The Growing Profession: Absence Management
We all know how extensive leave laws have become.
The ADA, the FMLA, and other laws are being joined by a growing list of legislation and regulation that mandates paid leave.
Vermont just became the fifth state to pass a paid leave law, while the U.S. Department of Labor issued preliminary regulations mandating paid leave for companies that do business with the federal government.
There is every indication this trend will continue, perhaps culminating in a federal paid leave law.
The winds of change are blowing in a direction that requires employers to understand laws in a more comprehensive way. Compliance with the FMLA and the ADA is not enough. Organizations must be able to meet, keep up with and even get ahead of the new order of leave laws.
An entire generation of absence managers is learning to think in legal and risk management terms. This is raising skill levels and the areas in which absence managers contribute to an organization’s performance.
DMEC’s 5th Annual Leave Management Survey indicates employers are adding to staff to manage compliance with the myriad of leave laws and regulations. While that can be viewed as a cost to an organization, the survey indicates the issue is more complex than just adding staff.
FMLA, ADA, state, and even local leave laws require staff that is well-versed in not only traditional absence management, but in legal and regulatory matters as well.
An entire generation of absence managers is learning to think in legal and risk management terms. This is raising skill levels and the areas in which absence managers contribute to an organization’s performance.
In a similar way, this broadening of skills means absence managers need to work more closely with legal, IT, and other departments. This can — and does — lead to more efficient work processes. Efficient not only in terms of cost savings, but also in the new ideas that are generated when employees with different backgrounds and perspectives collaborate on common goals.
Breaking down silos reduces administrative costs and leads to new processes and ideas that enhance performance and increase profits.
This dynamic can be seen most clearly in companies in which leave and compliance has moved from tactical to strategic. These are organizations of all sizes in which leave is central to a recruitment and retention strategy.
In these organizations, the immediate cost of leave is set against the longer-term benefits that can be derived from accommodating the needs of diverse and talented employees. This is the stated rationale for expanded leave policies in growing and profitable companies like Netflix and Facebook.
This regulatory change translates into a challenging environment for absence management professionals. But it also signals a large and expanding professional growth opportunity.
Absence management professionals are becoming more skilled, which translates to being more valuable to current and potential employers. The absence management professional has an increasingly larger role in helping the organization with strategic initiatives that harness social and legislative change in their workplace.
The 2015 DMEC Leave Management Survey paints an encouraging picture not only for work-life balance, but also for the professionals who manage absence for organizations. A complimentary copy of the 2015 survey can be obtained at on the DMEC website.
One of Kristy Arciszewski’s clients includes a large union that rejected a proposed Post-65 Medicare exchange solution for 2015. Arciszewski then developed a strategy that involved evaluating a consortium of local vendors that could meet the needs of this client and the union.
In order for this project to be successful, Arciszewski developed an understanding of the client’s culture and how its values should align with its benefits program. She worked with the director of labor relations and the union president to develop the best possible solution and communicate it to the members.
Arciszewski was new to both the client and Gallagher, and had to “hit the ground running” at full speed to meet necessary deadlines. Her Post-65 Medicare exchange solution exceeded the client’s expectations.
“We made the decision to move from a broker we had for 15 years because Kristy Arciszewski presented a solid knowledge of our company background, culture and benefit needs,” said Dave Toben, director of benefits at Bi-State Development Agency.
“She provided a solid implementation plan and exceeded all expectations in transitioning 15 years of history and work product seamlessly while jumping into key projects providing innovative solutions that helped us manage multimillion dollar issues on our balance sheet.”
“Kristy Arciszewski is an outstanding business partner and extraordinary to work with,” said Kim Nowell, chief people officer at Ingram Marine Group.
A True Partner
Kelly Bonanno was instrumental in crafting a creative voluntary benefits solution for a large mid-Atlantic hospital group that was merging its network and employee benefits plans. While this change eventually made it easier to manage the plan, there was a short-term problem: As of January the following year, roughly 2,400 employees would lose their current long-term sick care benefit and not be able to replace it with similar coverage until the following April.
Working with Bonanno and the client’s other Gallagher consultants, the hospital group decided to introduce voluntary benefits to bridge the gap in coverage for the affected employees.
The solution included introducing a voluntary short-term disability plan, negotiating with the carrier to waive the pre-existing condition clause, educating the staff on the new program on short notice, and providing staff with access to a call center to answer their questions.
As a result, 98 percent of the employees were educated on the new plan offering in three weeks, and 65 percent of employees who were previously covered elected the new voluntary benefits, mitigating their risk of exposure during the gap period. Moreover, there was no pre-existing condition requirement on the competitively priced plan.
“Kelly Bonanno is brilliant, hard-working, very responsive and really, a partner not just a vendor,” said a grocery store chain client.
Christine Brown managed an affiliation that consisted of 32 municipalities and authorities that were fully insured under an affiliation rating methodology that became unsustainable due to health care reform mandates.
Brown developed a strategy to partner with the incumbent carrier and the current affiliated groups to transform the fully insured affiliation into a self-insured trust.
After Brown received buy-in from all 32 entities, the affiliation accessed an existing trust that Brown had been instrumental in building for local school districts, leveraging the current infrastructure to roll out a program that maintained benefits and managed costs.
Each municipal entity’s renewal decreased by approximately 7 percent; all 32 entities maintained their current level of benefits with no plan changes. The trust’s first-year financial results achieved a projected trust reserve of two months of claims and a renewal adjustment of less than 5 percent.
“Christine Brown is an excellent broker for us,” said Joseph Driscoll, chairman of the Delaware County Public Schools Health Care Trust. “Talk about saving money — the trust avoided approximately $35 million over the past two years, versus being fully insured.”
“The service provided by Christine Brown and her staff is outstanding,” said Thomas J. Judge Jr., chief administrative officer of Upper Darby Township in Pennsylvania.
Creative Solutions Across the Board
Costs were skyrocketing within the Archdiocese of Miami’s self-funded medical plan, and the ability to simply change the plan design or shift costs to the employees was not acceptable to the board of directors.
Stewart Durant and his team developed a program called “Bend the Trend,” looking at a number of strategic audits of employer, employee and third-party administrator processes. The team evaluated and implemented practices and programs to reduce ever-increasing claims and administrative costs with no impact to the employees’ or dependents’ plan design.
Durant and his team were successful in reducing the trend line on base claims from more than 10 percent to near zero over a two-year period.
For 2016, Durant is working with the archdiocese to add an onsite claims/service advocate provided by and paid for by the carrier/TPA; implement a new pharmacy benefit process to handle higher-cost specialty drugs; and enhance communication to help employees better understand how to use their plans, creating a true culture of wellness.
“Stewart Durant listens to the issues and finds creative solutions,” said Susan Waddell, director of the archdiocese’s health plan.
“A lot of times it takes an act of Congress to reach brokers, but Stewart Durant is so accessible,” said Angela Pettus, benefits and operations manager at Nations Roof LLC. “It doesn’t matter what the question is, his response time is almost immediate.”
Taming the ACA
One of Ken Fetterman’s clients was concerned about its employee benefit plan meeting the employer mandate and compliance requirements of the Affordable Care Act.
When Fetterman initially met this client, no carriers were willing to take on the company due to the low participation rate of 10 to 15 percent and a 400 percent loss ratio.
Employees were stuck with a plan where they were being balance billed every time they had a claim and costs were skyrocketing.
Fetterman used Assured Neace Lukens’ compliance officer to help bring the client into compliance, including assisting with the filing of a Form 5500 Annual Return/Report of Employee Benefit Plan. He then educated employees on the proper utilization of their insurance and how to maximize their benefits while maintaining the integrity of the plan.
Fetterman also utilized Assured Neace Lukens’ health and productivity team to educate employees on how their lifestyle choices impact them and the overall group. Employee participation more than tripled and the loss ratio fell below 60 percent. He secured an ACA-compliant plan with better benefits that reduced employer cost by more than 29 percent per employee.
“Ken has been a great resource to us, especially navigating through the ACA,” said Alexa Tabak-Baugh, director of business resources at Insights Consulting.
“He and his team have gotten to know us and understand our needs as a business.”
Sallie Giblin began partnering with a large mortgage company based out of San Diego, which wanted to reduce its $17 million-plus employee benefits spend.
Giblin and her team were able to successfully move the client to a self-funded platform that allowed the client to access its data and opened up new strategies and solutions that were not previously available. First-year savings to the client were in excess of $1.5 million.
“Sallie Giblin is very dynamic, incredibly knowledgeable, motivated and also just extremely fun,” said Carolyn Frank, vice president of human resources at Guild Mortgage Co.
“It’s also about the delivery of the results, and at the end of the day, she is able to deliver on her word and back up her promise.”
“Sallie Giblin came out to help us with open enrollment and her support was unbelievable,” said M.G. Kristian, senior vice president of human resources at Mitchell International Inc.
“For the amount of changes we had, it ended up being a non-event. We could not have done it without her significant quality of customer service — she came in and literally saved us.”
Giblin focuses on large and middle-market clients looking for more creative ways to structure their programs. Because she is playing upmarket, her time is spent dealing with more complex risks and solutions on a daily basis.
Giblin has also recently started mentoring other women producers at Lockton.
Tenacious and Creative
When Jill Goldstone’s client, Glenmede, received feedback that employees were not satisfied with the company’s high-deductible/HSA plan and wanted the copay plan back, Goldstone suggested engaging the employees in the potential redesign or modification to the existing plan options.
First, actuarial modeling was conducted to determine new health care options and pricing. Glenmede then reintroduced a copay plan as an option to the high-deductible plan, giving employees an online interactive decision support tool that
Goldstone and her team implemented. The tool collected information about employees’ personal situations, family sizes and expected expenses, and then recommended the plan that best fit their needs.
Goldstone also recommended adding an incentive to keep employees in the high-deductible plan, and Glenmede also added supplemental critical illness and accident coverage offerings to offset costs.
As a result, only about 4 percent of the population migrated to the new copay option.
“Jill Goldstone is fantastic,” said Ann Marie Bell, director of human resources at Glenmede. “She is timely, very proactive in dealing with issues, and does a great job of finding solutions for individual employees as well as the HR team.”
“Jill is an amazing person,” said Charelle Hirsh, director, compensation and benefits at Dr. Reddy’s Laboratories Inc. “She is very creative, innovative, and down-to-earth.”
Solutions for the Costliest Challenges
A client of Bev Gregory’s had an employee with an incredibly rare genetic disorder requiring weekly life-sustaining infusion treatments — claims were in excess of $2 million a year.
Gregory coordinated a meeting with the respective stakeholders to explore options. First, the treatment modality was changed from inpatient to an outpatient facility.
The employee was actually thrilled with the outpatient location, as it was closer to both work and home. Claims costs were reduced by $1 million annually, and Gregory’s client received an initial renewal of 42 percent that was negotiated to 18.9 percent. With the midyear adjustment, the overall renewal was 9 percent.
“Bev Gregory has been the most phenomenal broker I’ve ever worked with,” said Susan Seaman, associate director, benefits and employee programs — human resources at ACADIA Pharmaceuticals Inc. “ACADIA had challenges locating a consultant for our HRIS implementation and I reached out to Bev to see if she could help. She introduced us to ihouse, a consulting business within HUB International specializing in HR and recruitment systems.
“Within four weeks we had someone from Rochester, N.Y. dedicated to our project because of Bev.”
“Bev Gregory is awesome,” said a biotech client. “She’s extremely responsive to clients’ needs and looks for innovative ways to solve problems.”
A Benefit Captives Leader
Karin Landry championed employee benefit captives as they progressed from a niche to a mainstream funding option.
For several years there was uncertainty surrounding employee benefit captives related to “prohibited transaction exemptions” (PTEs), the regulatory approval that employers need to secure from the Labor Department in order to place ERISA-covered benefits in captives.
The original expedited process (EXPRO) for securing a PTE had sunset a few years earlier and without it, employers were faced with a nine month-plus approval process rather than the 78 days the expedited process provided.
Landry spent much of the past year working with the Labor Department to get her clients’ PTEs approved, as well as to re-establish the expedited process. EXPRO 2.0 is now modeled, in part, on the work done by Landry on behalf of Intel Corp. One of the first cases to be approved this year under the new process was another Landry client, Sealed Air.
This work not only benefited her clients, but also the entire captive industry.
Landry also assumed a leadership role in employee benefit captive funding, speaking on the subject at more than 10 conferences in the past year, as well as teaching a course for the International Center for Captive Insurance Education.
She also conducts education webinars attended by hundreds of risk managers, human resource managers, brokers, captive managers and consultants.
Helping Clients Take Control
A client whose pension plan was 65 percent of market cap performed de-risking actions, but needed help to determine how to further reduce the size of the pension plan to be a smaller percentage of overall market cap.
The pension liabilities were outsized relative to size of business due to recent divestitures — only 15,000 employees were carrying obligations for 95,000 participants.
Sandy McCoy and her team helped the client develop a de-risking strategy that included a deferred vested lump sum window and a spinoff of the retirees into a separate plan.
The team then helped the client sell the annuities to an insurance company, allowing the client to terminate the retiree pension plan. The pension plan spinoff and plan termination was completed in six months, instead of the typical 12-month timeframe.
McCoy also worked with the client to develop a program to cap the lump sums at $1 billion, creating a communications program to ensure participants understood they might not receive the lump sum if the cap was hit. There were very few participants over the cap.
“Sandy McCoy always responds to inquiries timely and the quality of information is superior,” said Christa Kuennen, director, financial reporting and treasury services at Wellmark Blue Cross and Blue Shield.
“Sandy McCoy is great to work with,” said a retailer client. “She went above and beyond what other consultants do.”
‘Finding’ Money, Putting It to Work
A drug research nonprofit had a voluntary employees’ beneficiary association (VEBA) trust that was used to fund retiree medical benefits. Scott McDuffie found that the language in the trust documents allowed the funds to also be used for the active employees’ benefits.
McDuffie engaged his firm’s actuarial practice to analyze the impact that withdrawals would have on projected future valuations. The size of the trust is approximately $5 million, and actuaries estimated that only about $1 million would be needed to meet retiree obligations. In essence, McDuffie found “free money” for the client to utilize.
The net employer costs for the medical plan are approximately $3.5 million annually. As such, the value of the trust exceeds one full year of medical costs. This windfall provided time for McDuffie and his team to work with the client to transition to a less expensive consumer-driven model.
The client is now in the process of implementing a high-deductible health plan with a health savings account component. Due to the successes, the client asked McDuffie and his firm to take over some of the responsibilities of the retiring benefits manager.
The team produced enrollment materials to enable employees to review benefit offerings, with the goal of educating employees on consumer-driven health.
“Scott McDuffie really does a fantastic job for us,” the client said.
One of Andrew Savarese’s clients faced a 29 percent increase in annual premium costs for a single plan offering on medical plans. The combination of an aggressive marketing campaign, underwriting review, and program restructuring resulted in 2 percent savings below the client’s current costs.
Moreover, Savarese found that by taking advantage of the client’s foreign ownership structure, his team could implement a life insurance/disability policy that paid an annual dividend to the U.S.-based company contingent on the performance of the parent company’s international life insurance policy.
He identified an insurer that could offer a policy which would include the performance of the U.S. plan as part of the overall dividend calculation, decreasing the U.S. employer’s annual cost for coverage by 23 percent and the amount of the potential dividend increased significantly.
“Andrew provides insightful viewpoints and perspectives on insurance and risk products, first-class service — both proactive and reactive, aggressive negotiations on our behalf and competitive fees; excellent reporting and analysis; and effective liaisons with our underwriters,” said an asset management company client.
“I personally think Andrew hung the moon,” said Bethany Spurrier, director of global benefits at Stewart & Steveson LLC. “He is the consummate professional that can speak to the executives as well as rank and file employees.”
Helping Investment Advisers Hurdle New “Customer First” Government Regulation
This spring, the Department of Labor (DOL) rolled out a set of rule changes likely to raise issues for advisers managing their customers’ retirement investment accounts. In an already challenging compliance environment, the new regulation will push financial advisory firms to adapt their business models to adhere to a higher standard while staying profitable.
The new proposal mandates a fiduciary standard that requires advisers to place a client’s best interests before their own when recommending investments, rather than adhering to a more lenient suitability standard. In addition to increasing compliance costs, this standard also ups the liability risk for advisers.
The rule changes will also disrupt the traditional broker-dealer model by pressuring firms to do away with commissions and move instead to fee-based compensation. Fee-based models remove the incentive to recommend high-cost investments to clients when less expensive, comparable options exist.
“Broker-dealers currently follow a sales distribution model, and the concern driving this shift in compensation structure is that IRAs have been suffering because of the commission factor,” said Richard Haran, who oversees the Financial Institutions book of business for Liberty International Underwriters. “Overall, the fiduciary standard is more difficult to comply with than a suitability standard, and the fee-based model could make it harder to do so in an economical way. Broker dealers may have to change the way they do business.”
As a consequence of the new DOL regulation, the Securities and Exchange Commission (SEC) will be forced to respond with its own fiduciary standard which will tighten up their regulations to even the playing field and create consistency for customers seeking investment management.
Because the SEC relies on securities law while the DOL takes guidance from ERISA, there will undoubtedly be nuances between the two new standards, creating compliance confusion for both Registered Investment Advisors (RIAs)and broker-dealers.
To ensure they adhere to the new structure, “we could see more broker-dealers become RIAs or get dually registered, since advisers already follow a fee-based compensation model,” Haran said. “The result is that there will be likely more RIAs after the regulation passes.”
But RIAs have their own set of challenges awaiting them. The SEC announced it would beef up oversight of investment advisors with more frequent examinations, which historically were few and far between.
“Examiners will focus on individual investments deemed very risky,” said Melanie Rivera, Financial Institutions Underwriter for LIU. “They’ll also be looking more closely at cyber security, as RIAs control private customer information like Social Security numbers and account numbers.”
Demand for Cover
In the face of regulatory uncertainty and increased scrutiny from the SEC, investment managers will need to be sure they have coverage to safeguard them from any oversight or failure to comply exactly with the new standards.
In collaboration with claims experts, underwriters, legal counsel and outside brokers, Liberty International Underwriters revamped older forms for investment adviser professional liability and condensed them into a single form that addresses emerging compliance needs.
The new form for investment management solutions pulls together seven coverages:
- Investment Adviser E&O, including a cyber sub-limit
- Investment Advisers D&O
- Mutual Funds D&O and E&O
- Hedge Fund D&O and E&O
- Employment Practices Liability
- Fiduciary Liability
- Service Providers D&O
“A comprehensive solution, like the revamped form provides, will help advisers navigate the new regulatory environment,” Rivera said. “It’s a one-stop shop, allowing clients to bind coverage more efficiently and provide peace of mind.”
Ahead of the Curve
The new form demonstrates how LIU’s best-in class expertise lends itself to the collaborative and innovative approach necessary to anticipate trends and address emerging needs in the marketplace.
“Seeing the pending regulation, we worked internally to assess what the effect would be on our adviser clients, and how we could respond to make the transition as easy as possible,” Haran said. “We believe the new form will not only meet the increased demand for coverage, but actually creates a better product with the introduction of cyber sublimits, which are built into the investment adviser E&O policy.”
The combined form also considers another potential need: cost of correction coverage. Complying with a fiduciary standard could increase the need for this type of cover, which is not currently offered on a consistent basis. LIU’s form will offer cost of correction coverage on a sublimited basis by endorsement.
“We’ve tried to cross product lines and not stay siloed,” Haran said. “Our clients are facing new risks, in a new regulatory environment, and they need a tailored approach. LIU’s history of collaboration and innovation demonstrates that we can provide unique solutions to meet their needs.”
For more information about Liberty International Underwriters’ products for investment managers, visit www.LIU-USA.com.
Liberty International Underwriters is the marketing name for the broker-distributed specialty lines business operations of Liberty Mutual Insurance. Certain coverage may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds. This literature is a summary only and does not include all terms, conditions, or exclusions of the coverage described. Please refer to the actual policy issued for complete details of coverage and exclusions.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty International Underwriters. The editorial staff of Risk & Insurance had no role in its preparation.