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Wellness for Small and

Mid-Size Businesses

Lee Dukes

President, Principal Wellness Company

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1. Recognize and establish the value of wellness

programs for small and mid-size employers.

2. Identify resources for implementing and

maintaining a successful wellness program.

Learning Objectives

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• Info about the SMB market

• Challenges for the SMB employer

• Advantages for the SMB employer

• Action steps for SMB employers

• Resources for SMB employers

Overview

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SMB Industry Profile – Firm Size

U.S. Employers Number of Businesses by Firm Size

(Firms with more than four employees)

5 to 49

100 to 999

1,000+

2 mm

94k

9k

# of Businesses

# of employees in firm

• Businesses with 5 to 99

employees…

• Number 2.1mm; 95% of

these have less than 50

employees

• Employ 55mm people, or

nearly 50% of the total

U.S. workforce

• Will see a CAGR of their

employee base of 2.1%

between ‟10 and „16

• Firms with 4 or fewer

employees represent 60% of

all U.S. businesses, but only

6% of the workforce

Source: Moody‟s Forecast, July 2010; U.S. Dept of Commerce, Census Bureau, December 2010

50 - 99 123k

According to the U.S. census bureau, the new business survival rate is 70% after 2

years, 50% after 5 years, and only 33% after 10 years. In 2010, new business births

outnumbered deaths 1.8 to 1

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SMB Industry Profile – Growth Segments

Source: Moody‟s Forecast, July 2010, Dun and Bradstreet

• The 5 to 99 employee SMB segment is expected to steadily grow in the

next five years

• While most industries project some growth, the Professional and Business

Services and Health Care / Social Assistance industries will see

exceptional increases in employment, with projected growth rates of 52%

and 43% respectively from ‟08 to ‟18

• Certain segments with small bases, such as minority owned businesses,

are seeing strong growth rates (% owned by and % growth rate since

2002): Hispanic 8%, 44%; African American 7%, 61%; and Asian 6%,

41%

52

54

56

58

60

62

64

2011 2012 2013 2014 2015 2016

Em

plo

ymen

t (m

m)

2,000

2,050

2,100

2,150

2,200

2,250

2,300

2,350

Fir

m's

(00

0's) The number of firms

with 5 to 99

employees is

projected to grow by

180k from 2011 to

2016

Employment in

firms with 5 to 99

employees is

projected to grow

by 6.5mm people

from 2011 to 2016

Firms

Employment

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SMB Industry Profile – Employee Benefits Plan Funding

Source: LIMRA, 2010; Eastbridge 2009.; Employer Council on Profit Sharing, 2010; Note - Voluntary defined at Principal as plans

where employees fund more than 50% of cost; where Eastbridge defines it as 100%

How Benefits Plans are Funded Today

(firms with 2 to 49 employees)

Anticipation for FundingNew Benefits

(firms with 2 to 49 employees)

35%

47%

48%

48%

48%

48%

52%

53%

57%

66%

67%

70%

70%

24%

43%

34%

38%

40%

44%

33%

22%

31%

23%

24%

26%

26%

41%

10%

18%

14%

12%

8%

15%

25%

12%

11%

9%

4%

4%

Cancer Insurance

Life

Accident

STD

LTD

AD&D

Critical Illness

Supplemental Med

LTC

Dental

Vision

Presciption

Medical

Company Pays Part Company Pays All Employee Pays All

15%

11%

11%

66%

76%

79%

88%

11%

7%

5%

20%

1%

3%

2%

5%

Vision

Dental

Presciption

Medical

Company Pays All Company Pays Part Employee Pays All Don't Know

The percentage of companies willing to pay the entire cost for benefits plans (green

bar segments in both charts) is anticipated to shrink

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Wages and

Salaries, 70.8%

Legally Required

Benefits, 8.2%

Paid Leave, 6.8%

Supplemental Pay,

2.7%

Insurance, 8.0%

Retirement and

Savings, 3.5%

Source: Bureau of Labor Statistics – Dec. 2010, mid-size businesses, private industry; ADP, PWC

According to a study

by ADP/ Price

Waterhouse

Coopers, mid-size

employers spend an

average of $348 per

employee per year

on benefits

administration

Breakdown of Employee

Costs for Employers

SMB Industry Profile – SMB’s Benefits Spend

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SMB – Current and Emerging Trends

Source: Deliotte, Towers-Watson

Healthcare Reform – Misunderstanding,

Concerns, and Opportunities

• Employers will see additional burden in compliance and

administration as 11 new requirement categories for

employers get phased in over the next three years

• Many companies are unclear on what they‟ll do in

response

• Opportunities exist:

• Tax incentive for SMBs with 25 or fewer employees

• Reform offers wellness incentives or grants for

SMBs– available in 2011

• Brokers eager to prove value will focus more on

selling ancillary products (and wellness)

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45%of companies are

unclear on what

they’ll do in

response to HC

reform and are

looking to brokers

for help

60%of companies will

consider creating

or expanding

wellness offerings

as a result of

reform incentives

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SMB – Current and Emerging Trends

Economic Conditions Improving, but still weigh

heavy….Regulatory Requirements Increasingly Complex

• Overall sentiment on sales, hiring, and subsequent spending is on the

rise

• Capital spending, however, still remain low. Credit availability is not

the issue

• Only 2% of SMBs had plans in March to hire new employees, down

3% from February. This is historically low– especially in a recovery

period*

• Multiple new and proposed regulations due to the economic crisis and

healthcare reform will impact the market

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Small business

optimism continues to

rise, but slowly,

according to the NFIB

index

* - seasonally adjusted

Source: NFIB Small Business

Optimism Index Survey

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SMB – Current and Emerging Trends

Source: LIMRA, 2010

Accelerated Cost Shift to Employees

• Cost pressures continue to increase, driving SMB

employers harder to consider pushing more costs to

employees

• Increasing funding responsibility for employees will

increase the complexity of the benefits decision making

process for them

• Few employers, however, anticipate shifting current

subsidized plans to 100% voluntary or dropping plans

• For employers with 50 employees or less, those with 10

to 19 employees are most likely to consider voluntary

plans

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40%of SMBs will shift

more of the cost to

their employees in

the next two years

for at least one

benefit

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SMB – Current and Emerging Trends

Source: LIMRA 2010, Brightworks 2010, Deloitte, 2011

Advisor Business Models Changing

• Based on anticipation by brokers with average

client sizes of less than 100 employees,

healthcare reform will present big challenges for

many brokers, but will create opportunities for

others

• Insurance brokers eager to prove value to

clients will look to alternative products and

services

• Retirement advisors shifting to fee-based. In

2010, 42% of retirement advisors stated their

compensation method as fee-based compared

to 24% in 2005.

4Broker Anticipation from

Healthcare Reform

50% 33%

Will lose

clientsWill gain

clients

Have and Have Nots

Proving ValueAlternative Value Streams

Consultation on

healthcare reform

More focus on selling

specialty benefits

Wellness offerings for

clients to gain incentives

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SMB – Current and Emerging Trends

Technology To Play a Bigger Role

• Explosive growth of digital technology in business

and day-to-day lives presents opportunities in the

SMB benefits market

• SMBs looking to ease administration burden

through additional online services, and would even

consider purchasing benefits online

• Advisors rapidly embracing smart phones and web

for business, with three-fourths owning a smart

phone. 86% of advisors state they would place

more business with a provider that has a strong

website

• Advisors interest in social media for business low

but growing– currently constrained by FINRA rules

559%of SMBs, with 20 to

49 employees, would

consider purchasing

benefits online

BlackBerry, 40%

i-phone, 16%

Other, 18%

Advisor Smart

Phone Ownership

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SMB – Current and Emerging Trends

Financial Wellness Gaining Traction

• The financial crisis has left most employees in worse

shape than ever, with 61% reporting that they were in

serious financial distress

• Employers stand to gain from the financial well being

of their employees. Employees reported spending an

average of 16 work hours per month dealing with

personal financial issues

• Financial well being is strongly tied to health well

being. Employees reported financial concerns as

being five times more stressful than health concerns

• There are numerous financial services companies with

financial literacy campaigns and programs– but little

evidence of success

6According to

Workplace

Options study,

48% of

employees

report that

financial stress

is affecting their

work

performance

40%Of employers

would be

interested in a

financial well being

program for their

employees

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SMB – Pain Points

Source: NFIB Survey

• Cost of doing business continues to reign as

the number one problem that concerns

SMBs according to a survey by the NFIB–

and within the category, health insurance

costs specifically are cited as the biggest

worry

• Employee job satisfaction and loyalty

measures are declining

• SMB owners cite growing pains when they

reach the size to need specialized functions

like larger companies, e.g. finance, H.R., but

don‟t yet have the staff in place to perform

them

SMB’s Top-10

Concerns

1. Rising Costs

2. Competition

3. Employees

4. Finance

5. Information

6. Management

7. Public service

responsibilities

8. Regulations

9. Taxes

10. Technology

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Challenges for SMB Employer (related to wellness)

• Limited internal resources

• Money, people, time, space, limited knowledge about

wellness

• Not many wellness vendor/partners who

service SBM employers

• Limited or no group wellness reporting

• Difficult to establish financial impact

• No significant research about SMB wellness

programs

• Employer doesn‟t know where to turn

• Many brokers have little or no wellness

experience

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Advantages for SMB Employer

• Management support can be very obvious

• Close-knit work group

• Awareness of coworkers needs

• Efficient communications

• Peer support

• Culture has strong impact on behaviors

• Policies and environment can more easily be changed

• Informal leaders are readily known

• Can cost less to achieve more

• Program impact is known more quickly

• Job provides a greater sense of “completed-ness”

INDIVIDUAL ACTIVITIES

PreventiveScreening

HealthCoaching

WellnessAssessment

Seminars

Incentive Plan

Personal Improvement Population Improvement

Outcomes ReportingParticipation Tracking

Communications Plan

Challenges CampaignsWellness

CommitteesLocal

Events

ORGANIZATIONAL ACTIVITIES

Wellness Strategy

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Action Steps

• Issue a letter of support from the CEO

• Designate a company wellness leader

• Conduct an employee health interest survey

• Provide an opportunity for health screening

• Administer an annual physical activity campaign

• Hold lunch and learns

• Establish an in-house wellness library

• Disseminate a quarterly health newsletter

• Implement health promoting policies

• Promote community health efforts

Source: WELCOA Absolute Advantage Volume 7, Number 2

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Do…

• Make your program inviting and fun

• Openly explain the purpose and expectations of the

program

• Address any concerns about privacy protection

• Create an identity for your program

• Listen to what your employees want

• Understand the needs of your employees

• Offer a variety of activities throughout the year

• Capture risk data at the beginning at periodically to

measure impact

• Selectively invite local resources to bring expertise to

your program

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Resources

• Senior leadership

• Existing channels of communications

• Knowledge and experience of employees

• Supportive environment

• Supportive policies

• Community resources – hospitals, colleges, health

organizations, home extension services, state and

county health departments, state and local wellness

councils

• Community events

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Resources

Centers for Disease Control and Health Promotion

www.cdc.gov/workplacehealthpromotion/model/index.html

American Heart Association

www.americanheart.org/workplacewellness

American Cancer Society

www.acsworkplacesolutions.com

List of State Agencies

www.cdc.gov/workplacehealthpromotion/organizations

Department of Health and Human Services

www.hhs.gov/safety/index.html

www.Healthfinder.gov

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Resources

US Office of Personnel Management

www.opm.gov/Employment_and_Benefits/WorkLife/HealthW

ellness/wellnessresources/worksitewellnessprogram.asp

Wellness Councils of America

www.WELCOA.org

National Network of Wellness Councils

www.TheNNWC.org

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Thank you!

Lee Dukes

President, Principal Wellness Company

Dukes.Lee@Principal.com

317-874-3800