Booncast Episode 7: Adverse Selection & Fringe Benefits: The Cornerstone of Compliance Solutions and Competitive Contracting
Compliance, governing laws like the Davis-Bacon Act (DBA) and Service Contract Act (SCA), and making cost-conscious choices in an ever-evolving space. These are the challenges that have the greatest impact on government contractors. Committing to a benefit solution, for the long-term, can be a strategy that points contractors in a winning direction. Employee fringe benefits are what Boon does best.
Keith Stueler, Boon’s Vice President and Head of Sales, joins Booncast to provide a practical education on the unique relationship that contractors have with benefits and to share how a long-term fringe benefit plan can deliver on vital competitiveness.
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Hello and welcome to Booncast, a podcast where we discuss evolving healthcare needs and flexible employee benefit solutions. Join our experts for unique insight into the niche market of fringe administration, solutions to address the needs of the American employer and the hourly worker, compliance concerns, and updates on developing topics in the industry.
Caitlin Kennedy: Welcome back to Booncast! Today’s guest host is Keith Stueler, Vice President and Head of Sales at Boon. He’s here to discuss what Boon does best – and that’s fringe benefits. How contractors can maximize the fringe, the unique relationship that contractors have with benefits, and how a long-term benefit plan drives a competitive edge in the space. Keith, thank you so much for joining us.
Keith Stueler: Thank you, Caitlin. It’s great to be here. Really appreciate the opportunity.
Caitlin Kennedy: Absolutely. So in your own words, how would you describe Boon’s ultimate goal when it comes to the solutions we create for clients?
Keith Stueler: Ultimately, it’s about compliance. You know, you just mentioned compliance and the end result and everything that we do at Boon is to keep that contractor in compliance with the regulations they fall within. Whether it be the Service Contract Act, Davis-Bacon Act, or some other type of acts out there, such as Healthy Terminal, and some living wage ordinances out there that we help contractors with.
Caitlin Kennedy: So, speaking of contractors, you mentioned Service Contract Act and Davis-Bacon Act. What types of contractors do you typically work with, and maybe even beyond just the types of contractors themselves, who are the contractors that are in most need of your solutions?
Keith Stueler: Historically, you know, Boon was founded back in ’82. So we’ve been doing this for about 40 years now. Sterling Boon founded this company, a company working with Davis-Bacon contractors, and then over time our niche has fell within the Service Contract Act as well.
And then as things have progressed, across the industry, over the years, there’s been different municipalities, different ordinances established across the country that actually engage a health and welfare amount and/or fringe, whatever you want to call it. There’s many terminologies out there.
But historically, it’s been the Service Contract Act over the last 20 years. But it’s important to remember that the Davis-Bacon Act is truly what The Boon Group was founded on. And we have always, always worked in that particular arena.
Caitlin Kennedy: So a big part of what we do at Boon, and the cornerstone of the solutions we create is, we deal in the fringe rate. Fringe benefits. You know, the compliance, the administration, and calculation. Y’all are all on the cutting edge of it. So, in what ways can contractors maximize their fringe dollars? And what’s the benefit of doing so?
Keith Stueler: Well, the fringe contractor actually kind of has a leg up on, you know, say the private companies out there that are having to provide benefits out of overhead. These contractors actually get reimbursed by the government or entity to provide health and welfare benefits. So, employers in this space should truly, truly be looking long-term. Developing a benefit plan that makes sense, with a long-term strategy in mind.
You know. Employer paid dollars, which is what this industry is truly about, tends to drive more competitive programs over the long haul. And ultimately, that’s what groups in this space should truly try to maximize their dollars with. You have the flexibility of the fringe dollars. Use them to the to your advantage.
Caitlin Kennedy: So that whole long-term facet of things is really the point of this whole podcast. I know you started to touch on some of these ideas, but how can a long-term fringe benefit plan ultimately make a contractor more successful?
Keith Stueler: So when you have fringe dollars that’s being provided by the federal government here, why not use those fringe dollars to your advantage by paying 100 percent of your medical premium for the employee-only to drive that participation into your program. Which ultimately means less adverse selection into your plan. So the more premium into your program, into your plan, the better long-term you should be over the years.
Caitlin Kennedy: So you bring up the term adverse selection, which comes up often when discussing employee benefits. Could you define adverse selection for the listeners and get into some detail on what that means for employers?
Keith Stueler: Absolutely. Adverse selection, most people don’t think about it when they’re going in and working with the carrier, their broker, whoever it may be. But ultimately, adverse selection is when you offer a voluntary program, which means the employee is going to contribute some sort of that employee only premium. And they have the choice whether to take the plan or not. Well, in theory, and in reality, people that don’t think they need the coverage, they’re not going to pay for it. So they’re not going to enroll. And then, you know, the opposite end of that is, “Okay, well, I’m going to the doctor and I have a condition. I’m, you know, I’m kind of sick. So I’m going to take that plan.”
And that basically means that your sick people, historically, enroll in the benefits, regardless of the cost, and your healthy people do not. And that’s what you try to avoid when designing a benefit plan that’s going to work long-term. Because again, the more premium you have into your program, the less risk you’re going to have on the backside with adverse selection.
Caitlin Kennedy: Hmm, fascinating stuff. So, you know, there are some elements of… kind of benefit strategy. Employee benefits addressing problems, that’s sort of par for the course just in discussions of employee benefits. But getting into more of the here and now, what are some challenges in the current contracting space that you feel can be addressed directly through a benefit solution?
Keith Stueler: Biggest plan problem we’re seeing now is back to this adverse selection. Meaning employers have historically, you know, allowed the plan voluntarily. So the challenge with these contractors is how are they going to keep a plan that actually has a cost within the fringe amount? You know, the new rates are $4.41 and $4.60, respectively, depending on if it’s subject to the sick leave executive order. So, when you offer a voluntary benefit plan, claims are catching up with these plans as well as trend.
There’s no secret that inflation in the world today is a very common term. The cost of everything has gone up double digits, and that’s what we’re going to look at in the healthcare industry as well. Where trend for Q1 is already in double digits, where over the last couple of years, it’s been in the single digits. So being able to design a benefit plan to attract those employees to your company, that can be spent within the fringe rate is a challenge for these contractors. Which is another reason why maybe they need to think outside the box. Let’s think differently than traditional methods. And let’s think “Hey, I’ve got these fringe dollars here. How can I best utilize them to sustain a longer-term strategy?”
And, you know, when when these employer groups hear that, it makes sense, and they understand that they need to do it. But they also have the challenge of, you know, what’s that going to mean for attracting employees where historically they’ve been, or retaining employees where historically maybe they’ve been paying those fringe dollars in the paycheck. But, you know, the only method around that is to take those fringe dollars, use them to the advantage of the employee benefit plan. And then ,ultimately, it’s going to design a better cost predictability model over time.
Caitlin Kennedy: Just fascinating stuff. You know, I really appreciate just that forward momentum and innovation, the forward thinking. I think that you summarize beautifully, just kind of what works with the solutions offered at Boon. Keith, we are coming up on the end of our time. So we like to end our interviews on this essential question: In your opinion, in your own words, what value does Boon offer our clients?
Keith Stueler: Ultimately, you know, it’s a great question. But ultimately, the biggest… I’ve been doing this for 20-something years now and you know, there’s always value in a conversation. Just like we’re having today. Having a conversation to see what actually makes sense for a group, because most people in this day and age they don’t want to be sold on anything. But if you have a conversation about: What’s going on? What makes sense? What can I do to change things up a bit? You know, then this, let’s just have that conversation.
Because, you know, quite frankly, not everybody is a fit for everyone. And the Boon Group is certainly not a fit for every contractor out there simply because of the, of maybe what they’re doing. But there’s always value in hearing what conversation is out there. Other ideas, you know, other thoughts. That maybe it’s not working today.
And then you know, ultimately, Boon is, like I said earlier, Boon has been in existence since ’82. And we’ve got a lot of experience in this industry, with a lot of long-term employees, where we have decades of experience in our Sales team that can work with these contractors to consult with them, and ultimately make the best decision for them.
Caitlin Kennedy: I love that. And I think what a perfect note to end things on is the value of conversation. the value of exchanging knowledge and experience. Keith, thank you so, so much for coming on today. We loved having you.
Keith Stueler: Appreciate it. Anytime and look forward to it.
Caitlin Kennedy: Absolutely.
That’s all for this episode of Booncast! Thank you for listening! Visit us on www.boongroup.com for more podcasts, blog posts, and information on Boon’s benefit offerings.