MetroWest495 Biz

Then, this past year, the number of workers sign- ing on for insurance through the job jumped from around 45 to more than 100. "You run your budgets based on historical aver- ages," Ciffolillo said. "All of a sudden, there was a buffalo stampede of people jumping on the plan ... It's a problem as a business owner. Our customers aren't letting us raise prices and we're not in a high- margin industry. We're not making software; we're not Microsoft." Greenscape's insurance broker suggested a new option. Instead of offering a set percentage of every plan, the company could focus on a single, middle- of-the-road plan and set a percentage of that pre- mium it would be willing to pay. Then, all employees opting for employer-based health insurance would get that sum of money and have the option to apply it to a number of different plans. Workers could pay extra for a fancier plan, or less for a bare-bones op- tion. Ciffolillo went for the idea and ended up with a simpler enrollment process and lower overall costs. Increasing popularity MetroWest insurance brokers say this type of in- surance arrangement, known as defined contribution, is on the rise locally and across the country. It got a strong boost at the start of this year, when Blue Cross Blue Shield of Massachusetts rolled out My Blue Choices, a program for businesses with 20 or more employees that simplifies defined contribution insur- ance plans for employers and employees. But while it can lower employers' costs, it may force employees to shoulder more of the rising costs of health care. Yet, it also gives them a chance to assess their own needs and conduct a cost-benefit analysis to determine what coverage is best for them. Larry Croes, vice president of sales for the insur- ance carrier, said the program is powered by what's sometimes called a private exchange. Using third- party software, the My Blue Choices website asks employees questions about their lifestyle and health history and then suggests their best options for insurance, using a set contribution and an array of plans chosen by an employer. Companies can also let workers use their funds to buy other products, like dental insurance, short- or long-term disability plans, or even pet insurance. "The software is really very sophisticated," Croes said. "It's a very clever concept, and it does give em- ployees a lot more choice than they ever had before." Croes said the carrier is rolling out the plan now because technological advances have made it more feasible. Strong software makes the process of buying insurance comparable to shopping for plane tickets on Travelocity, and is the kind of online experience customers expect, he said. At the same time, he said, access to the Internet is more widespread than it was just a few years back. "Five years ago, people would say, 'Half my workforce doesn't have a computer,'" he said. "Now it's not just that everybody has a computer, they now have a smartphone, too. ... I don't think there's any issues around access." Croes said the private exchange takes the burden off employers in two ways. The interactive website helps workers think through their insurance needs without assistance from a human resources manager — something that can be particularly appealing for small firms with limited resources. And the defined contribution aspect allows employers to set their expenditure level for each year without having to choose between paying for double-digit increases and cutting back on offered plans. It's similar to the switch from a traditional pension to a 401(k) plan that many employers made years ago, freeing the em- ployer from some of the risks of an unstable market. "What defined contribution does for you is says, 'OK, I'm not going to play the game of downgrading my benefits,'" he said. "The burden now is on the employee. The employer is no longer the bad guy." Gaining ground with smaller employers Ted Kane, managing principal of 21st Century Benefit Advisors Inc. in Southborough, said private exchange and defined contribution plans have been gaining ground among large employers and are starting to become more available in smaller-group markets. "At the moment it's pretty small, but it's definitely an emerging trend in the small and mid-size mar- ket," he said. He said defined contribution plans are expected to rise from less than 20 percent of the market to 40 or 50 percent within the next two or three years. "It makes sense from a cost perspective and from a choice perspective," he said. With older employees staying on the job longer, he said, companies need to find ways to provide insur- ance options that appeal to 22-year-olds, 82-year- olds and anyone in between. Ellen A. Kaplan of Group Health Specialists, a Framingham broker that specializes in small groups, said the federal Affordable Care Act is pushing some employers toward defined contribution plans as a way to make sure they're offering an option that's considered affordable under the law's guidelines. Unlike Croe, though, she said she's still concerned 14 MetroWest495 Biz | February 2014 s continues on page 21 BY LIvIa GErshon l ike many small business owners, Joe Ciffolillo of Greenscape Land Design in Taunton has found health insurance a frustrating subject. For years, he offered a range of plans for his workforce of about 300 employees, many of them seasonal workers. But administering the plans was a hassle. And since Greenscape paid the same percentage of each plan's premiums, regardless of their total costs, he worried that the difference in payout to each employee amounted to a kind of discrimination. 9 1 15 9 27 19 30 30 31 40 Public Private 2014 2015 2016 2017 2018 (* - run by federal or state governments) Source: Accenture, May 23, 2013 Projected monthly enrollment, private vs. public* exchanges (in millions) Like 401(k)s for health insurance The rise of defined contribution plans and private exchanges

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