By Rick Ramos
With more than 32 years of experience as an employee benefit specialist, Suzy K. Johnson understands benefits better than most. She is president and owner of Employee Benefit Advisors of the Carolinas. I had a chance to speak with Suzy and ask her about her thoughts on the industry and where we are headed.
Rick Ramos: Suzy, you’ve qualified for the NAHU Soaring Eagle agency recognition award each year since its inception in 2010. What’s changed most in the benefits space in the last seven years?
Suzy K. Johnson: The better questions is, “What hasn’t changed?” We used to primarily do small groups under 100 employees and now we only prospect groups with more than 50 employees. Our average new case used to be 35 lives and now we average around 115 employee lives.
We used to educate about how small groups under 50 employees were rated based on their risk factor, but now it is only ACA community rates or level-funding with underwriting questions for groups of 25 or more in North Carolina.
In 2008, we received a lucrative percentage of commissions along with handsome volume overrides from carriers. This meant we had an automatic increase in annual revenue, even if our new production wasn’t what we targeted. Now we are paid a per employee per month (PEPM) fee for group health of all sizes. Now when employers lay off workers, our revenue decreases. As a result, we must continuously sell new consulting work to grow revenue and the company.
The Case for Employer Sponsored Group Disability:
Are you providing group disability benefits for your employees?
Today only about 40% of employers actually sponsor a group disability program for their employees but it is one of the most important benefits that an employer can offer after group life, group health insurance and a 401K plan.
Did you know that roughly 25 percent of people entering the workforce today will have their income interrupted for 3 months or more due to illness or injury?
Most commonly this is due to musculoskeletal issues, depression or other mental/nervous disorders or cancer.
As you might expect, older individuals are more likely to file a claim, however companies with young women see a lot of claim activity under Short Term Disability for maternities. The plan will pay for the period the Doctor disables that employee upon giving birth.
Group Short Term Disability provides an income replacement for a disabled employee equal to 60 or 66 2/3% of their pre-disability income and it can be created to be a tax-free income replacement. Typically, a Short Term Disability benefit will begin paying after two weeks of disability and the employee receives a weekly check up to a maximum of $1500 week.
The costs for this coverage is related to income but averages about $18.00 to $20.00 per employee per month.
Group Long Term Disability plans typically begin paying after an elimination period of either 90 or 180 days (can be designed to dovetail with the Short Term Disability benefit) and typically cover 60% of pre-disability income up to a monthly maximum. These programs can be set up to provide a taxable or tax-free benefit (a tax-free benefit typically costs a little more). The total cost of group disability is based on the contract, industry and income of the employee however, the average group cost is $20 to $25 per employee per month for a comprehensive plan.
A quality group Long Term Disability plan will typically provide benefits for as long as the employee is disabled up to their normal Social Security disability age.
These plans are good for employers as well. There is a premium cost but it is a benefit employees appreciate and are looking for and the plan can be designed to share the low group rate with the employee if they elect coverage.
If you have a group disability plan in place the disability benefit is what will be paid to the employee if they become disabled. You as an employer can feel good about the fact that you put a plan in place to provide income security for that employee.
Further, you don’t have to struggle with decisions about how long to keep their job open and when you can actually begin finding someone to replace that person’s job duties.
After the FMLA period is met, the employee can be terminated and offered Cobra coverage. If there is a job for them when and if they become well enough to return to work, there is no problem hiring them back but no obligation to either.
All in all, group disability insurance is a “win/win” for the employer and the employee and more employers should be offering this benefit to attract and retain the best employees.
Suzy K. Johnson
Employee Benefit Strategist