized, understanding the customer has become an ever more important element of successful selling.

Rackham describes the three “pillars” of consultative selling:

  • Helping customers understand their problems and opportunities in a new or different way;
  • Showing customers new or better solutions to their problems;
  • Acting as advocates within provider organizations.

Differences Between Product and Solutions Selling

CEB Global’s Corporate Executive Board, 2012 – – has identified Voluntary Sales as a third era in the evolution of selling based on delivering “customer insights.” Here are some identified differences between product selling and solutions (or consultative) selling:

Product Selling Solutions Selling
Nature of the sales conversation Lead with features and benefits Lead with questions
Ideal sales rep profile “Talking brochure” Interrogator
Key stakeholders to engage Decisionmaker Coach/advocates
When to engage When customer assesses options When customer understands needs
Flow of information Customer places order Customer coaches on how they buy

Nelson L. Griswold, one of the benefits industry’s leading authorities on consultative selling and cross-selling voluntary benefits points out that employers are hungry for guidance and direction on benefits and will eagerly engage with a broker who can drive their benefits strategy.

Re-frame the Conversation

Speakers at this year’s Benefits Selling conference offered this advice for brokers:

  • Connect employee needs into one seamless program for the employer – through one carrier or by integrating with a third party administrator.
  • Focus on state-of-the-art benefits administration and enrollment innovation, taking the employer out of the middle.
  • Focus on employees’ overall needs regarding health and wellness, retirement savings and income and protection from catastrophe.
  • Have a broader knowledge of benefits, not a siloed, specialty approach.
  • Expand relationships beyond benefits decision makers to a team of stakeholders (finance, communications, marketing, procurement, etc.) Bring them together for discussions.


Eighth Annual Benefits Selling Expo, May 9-11, 2012.
Griswold, Nelson L., “Are You Driving the Benefits Strategy? Employee Benefit Advisor, August 2011.
Griswold, Nelson L., “Cross-sell Voluntary with a Consultative Approach,” Employee Benefit Advisor, December 2011.
Rackham, Neil & De Vincentis, John, Rethinking the Sales Force, McGraw-Hill, 1999.

Source: The National Institute for Health Care Reform

Decline in Employer-Sponsored Coverage

Reed Abelson at Economix points to a study showing a decline in employer-provided health insurance  due to the effects of the Great Recession. Between 2007 and 2010 the share of working-age adults with employer-provided health insurance dropped 10% from 63.6% to 56.5%. The key driving factor was the enormous loss of employment during the Great Recession, which started in December, 2007, and officially ended in June, 2009.  The proportion of unemployed adults under 65 spiked 10% from 21.6% to 31.6.% There was also a small shift from full time to part time and self employment – but the shift from high quality to low quality jobs accounts for only 3% of the total decline in employer-provided coverage.

The three groups disproportionately affected were:

  • Young adults: 
    • Percentage employed dropped from 70% in 2007 to 50% in 2010.
    • Percentage covered dropped from 43% ito 31%.
  • Families of adults with less than a high school education:
    • Percentage employed dropped 16% to just over 50%.
    • Percentage covered dropped from 47% to 36%.
  • Those employed in small firms:
    • Percentage employed dropped 51% to 45%.

Most Employers Remain Committed

However, according to management consulting firm Oliver Wyman’s new study, “Employer-Sponsored Healthcare: What Happens Now?,” an overwhelming majority employers want to keep providing health coverage no matter what.
They also ready for reform and express a strong appetite for change. The type of desired change depends on the type of company, but few are considering making “drastic” changes to their offerings.  Key findings are:
  • Only 8% of companies plan to drop employer-sponsored coverage. These are mostly smaller  manufacturing and retail companies with lower-paid employees for whom cost is a burden.
  • 92% would not drop coverage. Providing health care benefits to their employees is an important part of how they do business, partly because they report it’s the right thing to do, and parly to attract and retain happy, loyal workers.
  • 50%  anticipate having to make significant changes in order to maintain coverage.
  • 42% plan to continue the same coverage. They’re in relatively good financial health, so the cost of coverage is a secondary concern.

Employees Also Ready For Change

In addition to employers referenced above, the study also reached out to 738 employees.

  • 90% would be open to accepting “significant benefits changes” if they too could save money.

The PPACA represents the $2.6 trillion U.S. healthcare system’s biggest overhaul in nearly 50 years.  And even though 26 of the 50 U.S. states have challenged the law in court, the fact that change will happen seems certain. Fortunately, both employers and employees and seem receptive to the possibility of doing things differently.

The question for benefits professionals is how to respond to those changes. The study shows that employers are considering almost anything that’s on the table so long as it’s cheaper. Also, offerings provided by private exchanges and value-based networks will provide increased competition. It is urgent for coverage providers and brokers to respond quickly to changing products in a changing marketplace.

Snap! principle of doing business in an era of healthcare reform:

Insurers and brokers need to respond quickly to changing products in a changing marketplace. 

Stephen Miller reports in SHRM that US health care costs are expected to grow at a historically low rate of 7.5 percent in 2013, the fourth year of relatively flat growth. This is the conclusion of Pricewaterhouse Cooper’s (PwC) Behind the Numbers report.

The net impact for employers could be as an increase as low as 5.5% after accounting for changes in benefit design by purchasers.

3 Cost Growth Containers

A pattern of slower medical growth reflects three major factors:

  • Employers’ efforts to hold down expenses.
  • Lower use of services by cost-conscious patients.
  • The sluggish economy.

4 Deflators

The research indicates that four forces will continue to slow the rise in medical cost trend in 2013, acting as “deflators”:

  • Medical supply and equipment costs are abating under market pressure.
  • New delivery methods for primary care are gaining popularity.
  • Price transparency is exerting downward pressure.
  • The pharmaceutical patent cliff continues to increase use of cost saving generic drugs

2 Inflators

Two factors will nudge medical cost trend upward next year:

  • Patient utilization is expected to rise as the economy strengthens.
  • Medical advances are driving growth in high-cost care and catastrophic claims.

Employer Cost-Control Strategies

According to a report on PwC’s 2012 Health and Well-Being Touchstone Survey of 1,400 U.S. employers of all sizes, across a broad range of industries, employers are focused on two primary strategies to control medical costs in 2013:

  • Expanding wellness programs.
  • Increasing employees’ share of costs,

Wellness programs are offered by 72% of employers in 2012. Half of them said they are considering expanding their programs in 2013.

The most common offerings include:

  • Employee assistance programs (provided by 84% who offer wellness programs).
  • Health risk assessments (80%).
  • Biometric screenings (71%).
  • Tobacco cessation (67%).
  • Weight management (56%).

Disease management programs are offered by 58% of employers in 2012.

The most common are related to:

  • Diabetes (6%).
  • Cardiac disease (56%).
  • Asthma (54%).
  • Cancer (39%).

Plan design features with the most significant changes in 2012 include considerable increases in:

  • In-network deductibles.
  • Emergency room co-pays.
  • Prescription drug co-pays
Under consideration: Findings show that employers are considering these cost containment measures:
  • 57%: increasing employee contributions to health plans.
  • 50%: increasing cost sharing through plan design, such as higher deductibles.
  • More than 50%: raising employee prescription drug plan costs.
Other measures employers are already taking include:
  • 40%: a high-deductible plan with HSA, up from 38% percent in 2011
  • 17%: high-deductible plan with a health reimbursement arrangement (HRA), down from 19% in 2011.
  • 4%: an HRA linked to a traditional heath plan.
Cost-Controlling Solutions

Already implemented

Under consideration

Not under consideration

Increase employee contributions.




Increase prescription drug plan cost-sharing through plan design changes.




Expand and improve wellness inside the U.S.




Increase medical plan cost-sharing through plan design changes.




Implement a value-based design.




Implement a high-deductible plan as a full replacement option for medical benefits.




Implement a performance-based network.




Offer a health savings account.




Implement a high-deductible plan as an additional medical plan option.




Consolidate vendors.




Expand/offer flexible work arrangement.




Offer a health reimbursement arrangement.




Source: PricewaterhouseCoopers, Health and Well-Being Touchstone Survey Results, May 2012.

Related Articles:

Typical Health Costs for American Family Now Exceed $20,000SHRM OnlineBenefits Discipline, May 2012

Study: CDHPs Could Save Billions in SpendingSHRM Online Benefits Discipline, May 2012

Unnecessary ER Visits Linked to Low Co-PaysSHRM Online Benefits Discipline, May 2012

Survey: Employers Controlling Costs with Wellness ProgramsSHRM OnlineBenefits Discipline, May 2012

Half of Employer Health Plans Have No In-Network DeductibleSHRM OnlineBenefits Discipline, April 2012

Screenings and Early Intervention Can Reduce Medical CostsSHRM OnlineBenefits Discipline, April 2012

Costs Vary Widely for ‘Shoppable’ ProceduresSHRM Online Benefits Discipline, March 2012

Applying Effective In-Network Incentives at CalPERSSHRM Online Benefits Discipline, March 2012

Behavioral Economics Improve Health DecisionsSHRM Online Benefits Discipline, January 2012

Stephen MillerCEBSis an online editor/manager for SHRM.

Consumer-Driven Decision: Weighing HSAs vs. HRAs

Quick Links:

SHRM Online Benefits Discipline

SHRM Online Health Care Reform Resource Page

Provider Costs are the Key Driver

A new study highlighted in Salon shows the cost of employer-based health insurance has soared  during the Great Recession, even though Americans use less medical services. The insightful article was written by Joshua Holland is an editor and senior writer at AlterNet.

The extent of the problem?

  • Employee healthcare costs have risen at 2X the rate of inflation.
  • Healthcare costs are the single most important factor driving US deficits long term.
  • If we paid the same for healthcare per person as the 30-plus countries with longer average life expectancies, we’d be looking at budget surpluses.

High costs lead to these poor outcomes:

  • Tens of thousands of unnecessary deaths annually.
  • Some of the worst health outcomes in the developed world.
  • American firms become less competitive in the global marketplace.
  • Wage stagnation for the middle class and working poor.

New Facts

The new study uses insurance industry data made available to the public for the first time. The data shows that the costs of medical services continue to climb much faster than the economy or wages. The report shows that working people covered by their employers “are paying more and getting less” because hospitals and other medical providers “just seem to be able to raise prices faster than general inflation.”

  • prices have increased at five times the rate of inflation in some areas like ER visits, outpatient surgery and mental health services.
  • Many Americans are simply foregoing services. Because while healthcare costs – and insurance premiums as a result –  continue to climb, an ever-larger share of the burden of those costs has been shifted onto the backs of working people.
  • Quality of care problems are growing. Another recent study found that half of those respondents who had been sick during the previous year thought that the “quality of care” they’d received was a problem, with three in four identifying rising costs as a serious issue.

Economist Jared Bernstein sums up the perfect storm facing healthcare:

“recession-induced falling incomes” + “faster growing prices for health services” + “increased cost-shifting from employers to workers.”

Healthcare Reform Was An Important Step

There is some evidence that the healthcare reforms of the Patient Protection and Affordable Care Act (PPACA, so-called “Obamacare”) is beginning to reduce costs to some degree. However, while the series of insurance reforms passed in 2009 were “valuable tweaks to our private insurance system,” but the reforms didn’t go very far to significantly “bend the cost curve.”

You Can’t Please Ideologues on Either Side

Compounding the problem is a misguided push to roll back those insurance reforms by political forces on both the right and the left.

Politically obstinate partisans on the left want to do away with “Obamacare” because:

they’re ideologically predisposed to buy into demagoguery about “death panels,” “government take-overs” and the supposed perfidy of the public healthcare systems that produce better outcomes for less in most of the rest of the developed world.

Some ideologically inclined progressive partisans also want to do away with it because:

It’s built around an individual mandate to buy private health insurance – long the signature Republican proposal…Their thinking appears to be that if we revert to the status quo ante, the system’s deep dysfunctions…will exert so much pressure on families and businesses that it will inevitably lead to an outcry for a single-payer system.

They’re All Wrong

However, repeal of the PPACA would reverse all this progress:

  • No lifetime and annual caps on out-of-pocket expenses.
  • The requirement that preventive care be covered without co-pays (which should eventually result in some cost containment),
  • The provision allowing young adults to stay on their parents’ plans.
  • Closing the “donut hole” that requires seniors to pay a big chunk of their prescription costs out-of-pocket.
  • Making 10 million low-income Americans – people largely priced out of the market at present — eligible for single-payer public healthcare as the threshold for Medicaid eligibility goes up by 50 percent. (According to one study, 75 percent of low-income workers lack health insurance.)

To give you an idea of the schizophrenic and generally uninformed American thinking about health care,  the individual mandate – which is absolutely essential to a well functioning private insurer-based healthcare system – has become almost universally unpopular, even though it is linked to the highly popular requirement that insurers cover people suffering from pre-existing conditions.

What If It’s Repealed?

Given the 15-year period between the last attempt to reform health care and the passage of the PPACA, and assuming it takes that long again to get a better set of reforms, there will be more cost shifting onto working families, more denial of coverage and widespread public suffering, including 10 million poor people who wouldn’t be covered under Medicaid.

According to  Joshua Holland, instead of “throwing away a decent set of insurance reforms, and a new infrastructure for (almost) universal coverage,” we need to

“keep moving the ball forward. With Americans paying more to get less health care, the moment is ripe to open up Medicare to all comers. And talk of going backward is hard to understand.”

Next Steps

Yes, but just what will “moving the ball forward” require?  The solutions lie here:

  • Realistic public awareness that the providers – not the insurers, not political ideologies – are the problem (Hospital groups, Suppliers and Big Pharma.)
  • A legislative agenda to bring the Providers into line.
  • De-politicization of the issue.

Only if the public comes to understand that Big Pharma profits are obscenely bloated in relation to those of other industries, as a result of a systematic campaign of political influence, and that this problem endangers the health and economy of a nation, a realistic way forward will be possible.

What do you think?

More Evidence that Providers Drive Healthcare Costs

 of Benefits Pro reports this AP news story that adds more evidence to my conclusions that Providers and Suppliers, not Insurers, are the drivers of U.S. health care costs.

House Republicans are releasing emails and documents that shed light on dealings between the White House and the drug industry as President Obama worked to move the health care overhaul through Congress during the the summer of 2009.  Republican members of the House Energy and Commerce Committee obtained emails from industry to ascertain some interesting facts.

Interesting revelations about how the influence of the drug industry on the legislation:

  • An $80-billion financial commitment by the drug companies gave the bill some momentum.
  • The deal included better prescription coverage Medicare recipients.
  • Drug makers succeeded in avoiding new requirements to pay rebates to the government for Medicare drugs.
  • They were able to preserve an existing ban against patients importing lower-priced medications from overseas.

Memo from the Energy and Commerce Committee Republican Members

This is based on an executive summary obtained by BenefitsPro:

  • The White House negotiated a deal with the Pharmaceutical Research and Manufacturers of America (PhRMA) in mid-June 2009.
  • After attempting to secure a commitment from the industry for $100 billion in payment cuts, eventually the White House settled for approximately $80 billion in payment reductions through expanded and increased Medicaid rebates and a new health reform fee. PhRMA also had direct input into the actual legislative policies that produced the $80 billion, including the proposal for closing the Part D doughnut hole.
  • Under the deal, “the White House and Senator Baucus agreed” that neither price controls nor a government-run Medicare Part D plan would become law, the White House would oppose price controls on dual eligible beneficiaries, and that savings from a follow-on biologics proposal would be applied to the total $80 billion commitment.
  • White House Office of Health Reform Director Nancy-Ann DeParle told PhRMA’s chief lobbyist for negotiating the deal that the White House would oppose new drug importation policies because of “how constructive” PhRMA had been. According to PhRMA’s lobbyist, White House Deputy Chief of Staff Jim Messina told him that the “WH is working on some very explicit language on importation to kill it in health reform.”
  • Despite countless promises of televised negotiations and transparent government, the White House met in private with PhRMA representatives and drug company CEOs in July 2009, “to look the other side in the eye and shake their hand on whatever deal we work out.”
  • The White House was not above threatening PhRMA to get its way. According to PhRMA’s chief lobbyist, the White House was going to have President Obama call for rebating all of Medicare Part D, a policy PhRMA staunchly opposed, in his Weekly Radio Address unless PhRMA cut a deal with the White House to support health reform.

Beyond the Partisan Hype – Some Conclusions

While it’s clear that the hyper partisan environment looking to dig up dirt is driving this kind investigation, the information has no smoking gun for the Administration. But it should be an eye-opening look into the incredible clout that Providers have in health care today.
  • Big Pharma exerts power – over every level of government.
  • It isn’t partisan – Big Pharma works both sides of the aisle.
  • Lowering health care costs is impossible – until Americans see the reality of Big Pharma and the Hospital Groups’ role in controlling costs.

Obscene Profit Margins

To put the issue squarely in perspective, profit margins for the major pharmaceutical companies are typically in double digits, with several are over +20%. These margins contrast sharply with most other areas of consumer goods and services, where margins are in the 0-5% range – assuming they’re profitable.

Profit margin data as of 2009

Consumer Goods & Services:
  1. Walmart         +3.47%.
  2. Best Buy          +2.0%
  3. Home Depot  +3.5%
  4. Lowes               +5.87%
  5. Target              +5.2%
  6. The Gap           +6.65%
  7. CVS                   +3.72%
  8. JC Penny         +1.46%
  9. Staples             +2.84%
  10. Starbucks       +4.00%
  11. Unilever           +9.8%
  12. Sears                  0.00%
  13. Yahoo                -1.41%
  14. Office Max       -5.57%
  15. Office Depot   -14.95%
  16. Time Warner  -43%

Big Pharma margins, by size of net revenue:

  1. Johnson & Johnson  +21%
  2. Pfizer                               +17.7%
  3. Novartis                          +18%
  4. Astra Zeneca                 +22.6%
  5. Abbott                              +18.7%
  6. GlaxoSmithKline        +18.5%
  7. BristolMyersSquibb  +23.5%
  8. Lilly, Eli                           -1.0%
  9. Amgen                             +31.8%

(Ortho-McNeil-Janssen and Schering Plow are not publicly traded.)

Despite the recession, Big Pharma continues to rake in huge profits due to factors, including:

  1. Massive subsidization of their sales by government purchases at federal, state, and local levels.
  2. Massive consolidation within the industry. For example, Pfizer alone swallowed up Parke-Davis, Pharmacia, Upjohn, Wyeth, & Searle. Novartis swallowed up CIBA and Sandoz.
  3. The fraudulent extension of patent exclusivity by Big Pharma by numerous means. Pharm companies always apply for patent extensions, which are almost always granted
  4. Intra-company agreements to not sell generics–even after patents have expired. In other cases, another company will buy the drug once the patent has expired, and re-patent it, thus again preventing the generic from entering the market.

Snap! principle of health care cost drivers:

It’s the Providers and Suppliers, not the insurers, stupid!

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