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Friday, Mar 29, 2024

PEOPLE: Finding the Benefit in Tough Times

PEOPLE: Finding the Benefit in Tough Times Sheila Hartman, who turned employee benefits for companies with low-income workers into a bonanza, is dealing with hard times just like her clients. By JACQUELINE FOX Staff Reporter Sheila Hartman, a native of Mexico and president of Woodland Hills-based Financial Independence Co., left behind an 11-year career as a high school teacher in 1983 to launch her own employee benefits brokerage house. FIC caters to the Hispanic community, primarily workers in the hotel industry, which has fallen on hard times since the Sept. 11 attacks. She said she chose the business because of its reliable revenue-earning potential: commissions are monthly and earnings are heavily tied to annual renewals, unlike other industries that rely on new business for growth. But she also says she saw a real need for a brokerage firm that specialized in helping workers with limited English-speaking skills understand their benefits and navigate the system. FIC brokers benefits packages for more than 200 companies and some 30,000 workers across the country. Plans include standard benefits for full-time employees, but others are customized for part-time employees who don’t qualify for coverage or for workers whose employers simply don’t provide any benefits whatsoever. FIC also works to educate workers about changes in the laws that affect their income, such as a little-known tax credit for low-income workers with dependents that can be used to pay for medical coverage. More than half of Hartman’s 30 employees, including the field representatives, speak Spanish or another language a requirement for most positions at the company. FIC was ranked No. 2 on the San Fernando Valley Business Journal’s 2001 list of Women-Owned Businesses. Revenues were $77 million for 2000 a continuation of a growth spurt that began the year prior when revenues were $65 million, a 9.2-percent increase over 1998. But the insurance industry has changed in the last few years. Costs have gone up; providers and carriers alike are being acquired at rapid speed. The slow economy and the recent terrorist attacks have also forced companies to lay off workers, affecting the commission-earning potential for FIC staff as enrollees are cut from their plans. Question: Why did you leave teaching to start your own insurance brokerage house? What is it about this industry that you believed presented a profitable business opportunity? Answer: One of the reasons I selected the employee benefits industry was because it offered a continuous flow of income. The commissions are paid every month as long as the business stays on the books. If you keep on adding business it grows like a pyramid, unlike other businesses where you have to generate new sales to make an income, such as the real estate industry or a fee-based business. I also selected this industry because I knew I could make a difference. I knew I could make the bilingual employee or an employee of a diverse background feel like a very important person, a person that their employer cared about because they took the time to have someone explain their benefits to them in their own language. Q: Your company was the top women-owned business in the Valley in 2000, reporting a 9.2-percent jump in revenues from 1998 to 1999. What in your view has made your business so competitive? A: There are many types of insurance products on the market. But a good broker is not only measured by the type of service provided, but by knowing the types of products available on the marketplace and delivering the right vendor for the clients’ need. Our biggest ally is the carrier that we partner with to provide the service. Q: Tell me more about what makes your benefits packages different from other companies. What can you do for the average hotel worker, for example, that other companies can’t? A: We become an extension of the human resources office for the client. We are very proactive in educating their employees about their benefits, so we help with orientation meetings for new hires. We have a question-and-answer session with them to find out if they are satisfied and understand the benefits they are offered. We become a single point of contact for the employees when they are dealing with an escalating issue. The human resource departments appreciate having us as the “go to” advocate. We’ve gone as far as taking a bilingual employee to the doctor because of language difficulties. Fortunately this doesn’t happen often, but when needed we are there with the employees to lend support. Q: What are some of the biggest challenges facing employers with regard to employee benefits? A: No question about it, the increasing rates. They are simply mind-boggling. We’ve seen increases in rates over the last few years of as much as 30 percent. I know the federal government is trying to help the individual, but every time there is a new mandate for the health care industry or for the insurers, the rates go up, and that’s hard for us because we have to go to the client and explain all that. Q: What can be done to improve that from your point of view? A: Well, for starters, I think the federal government needs to stop implementing mandates that drive up the costs. We get questions from the government all the time in our industry groups asking us for our views on the industry and what recommendations we have for improving things. But we don’t see much changing in terms of increasing costs. Q: How has the industry changed since you got started? A: Five years ago there were between 10 and 15 major insurance carriers out there, so you could shop around and get a couple of rates to take back to the client. But today there are only about five or six, and the whole industry is suffering because what’s happening is the providers are asking the carriers to pay higher rates for services, so the carriers don’t want to do business with them. Q: The softened economy and the Sept. 11 attacks affected your bottom line, and you’ve recently asked your staff to take a cut in pay. What industry-related changes have affected business? A: These are difficult times for the insurance industry and for brokers. Providers are negotiating tougher than ever with the insurance carriers, which has greatly impacted the cost to the consumer. This, in addition to rising prescription costs, has made it difficult to keep cost increases at bay. Employers are looking for ways to cut costs. Clients have lowered commissions because they are experiencing financial problems. We get paid a commission based on the number of employees we cover, so if an employer has to lay off workers our compensation goes down. We also lost a number of clients due to acquisitions. Q: Do you think the decision to ask your staff to take a pay cut was the right move? A: Absolutely. I think it was the right thing to do both ethically and morally. It was very hard to sit and think of who we could let go of and who we should keep on staff. I would find myself going around the office and adding up what everyone contributes to this company and who we might be able to do without, but I couldn’t do it. Everyone here is so valuable. Although we did lose two employees who said they couldn’t take the cut, the majority of my staff agreed that they would stay on and ride the wave. Q: Have the pay cuts affected morale or had a negative impact on productivity? A: Actually, it’s funny. I have this suggestion box on my desk and, not long after the pay cuts were announced, someone suggested that offering workers a half-day off every other Friday would be a way to compensate for the decrease in pay. So I agreed to that. Then someone later suggested that it should be a full day, and I agreed to that as well. So now my employees all get two Fridays off a month. Morale has not been low, in fact, because they know they are getting that extra free time to take care of personal business or spend more time with their families. They are planning ahead and so productivity has not fallen either. And that day off is forever. I’ve agreed not to ever take it away. Sheila Hartman Title: President, Financial Independence Co. Age: 55 Education: Teaching credential, Cal State L.A. Most admired person: Victoria Lowe, president, Alert Staffing Career turning point: Starting my own company Personal: Married, two children

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