Episode 27: Tips on Open Enrollment, Employee Benefits Strategies

Welcome to the Workplace, a podcast by Cal Chamber. I'm Erica Frank, Executive Vice president and General Counsel of the California Chamber of Commerce, and with me today is Vinnie Catalano, senior vice president of Gallagher Benefit Services. Vinnie, welcome.

Morning, Erica. How are you today?

I'm doing great. Vinny, you're senior Vice president, the Gallagher Benefits, right?

Gallagher is a big company. We are the third largest insurance brokerage in the United States with several hundred offices spread around. Our practice in my office here in Sacramento is employee benefits. We live and breathe all of this, all the time.

That gives our audience a little glimpse into what we're talking about today. And it is related to employee benefits, but more specifically, open enrollment, because it is open enrollment time.

Yes, ma'. Am. Words strike fear into the hearts of most HR professionals. It's this one time a year where everything becomes very fast paced, very transaction oriented. But there's a lot of things that need to be done ahead of time and thought of in order to make an open enrollment season very successful.

It kind of reminds me of Christmas and the holidays, the rush of getting all your shopping in before the big day.

Absolutely. And you should see our office. You know, our office is already, you know, thinking it's already January 1st. I mean, our team of accountants, account managers is very much geared up, talking with our clients, having discussions with the carriers, negotiating renewals. It's a very active time already.

And why is open enrollment so cringy for HR professionals and employers, for that matter, that gets their heart skipping a few beats?

Well, that's a great question. And I think it really falls back on this notion of the mystery of what is the increase going to be, because it's rarely ever a decrease, as we know, especially pertaining to health insurance. And so when we're looking at the unknown of an increase, there are times where I feel like I'm walking in with a Superman cape. And another time I feel like I'm walking in like the grim reaper. I'm not quite sure which. It depends on the year. And so there's a lot of moving parts to open enrollment. And once we establish what the strategy is for the plans and rates, then things do settle in. But I think, you know, when you're dealing with people's health and well being, there's a certain natural tendency for business owners and C suite and HR professionals to. There's this soft side. I mean, you're dealing with people's health and their wellness and their personal issues that is a little bit uncomfortable for some organizations to deal with because they're making decisions, you know, what level of benefit do we use? A high deductible strategy? Do we have a normal copay? What changes do we make? And change is generally uncomfortable.

Change is uncomfortable. And like you said, especially when you're dealing with personal issues, health benefits, all those types of benefits that employees want, that employers want to provide. And in this competitive landscape right now, employers cannot turn, turn a blind eye to the value of benefits.

No. And they're expensive. I mean, you know, our surveys show, you know, definitely that the combined benefits that employers are offering, you know, health, life, dental, disability, you know, 401k, et cetera, et cetera. You know, this is running, you know, 20 to 30% of the cost of payroll. You know, that's a huge number. And now all of a sudden, and not all of a sudden, but maybe in the last, you know, two to three to four years, it's definitely been on the minds of CFOs and business owners as they're looking at a line item, their second largest cost next to payroll, with the exception of their manufacturing company. They have the cost of goods and such, but for the most part, benefits is a very expensive line item for them.

What are some things that we can provide or some tips we can provide to employers out there as they prepare for open enrollment? What are some things that we could, some suggestions that we could give them to make it a little bit more palatable and also help them get the word out to their employees as far as the value and investment that the employer is making in the employee by providing these benefits.

Right. I think that those are some great issues. Communication is tremendously important. And I think, you know, everybody talks about open enrollment, quote, unquote, season. And a lot of times employers and unfortunately their consultants start too late to really develop a proper plan. So for me, the sooner we engage in conversations with our employer clients, the better so we can understand, you know, what their objectives are. And not only for this open enrollment, but frankly, the next three to five open enrollments, you know, what is this? What is, what does a longer term strategy look like in terms of benefits? In fact, unfortunately, over, you know, 60% of employers, according to the Gallagher Employer Benefits Survey, do not have more than a one year strategy that they're not really employing a multi year benefit strategy. So, so looking at doing things in a timely manner is incredibly important. That's number one. Number two, I think it's also important to really have a communication strategy. You could spend a lot of money on a lot of different benefits, but you Know, your employees are probably not appreciating what you are spending on benefits. And a lot of employers are not even using the simplest thing like employee benefit statements, you know, to show employees what their, you know, annual spend is or the total cost. So someone might be making, you know, 50,000 a year, but the total cost of their benefits could really be another $10,000. And the employee doesn't even know that the employ. So using total reward statements are very important in this current era of digital communications. Why are we still using paper.

In the employee benefit space? You know, technology definitely serves a very strong purpose and so does social media and so does, you know, technology. You know, whether webcasting or webinars or podcasts or any number of vehicles. I just actually started working with one of my clients to do a podcast that they're launching monthly on things like wellbeing and any number of topics to educate their employees on what their benefits are, how to get the most out of them. And so developing a proper communication strategy is very important. This particular client happens to be a large one and they have an internal marketing communications group that does an amazing job at pushing out branding and marketing to the world about their own organization. But we have to show them the path. We have some internal consultants that can help with that to show how they should refocus their messaging internally on employee benefits and such.

Those are very good points. Circling back to some of the things that you've just talked about as far as that five year plan for benefits, I think that's extremely informative because you're right, the open enrollment season comes, phew, we got over it. And then we'll just deal with it again. Again, it's just like Christmas. I know there's some people out there that do the after Christmas sal get stuff for the following year, but I'm done at that point. I could see that the same would be true when we're talking about health benefits and whatnot. I appreciate the suggestion of looking at it more from a long term perspective, particularly if we're continuing to see a trend of an increase in healthcare costs. That certainly is a way in which employers can start to plan so that when they meet with their broker or when they speak with whomever their carrier is, they're not knocked over by whatever the news might be. Like you said, whether you're a superhero or grim reaper. The other thing that I think is extremely helpful and something that I think employers should really take note of is the impact of communicating with your employees and letting them know how Much you're spending on their healthcare. That to me is a huge way of maybe breaking some misconceptions that employees might have about their salary, what the employer is doing for them, and also perhaps lessening the desire for, you know, with this competitive market, employees going to other places thinking that the grass is greener on the other side.

No, absolutely. I mean, you know, for people, for the layperson to compare benefit plans, I mean, I do it every day, so. So, I mean, it's a natural part of what I do. But for the layperson to compare benefit plans from company to company, you know, they look at, sometimes they look at the wrong things. You know, oh, the copay is only $20 here or $25 there. There's so many. That's a very simp view of how you evaluate one plan versus another plan. There's so many facets to an employee benefit plan. One of the things that I really enjoy talking to my clients about and potential clients about is the most boring benefit in the universe, and that's long term disability. Okay, so when you look at structuring a benefit plan, obviously health insurance is the most expensive one. And then most other people focus on the things you touch and feel. Okay, well, you have the dental benefits, but, you know, dental insurance, quote unquote, is really a benefit. You have a fifteen hundred dollar or two thousand dollars annual utilization that you have access to vision, you know, even less. You might be, you know, basically spending money on a vision benefit that really to the employee is really a $500, you know, annual benefit. Long term disability is one where, you know, I hate those words. Long term disability sounds grim. I like to call it income protection. Okay, how do we structure it in a way that we're protecting the employee's paycheck if someone has to go out on disability beyond a long period of time. Now, state of California employees, you know, most of them are covered by state disability, which covers them for 52 weeks. But beyond that, what do they do? And so a lot of employers don't grasp the notion that if I'm putting in a structure of a program that protects 60% of someone's paycheck, up to 10,000 bucks a month, that's a significant benefit that can pay tens of thousands of dollars over a person's career if they get disabled in their mid career, if they get disabled in their 40s and can never go back to work, they have a paycheck until they're 65 coming from the insurance company. So I consider disability, long term disability. The second most important employer paid benefit that there is. And one of the things, even if an employer has a long term disability plan, and this by extension goes to life insurance and other, because your consultant or broker comes in and says, hey, you got a rate pass this year? Oh, whatever it might be, that doesn't mean that the market is in bearing a lower cost out there. So it's important to review, you know, the cost and every couple of years go to market on things like life and long term disability. And then the other little tweak on that is making sure that the benefit itself is going to be paid to the employee on a non taxable basis. So a lot of employers structure their long term disability plan where the employer pays 100% of the premium. Well, if they pay 100% of the premium, the employee's benefit gets taxed. If they structure it where they're actually grossing up the employee's wage for a little bit of the monthly premium, then they get paid tax on that, then the benefit is tax free. So these are the annual things that people should be mindful of. Contract reviews are important. Make sure the benefits are rolling, make sure the contracts are solid, make sure there are none of these little quirks like the ones I'm talking about in long term disability.

Vinny, this is all fantastic information. We're almost out of time. What I want us to conclude upon is have you perhaps inform our listeners a little bit about some of those other benefits we talked about. Long term open enrollment and employee benefits isn't just about health insurance and dental.

Insurance, so many other things.

And this is something that could get folks excited about. I don't know, just that menu of options that sweeten that pot too when we're looking at recruiting in such a compet. So I'm going to just say hit it on some of those other benefits.

There's so much there, I mean there's so much opportunity to offer employees things that don't necessarily cost the employer a lot. Right. So there's a whole obviously suite of voluntary benefits and carriers, a lot of the carriers are offering things like critical illness and hospital indemnity plans and accident insurance and pet insurance has all of a sudden become all the rage. There are a lot of tools out there now for people to help them restruct their student loans. Okay. Employers are starting to give employees annual, you know, low cost, a few hundred dollars here or there stipends to be engaged with charitable causes of their choice. Okay. One of the things that employers are starting to hear and we're hearing in a lot of surveys is that employees want more flexibility. So how do we do that? Do we give people Friday afternoons off? Do we give people more flexibility to work from home? This, you know, you have five gener in the workplace. Okay, today, when we're looking at people in their coming out of college, in their mid-20s, early 20s, to people in their now-60s who are working beyond the normal retirement age, how do we structure things? And there's so many options of programs that are available to just they don't cost the employer a lot, but they work toward building loyalty with their employees. And those few things I touched on are just the tip of the iceberg. I mean even down to having a dry cleaning service come to do pick up dry cleaning at the office, providing healthy meals to, I mean in Silicon Valley, and you and I talked about this before, but in Silicon Valley, I mean, you know, people are feeding their employees three meals a day. I don't suggest doing that. That's very costly unless it's a salad bar. And providing some healthy meals for your employees.

I'm thinking massage chairs.

Massage chairs do work.

Nanny pedi. Absolutely.

No, you can have those come in too.

But I think we're now digressing onto other issues, so I'm going to call it a wrap here. And thank you so much for coming on to our podcast today. Thank you for joining us at the workplace. Please comment, share and subscribe to Cal chambers podcast@calchamber.com.