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The AGC Alternative Cuts Cost and Burden of Health Insurance

Also provides greater employee flexibility and choice

Throughout the construction industry, business owners are looking for ways to better manage the burdens of providing health and other insurance benefits to their employees. The Affordable Care Act (ACA) requires many employers to provide broader coverage for health care, and the cost of such care continues to climb, pushing up premiums for both employers and employees.

According to the 2014 Milliman Medical Index 1, employers have seen the average cost of providing health care coverage increase 52 percent since 2007. Employees have seen their costs increase 73 percent over the same period of time. In an industry heavily dependent on a large labor force, even small increases in insurance premiums can have substantial impacts. They hit a contractor’s bottom line and an employee’s family budget.

“I have heard about some business owners that experienced double digit increases over multiple years,” says Terry Wooding, executive vice president of Petra Construction, an AGC of Connecticut and AGC of Massachusetts member. Providing health care coverage to all full-time employees in the 100-employee company has been pleasantly free of such financial surprises but it is still a burden. Administration of the program has become a significant issue. “We’re not currently overwhelmed, but our two human resource (HR) staff members spend a lot of time educating employees about options during the enrollment period and answering many questions,” Wooding explains.

“As the construction industry recovers from the recession, and good workers become harder to find, more and more construction contractors are finding that providing quality health insurance and other benefits as part of an employee recruitment and retention program makes good business sense,” says Michael E. Kennedy, general counsel for AGC of America. “At the same time,” he adds, “the cost of providing such benefits, and the time and effort necessary to administer them, can be hard for companies to cover.” AGC developed its new insurance program to help its members meet these challenges, “giving them an affordable and effective way of meeting their need to attract and retain good people at a cost they can control.”

The AGC Alternative is a private insurance exchange AGC of America has developed in conjunction with Willis North America. It offers AGC members an entirely new way of managing the costs and administrative burdens of providing health and other insurance benefits to their employees. Unlike many of the public insurance exchanges, a private insurance exchange configured to meet the needs of a specific company will work very well. The proven technology is fast, reliable and intuitive, and includes options for not only health care but also dental and vision care, and disability and life insurance coverage.

Unlike the traditional health insurance plans that employers have long sponsored, in which the employer commits to pay a percentage of the premium, the AGC Alternative is a defined contribution plan. Much like the 401(k) plans that have replaced most of the defined benefit pensions plans, the AGC Alternative enables an employer to set a specific dollar amount that it will give to its employees to purchase their health and other insurance benefits from the employer’s private exchange. Willis will help the employer determine the size of the contribution that the ACA requires the employer to make and all of the plans that the exchange offers to employees will be compliant with the ACA.

“As each employer signs up for the AGC Alternative, consultants will work with employers to determine the contribution level that best meets each company’s goal to provide affordable insurance to employees,” says Jim Perrin, senior vice president at Willis. Moving to a defined contribution model enables companies to know exactly what their insurance costs will be on an annual basis rather than basing predictions on the outcomes of the open enrollment period, he adds.

Employees will have the flexibility to spend the employer contribution on a combination of benefits that fit their lifestyles, taking advantage of the greater variety of health and other insurance options that the exchange will offer.

“While many large companies have been able to offer a wide variety of health insurance plans and supplemental programs to their employees, smaller companies with fewer than 150 employees have found that hard to do,” says Christi Reimer, director of AGC’s private insurance exchange. “Insurance companies have not been willing to give the smaller companies the discounts they need to cover the cost of creating their own exchanges, and for most small companies, the administrative burden of offering a lot of choices to their employees has been too great.”

AGC anticipates that the AGC Alternative will offer an initial range of five to seven health insurance plan options with a variety of supplemental programs such as dental and vision, says Kennedy.

The burden of administering the health and other options will be eased by the exchange’s web-based, online enrollment and management platform. The platform provides companies a way to easily enroll employees into their private exchange, allows employees to shop online for the best available plan options based on their lifestyles and contribution dollars, and provides both administrators and employees a turnkey portal for managing health care and other benefit plans throughout the year.

“The exchange platform is more than an enrollment site,” explains Perrin. “We offer decision-support tools to guide employees as they evaluate their benefit options.” After asking employees questions about family, health and lifestyle, the system will produce recommendations that fit each employee’s needs. “Of course, employees make the final decision, but we walk them through the process so they understand each option.”

In addition, the AGC Alternative will be backed by telephone support for employers and employees with questions or who need technical assistance, says Perrin. “The telephone support is ongoing, not just during enrollment, which will remove some of the administrative burden from the HR department.” Employees with no access to the Internet, or who are not comfortable with online tasks, can also enroll by telephone.

AGC will identify primary carriers for different insurance products such as health, life or dental insurance, and then negotiate a discount that is applied to the underwriting proposal prepared for each employer. “Because we’ll give a single carrier access to all members in the exchange, as opposed to a single company, AGC’s negotiating power is greatly increased,” explains Kennedy. The proposal for individual employers will be based on typical underwriting parameters such as number of covered lives, employees’ age and health history, and plan options offered, and then the discount will be applied. “Carriers benefit because they get easy access to potential customers with no additional marketing efforts and employers benefit because they gain discounts.”

“AGC member companies will get lower rates from our selected carrier through the AGC exchange than they would be able to go and get directly from that same carrier on their own,” says Reimer. Members may be able to get lower rates from different carriers, but they won’t get lower rates from the same carriers, and other carriers won’t include the robust technology needed to reduce the administrative burden and enable smaller companies to offer a variety of plans comparable to the AGC Alternative, she adds.

To ensure a successful roll-out for employers whose plan year begins January 2015, the program will be phased in according to regions covered by a national carrier that will anchor the program, says Kennedy. “We believe that the anchor carrier will be either competitive or highly competitive in roughly half the states,” he explains. “The focus in 2014 will be on those states, and in particular, on the states where we also have chapters that are interested and engaged.” In the fourth quarter of 2014 and 2015, AGC will turn its focus to the states in which the anchor carrier is not a predominant player in the market. And AGC of America intends to have open and continuous dialog with the AGC chapters that already offer some kind of health care plan, looking for ways to enhance whatever those chapters are already doing, and being careful to avoid any disruption.

1 The Milliman Medical Index is an actuarial analysis of the projected total cost of healthcare for a hypothetical family of four covered by an employer-sponsored preferred provider organization (PPO) plan. Unlike many other healthcare cost reports, the MMI measures the total cost of healthcare benefits, not just the employer’s share of the costs, and not just premiums. The MMI only includes healthcare costs. It does not include health plan administrative expenses or profit loads.

Introduce New Process Using Familiar Forms for Greater Success

Construction industry business owners are not just talking about the challenges of health insurance coverage for employees. They are taking steps to reduce their administrative costs and streamline their own enrollment process.

At Petra Construction, a member of AGC of Connecticut and AGC of Massachusetts, changes in the enrollment process have resulted in more efficient use of human resource (HR) personnel and introduced the use of technology into the process. Although the majority of Petra’s 100 employees are located in Connecticut, making educational sessions easier to schedule, the company’s full-time staff includes some field employees in key trades such as carpenters and masons. Communication as well as distribution and return of enrollment forms is more challenging with field employees who don’t normally come into an office, admits Terry Wooding, executive vice president of Petra Construction.

To streamline the actual enrollment process for the 2014 plan year, Petra offered employees an opportunity to complete enrollment forms online. The electronic “pdf” forms were sent to HR staff who uploaded the information directly into the company system. “This is not a true online registration but employees were comfortable using a format they often use in their day-to-day jobs,” says Wooding. Because 50 percent of forms filed were completed online, less time was spent by HR inputting data, he points out.

Wooding says his company will continue to evaluate other options for coverage and enrollment to minimize cost increases and administrative burden of providing insurance each year. “I’m glad that AGC is developing an option that may be of value to us in coming years. A company our size cannot negotiate discounts or support that the AGC Alternative can offer to small or mid-sized companies.”