How has the prospect of health care reform affected your business? Like most of us, you're probably already feeling the impacts. Recent legislation has and will continue to have sweeping effects on our industry.
Changes aren't coming just to the products and services we offer, but to our bottom lines, as well. Anecdotal data suggests health insurance commissions could be cut by as much as 60 percent in order to make room for mandates associated with health care reform.
Already, health care reform is changing benefit plan designs. For one, the legislation includes up to 85 percent in mandatory loss ratios for certain group health plans. In their "Request for Comments Regarding Section 2718 of the Public Health Service Act (medical loss ratios)," the federal agencies involved with the health care reform legislation, implementation and oversight request insight from the industry consumer groups and the general public as to how minimum loss ratios should be calculated. This is available online at www.healthreform.gov.
While many questions remain about how health care reform will be implemented and how the regulations will be written, it's clear employers will be seeking new benefits alternatives, consumer involvement will continue to increase, and carriers impacted by the legislation will seek to maintain their profit margins while reducing certain expenses, including distribution costs. Thus, many brokers will find their traditional revenue streams challenged, and will need to change their established business models in order to adapt to these new realities.
How are we going to survive - much less thrive - in this new reality of regulatory and legislative change? Traditionally, some of us have addressed this through service differentiation rather than offering alternative product solutions.
Now, in addition, we're going to have to offer innovative product options to our clients to help them cope with benefit challenges. A great place to start is with our existing clients through cross-selling.
Cross-selling equals diversification
Several studies teach us that the process of identifying, developing a relationship with and then successfully selling to a new client takes as much as 10 times the effort and cost of cross-selling to an existing client. So yes, cross-selling to existing clients is smart.
But cross-selling isn't just a good business practice. Today, it's a crucial strategy for thriving and surviving the impacts stemming from national health care reform and other consumer trends.
The turning point for understanding cross-selling is realizing that it isn't just about the how-to or even the what-to, it's about strategically innovating your business model through diversification. Often, successful benefits brokers have flourished by specializing in one particular product niche, and selling those same products successfully again and again to their clients. But changes in regulations, employee demographics and the continued inflation in health care costs require us to think outside our current niche if we are to offer our clients the most effective benefits solutions and maximize revenue opportunities.
One example we are all familiar with is the "sea change" shift away from employer-paid benefits to an emphasis on employee-paid (voluntary) plans. If your niche has been employer-paid products and the voluntary product lines are still ancillary for you, it is time to strengthen your diversification of product offerings and educate yourself more thoroughly on employee-paid products, enrollment methods and ways to bundle such plans with traditional offerings.
Your clients are struggling to understand what health care reform means to them, their businesses, their employees and their bottom lines. By educating ourselves and bringing a more diverse set of options to the table, we're better able to meet their concerns, answer their questions and present them with alternatives that address their needs in this new environment.
A Power Shift
Another result of health care reform legislation is the continued momentum behind consumer involvement in health care solutions, risk sharing and cost sharing. It's no secret that over the years, the tide has turned from employers making most coverage decisions and paying for employees' benefits. Gone is the day when the great majority of people obtained their insurance through their employer and had limited or no choices regarding the types of products made available to them.
The pendulum has swung in the direction of employees choosing and paying, creating a vast and complex enrollment process and the need for brokers to assist their clients in providing not just product solutions, but bundled solutions that provide for more effective communication and education. These trends will only accelerate going forward.
As we meet with our clients, we need to help them consider non-traditional products and bundled solutions that include voluntary products. And if we're unfamiliar with these programs and associated services, we need to educate ourselves immediately or risk becoming obsolete to our clients.
Cross-Selling Equals Education
In the midst of these trends in voluntary benefits, health care reform legislation is forcing many employers to offer insurance to their employees.
As you likely know, health reform penalizes companies with 50 or more full-time workers if the employer either does not offer appropriate coverage to its employees or if the coverage offered is too costly for certain employees. A limited amount of "grandfathering" occurs for employees enrolled in employer-sponsored group health plans prior to March 23. However, the majority of your clients with more than 50 full-time employees almost certainly will be in the market for new kinds of group coverage.
It's crucial that we understand the tipping points between what is beneficial for employers to offer as employer paid vs. employee paid, and how both can be combined to offer a more compelling alternative.
As we consider the varieties and types of plans that may meet our clients' needs, it is important to remember the new resources available to employers as a result of health care reform legislation, including:
A state-established "American Health Benefit Exchange" (due in place by Jan. 1, 2014) that will be a governmental agency or nonprofit entity. Among its other functions, exchanges will provide for a Small Business Health Options Program to assist qualified "small employers" in facilitating the enrollment of their employees in qualified health plans offered in the small-group market in the state and make available qualified health plans or stand-alone dental plans to eligible individuals.
Beginning in 2017, states may allow health insurance issuers in the large-group market to offer qualified health plans through an exchange.
Tax credit for small business insurance expenses. For each tax year beginning in 2010 through 2013, employers who have 25 or fewer "full-time equivalent" employees and average annual wages of no more than $50,000 (indexed for changes in cost of living increases beginning in 2014) may be eligible for a full tax credit of 35 percent (25 percent for nonprofit small employers) of the employer's contribution to the cost of providing health insurance to their employees, so long as the employer contribution meets or exceeds 50 percent of the total cost of coverage. Effective Jan. 1, 2014, this credit will be increased to 50 percent.
Temporary reinsurance for early retirees. The secretary of Health and Human Services must establish a temporary reinsurance program that will pay for a portion of health benefits provided by employment-based plans (including multi-employer plans) to pre-Medicare eligible retirees, age 55 and older, and their eligible dependents. This program will end by Jan. 1, 2014. [See related: EBRI: $5B for retiree coverage likely to run out early]
Understanding the "carrots and sticks" health care reform offers our clients, we can better understand which products they need. By increasing our education, diversifying our product knowledge and bringing these options to the client, we're cross-selling in a way appropriate to these market shifts.
Technology, Choice
Web-based enrollment tools have the capacity to fundamentally alter how employees evaluate and select benefits. As new generations of tech-savvy employees continue to fill the ranks of employers, they will increasingly prefer the Web to traditional laptop or paper-based enrollment processes and expect the experience to more closely resemble purchases that are now commonplace on today's e-commerce websites, complete with automated "suggestions," help assistants and the ability to access information and become self-educated about their purchasing alternatives.
To return to our snapshot of the "old days," when employees basically just accepted whatever health care the employer offered, there was a widespread cultural mirroring of limited consumer choices - very limited. Going to the movies meant choosing between two or three options, and turning on a television meant five VHF and three UHF channels.
This continued focus on consumerism - giving consumers more choice and allowing everyone to participate in the process - impacts how we interact with our clients and their employees by demanding we take their needs into account as never before.
The power differential is shifting from traditional gatekeepers (health care providers, carriers and company owners) to the ultimate insured - the end consumer. We can look at this as an opportunity or a risk. Realizing and acting on it as an opportunity gives us more power.
Seizing the opportunity means asking more questions about consumers:
- How do consumers view benefits?
- How are they informed?
- What education tools do they need?
- How do they make decisions?
This is all about access and control, the shift from the employer having the gateway, to individuals entering through the gateway by themselves. Today's consumers want and need options - and the knowledge and tools to make decisions.
A Consultative Mind-set
When we meet with our clients, are we order takers and order fillers, or do we genuinely consult with them? Time is limited, of course, and our clients rarely have hours and hours in which to meet with us. But if we're just going in with a preset ordering card, we're missing the opportunities that will make the difference both for our clients and ourselves.
As mentioned above, seizing the opportunity means asking more questions and acting out of a consultative mind-set. Truly, we're not there simply to write down our clients' orders off the benefits menu. We're there to consult with them, to bring to them our expertise and innovative solutions, and to help them decide what is truly best for their company and their employees.
Do you have it?
- Do you have a method of understanding what your clients and their employees want and need? In other words, what are you doing to become more grounded in consumer needs/wants?
- What are you doing to protect yourself regarding your portfolio of products that may be at risk due to health care reform?
- What are you doing to take advantage of the opportunities you have (because you're either selling more traditional, "comfortable" products or because you see the opportunity to change)?
If you're struggling with what you believe about your answers to these questions, it's time to strengthen your consulting muscles and diversify the way you view your clients, their employees and benefits solutions.
How to Start
If you're wondering how to start diversifying and what kinds of products you should look into, voluntary disability and dental plans are great starting points. Exciting new products are coming out in both lines and reflect needs that the end consumers care about.
Also, look into indemnity-based (versus expense-incurred) limited medical plans, which appear to be exempt from the new restrictions brought about by health care reform. With many plans going by the wayside by Jan. 1, 2011, now is a good time to freshen your knowledge about the indemnity-based plans available and how they may provide attractive solutions for your clients.
Remember to assess the breadth of products in our preferred carrier-partner portfolios. The more relevant options we have for our clients, the more reasons they have to choose us. Finally, be consultative and open-minded, and always have multiple options available to your clients. A consultative mind-set is at the heart of providing diversified solutions, and is a critical part of what enables us to cross-sell clients successfully.
