Preparedness plans for the next recession
How are brokers and employers preparing for a potential recession?
“When the next recession happens, what will be the biggest impact on your business and your clients/? What preparations are being made?”
Lessons from the past
I think the biggest impact for our clients is a reduction in staff and how that affects their total operations. Employers have challenges when reducing staff, including government regulations, employee morale and overall efficiency of operations. As they look towards cost reduction, their biggest spend is on wages and employee benefits, and these are therefore the first places they often look to cut without considering any potential unintended consequences. During the last recession, we found our clients struggling to remain profitable and making quick decisions rather than clearly thought-out actions.
We understand these challenges, having assisted clients in the past as they’ve made difficult decisions in order to survive. In addition, this time, since HR is one-third of our practice, we have a heightened awareness of decisions affecting employees and their families. It is important for us to educate our clients on HR best practices, including employee benefits, and prepare them in the event of a recession.
Barry S. Cohn, president and CEO, Really Great Employee Benefits
New opportunities?
My first thought is that the pool of high-quality individuals will increase and allow those employers on a growth curve to attract and hire the needed talent that isn’t available today.
Jim Blachek, CEO, The Benefits Group
Next question, please
I would guess you are getting few responses because very few of us are taking steps to prepare for the next recession, and we don’t want to think about it. I, for one, plead guilty to this.
Melissa Burkhart, founder and president, Futuro Solido USA
Preparation pays
Personally, the biggest impact will be helping employers understand that today is the best day to prepare for an uncertain tomorrow. Depending on the industry, the impact of a recession may take months or years to trickle to their bottom line. Start to focus on talent and the cost control areas of your business that you know need better managing. As an advisor and Eagle Scout, my job is to educate employers on how to best be prepared. Be a good Scout. Your mission is to be prepared, as best you can, for the uncertainties of a recession.
How do the next two years look if you could cut 10–25% of your health care spending in order to increase your cash flow during turbulent times? It will be the employers that find every available strategy to lower costs and keep their best talent that make it through the tough times. A great culture is a family that works together to get through the hardships that are out of their control.
Robson Baker, employee benefits advisor and HR advisor, Clarus Benefits Group
Medicare immunity
I thought about different ways to respond but I just don’t think we’ll see much of an impact because we work with Medicare, a necessary evil. People may get coerced into cheap Medicare Advantage plans, but that happens now, regardless of the economy.
Joanne Giardini-Russell, owner and Medicare Guru, Boomer Health Group
Small businesses, big challenges
When the next recession happens, the biggest impact on my business and my clients will be the decline of small businesses. Not only does our book consist of a healthy portion of small businesses, but we as an agency also rely on several local businesses as referral partners and vendors. Our small town of Delaware, Ohio, essentially thrives on small businesses and the reciprocal relationship we have with one another. Many of them do not have the cash flow to survive a recession and could be forced to slow hiring and/or production, or even close their doors.
A decline in enrollment obviously affects our bottom line as an agency, but we would also see many of our clients drop benefits or increase health insurance deductibles to keep cost down, creating a lack of ability for them to attract and retain talent.
We are preparing our clients by not selling them benefits that are out of their current scope of need. We also spend time coaching them on strategies for handling premium increases and introducing creative solutions like self-funding and gap products. We educate employers and employees about cost-saving mechanisms like HSAs, prescription savings programs, and proper planning of in-network medical care whenever possible. We handhold our clients and their employees in whatever stage of business development they are in, so that they don’t overextend themselves and so that they can properly plan for a rainy day.
How do we prepare ourselves as a company? Internally, we focus on hiring the right people, providing a safe and healthy working environment that’s supportive of family and personal needs. We work on identifying inefficiencies, streamlining our processes and utilizing better technology wherever possible.
By striving to continually better ourselves, our systems and processes, we are able to build strength so that when we fall on hard times, either as individuals or collectively, we are there to support one another and able to stand together against whatever adversity comes our way. I’m proud to work for a small, locally owned business and I believe that a recession would hit us hard, but it wouldn’t knock us over.
Sarah Fisher, trusted advisor, Creative Financial Insurance
Survey says…
Each year, we conduct a survey that provides insight into the client-broker relationship and identifies some of the most significant challenges facing brokers. Many of these challenges only become more pronounced when a recession hits. Here are four of the most important issues that came up in our most recent survey:
• Cost containment. Employers cite the rising cost of health care as their number one challenge. This becomes even more pertinent when the economy takes a dip.
• Benefit planning. According to our survey, 86% of employers believe it is important that their employee benefits broker creates a multiyear strategic benefit plan that aligns with company goals. Planning is essential for a recession. Consistent planning will keep the employer agile and find the right plan design to protect the bottom line.
• Talent attraction/retention. Right now, talent attraction and retention is a top-five employer concern — and this is during a good economy. If we have a negative change, employers need to be ready from an attraction and retention standpoint. They will need to understand what candidates they will be talking to, how much to pay them, and how to market their business to talent in this new economy.
• Compliance. The last thing a business needs in a down economy is a U.S. Department of Labor audit, a compliance fine/penalty or a lawsuit. But staying on top of ever-changing compliance issues is a real challenge.
Jamie Nelson, senior content attorney and market analyst, Zywave
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