The insurance market in 2016 was marked by chaos anduncertainty, and 2017 will probably be remembered in much the sameway.

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So why are brokers expressing optimism?

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The main reason is that along with the chaos, there arepromising new developments and evolving trends that suggestemployers will be able to turn to brokers for education andinnovation within the insurance market. Even with expected costincreases, brokers are expressing cautious optimism that there areemerging solutions to the challenges of health care and otheremployer-sponsored benefits.

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Consolidation, the widespread adoption of voluntary benefits, new tools for transparency, and innovations like reference-based pricing are all part of arapidly changing industry that is becoming more nimble inaddressing challenges and better equipped to serve clients.

Change is good

Even if the last year has been a long, strange trip, manybenefits experts say there is plenty of upside to the turmoil. “Ithink the market is going to remain chaotic, but I don'tnecessarily mean chaotic in a bad way,” says Bob Gearhart, Jr., apartner at DCW Group, based in Boardman, Ohio. “Any time there'schange going on in a market, there's also tremendousopportunity.”

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Brandon Scarborough, senior vice president at Cobbs Allen inKansas City, Missouri, says the market is benefitting from bothemployers and consumers paying more attention to insurance ingeneral, and better educating themselves on what will work forthem. “They're moving past confusion to starting to be betterconsumers, to looking at alternative funding models, to being moreinnovative about the way they approach their health care benefits,”he says.

Curbing cost trends

According to a report by PwC's Health Research Institute (HRI),the 2018 medical cost trend is projected to be 6.5 percent, thefirst increase in growth in three years.

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HRI's report notes that cost trends had fallen into singledigits in the past 10 years. “Structural changes, such as the pushtoward paying for value, greater emphasis on care management andincreased cost sharing with consumers, are taking a stronger hold,pulling back against rapid health care spending growth. Still, withmedical cost trends hovering between 6 percent and 7 percent forseveral years, health spending continues to outpace the economy.Even the 'new normal' is not sustainable,” the report concludes.

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Benefits experts are not surprised by the projections. “I'mhearing that medical costs are going up,” says Robert Shestack,chairman and CEO of the Voluntary Benefits Association, based inPalm Beach Gardens, Florida. “Premium increases are happening and Ithink they're going to get worse in the next year or two.” Shestacknotes the rate of cost increases can vary, depending on whether acompany is self-funded or fully funded, and adds that geographiclocation also plays a role.

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Brokers and employers are looking at a number of strategies toaddress those rising costs. An ongoing switch to self-funded plans,aided by innovations such as reference-based pricing, is helpingmany companies. Holding down drug costs is another key focus, andvalue-based drug agreements are getting more notice. Theseagreements allow insurance plans to pay for drugs based oneffectiveness.

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According to Scarborough, brokers already have the necessarytools to help employers contain costs. “To me, the biggest myth ininsurance is that health care costs cannot be contained,” he says.“The fact that this has become accepted in our industry isextremely frustrating. As advisors, it's our duty to show companiesways to control their health care spend. Anything less than that,and we're not doing our job.”

Voluntary still gaining steam

Although the growth of voluntary benefits is not new, signs arethat even the holdouts are now coming onboard with the concept.According to Shestack, employers are increasingly seeing voluntarybenefits as another way to recruit and retain workers in a tightjob market.

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“We're seeing a lot of critical illness, accident and hospitalindemnity in voluntary benefits offerings, “ he says. “A lot ofemployers are focusing on financial wellness, work flexibility,paid time off, and other ways to become the employer of choice formillennials. There are also some plans that look at collegerefinancing or loan repayment.”

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Gearhart said his company has found that voluntary benefits canhelp round out offerings for employees. “When deployed correctly,voluntary benefits are designed to enhance and customize a benefitplan in a way you couldn't necessarily do before,” he says.

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Rudy Garcia, president and CEO of Qandun, based in Glendale,California, says his brokerage has also seen a recent uptick incompanies' curiosity. “There's a new interest in voluntarybenefits,” he says, “And employees are actually using theseproducts on a regular basis. They're getting value out ofthem.”

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However, benefits experts caution that a large voluntarybenefits menu is no substitution for a good basic medical insuranceplan. “It should not be a fallback for when medical costs have beenmismanaged,” Shestack says.

Technology and the workforce

Gearhart says that even as technology opens new possibilities,there are still challenges about how to educateconsumers—especially baby boomers. “The demographics have alwaysbeen the same in the workplace; the difference now is that thetechnology that each subset has grown up with is just wildlydifferent,” he says. “You have one subset in the workplace thatnever interacted with computers growing up or in their early yearsof employment, and another subset who prefers to do everything onsmart phones.”

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That wide gap in experience and expertise will continue to be aproblem for employers, he adds. “You can put in all the programsyou want, but if you can't effectively communicate it to theworkforce, it doesn't matter.”

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Gearhart adds that the most effective strategy is to have an“air traffic controller” approach—an independent service orapplication that can steer different employees to differentsolutions. “It needs to be someone who can who can direct theconsumer to the right care at the right time at the right price.That's critical.”

The drive to transparency

“Transparency” is a word that is popping up more and more amonginsurance experts. The entire concept of high-deductible healthplans (HDHPs), depends on consumers making informed decisions basedon price and quality. Without transparency in those two areas—andthere is often very little—consumers and employer-based plans havestruggled to find true cost savings.

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Recently, more transparency tools have come on line that providebetter information on costs and quality. Reid Rasmussen, co-founderand CEO of FreshBenies, notes that companies like his can providethe kind of direction talked about above—guidance to consumers onhow to find both price and quality information.

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“You want price transparency and also quality transparency. Whogets good results? Who does a procedure more often?” Rasmussensays. “That allows real consumerism. When you're planning how muchto put in your HSA this year, price transparency can reallyhelp.”

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Garcia says brokers can show transparency on their fees as well,to help gain trust from their clients. He says brokers should bestriving for “results-driven compensation.”

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“We tell employers, 'if you go into a self-funded plan and giveus the authority to manage it properly, we guarantee you thatthere's going to be a reduction in your costs the next year, and weare so confident that we are willing to put part of ourcompensation at risk—if you don't get your savings, we don't getour compensation.'”

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Gearhart said his agency takes a similar approach. “We're tyingour compensation from self-funded plans directly to the performanceof our client's health care plan,” he says. “I feel like if theadvisor sitting across the table from a client is confident theiradvice will work, why wouldn't they do it?”

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According to Gearhart, the results-driven compensation approachis not widespread, but there are firms doing well with it. “It'ssort of a different take on the health benefits space. There are ahandful of brokers out there who are doing this; it's starting togain traction.”

Stay calm and carry on

A focus on basic, practical concepts such as performance willlikely be key to growth in the market in 2018. After all, theissues drawing the attention the media may or may not end upbringing real change.

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Rasmussen notes that all the sound and fury around the ACArepeal in 2017 has come to nothing (so far.) “A year ago, we wereall talking about how we were going to respond to the repeal ofObamacare; 12 months later, here we are, and they didn't get itdone.”

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Fortunately, there are many signs that brokers and otherbenefits professionals are increasingly ready to take matters intotheir own hands.

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