At this point, we're approaching the middle of summer and at press time it's still uncertain whether or not we will have an NFL season. Life is filled with uncertainties, both large and small. Not having an NFL season may disrupt your entertainment schedule, but it's not disruptive to your livelihood in the grand scheme of things. Having PPACA turn your business revenues upside down with no alternative plan? Now that's disruptive.
You and your clients - all of us for that matter - will have to live with a fair degree of uncertainty about health care reform's impact. How could anyone know what to expect over the next three to four years?
Clients need structure
Well, that's just the point. To do the best possible job for your clients, you need a process for managing change because we know we will be operating in an environment where change will be the only constant for the foreseeable future. You need a process, a methodology, to help your clients plan their benefits decisions and expenditures.
Your clients need a roadmap, a strategic plan, to guide their tactical decisions - both their actions and reactions. And it needs to include a contingency plan because of all the possible changes that are completely out of their control.
To do this, you will need to become much more consultative in your approach. And you will need a formalized process, training and tools in order to make this transition successfully. But your clients need you to do just that, and they will be demanding that their adviser(s) provide this kind of counsel and expertise, or they will find a resource that will. All of this will be independent of how they gain access to medical insurance products in the future. Your primary value proposition cannot be as the access point to products. Your clients need your expertise, and you need to reinvent yourself to remain relevant.
If your clients are demanding answers, or at least counsel, from someone who seems to have a process or approach to managing in this environment, then what are the implications for your business model? Are you thinking strategically about your business and its future?
Look, undoubtedly your time is consumed with all the day-to-day tactical activities required to manage your business and retain your clients. And in all likelihood you are beginning to get used to the potential impact of health care reform and whatever the "new normal" will be.
Plan for the worst
My counsel is to plan for the worst and hope for the best. What exactly does that mean? Assume that group health commissions will decrease in the next 18 months. What will they be? Well, we don't have a crystal ball, but in several states group health commissions were 2% prior to health care reform. So that might be a very good working assumption for business planning purposes. Can you run your business on two points of compensation? You just might have to get used to it. And it's better to be pragmatic and plan for this outcome now than to wish and hope and pray, only to find that within 30 days your revenues have dropped by 50% or more.
There are other forms of change that you may have to consider. For example, in a growing number of states, some of the largest group health carriers are issuing renewals net of commissions, leaving their broker and adviser network to negotiate their compensation directly with their clients. And each month, your compensation is shown as a separate line item, reminding your clients just how much you are being paid. Can your client relationships withstand that kind of ongoing scrutiny? If not, you will have a significant issue on your hands.
Your clients need your expertise, advice and counsel. They are confused and anxious, and rightfully so. The bottom line is that we all will be adrift on a sea of uncertainty for the next two to three years. As a result, there isn't a client organization out there that's not willing to talk to an adviser who seems to have some information or process for coping with all this change. And that includes every one of your clients as well!
Denying it is not going to change the eventuality of all this. So where do we go from here?
Opportunity knocks
For forward-thinking benefit advisers, all this uncertainty creates enormous opportunity - provided that they are prepared. Once you can wrap your mind around the possibility that what we have been discussing is in fact probable, you will realize that you must take action, and you must take it now. You need to evaluate your business model and consider the possibility that you may not be paid commissions on group health coverages. So how can you monetize the client relationships that you already have? One possibility is to begin to migrate toward a consultancy model where you may be paid fees instead of commissions. It may not be one annual fee per client either. More than likely it will be a per employee per month fee for advice, counsel, service, advocacy, etc. While it may vary by state, the range I most frequently hear being discussed is $18-$22 PEPM.
So where should you start as you consider transitioning your practice to a consultancy model? One thing you can do right now is to engage all your clients in a dialogue from a strategic perspective rather than remaining on the tactical level. Start by asking your clients open-ended questions about what they want to accomplish with their benefit programs over the next three to five years. You can facilitate a strategic discussion about what they want their benefits programs to look like and what elements are most important to them and their employees. You can lead this process and thereby gain more control over your client relationships. By creating a "road map" you will be articulating all the important issues and strategic requirements that your client has for their benefits, including their budgetary requirements and contingency plans.
In addition, during this process you will have the opportunity to consider the intelligent integration of voluntary benefits. With all the plan design and redesign of the last decade, inevitably gaps in coverage exist.
However, the needs of employees have not diminished. If anything, they have increased. At a minimum there are opportunities to offer employee-paid permanent life insurance, disability income, critical illness, auto and homeowners insurance, long-term care, pre-paid legal services, household budget and debt counseling, and retirement plans. You should also assess their executive benefits, which may be woefully outdated and may impact their ability to retain key executive talent in today's "slow growth" economy.
Expanded services
You also need to evaluate your firm's ability to offer other HR services that are complementary to or synergistic with benefits: payroll and tax filing services, benefits administration, workers' compensation administration, outsourced HR consulting, regulatory compliance training and audit services, employee surveys, total compensation planning, year-round benefits communications programs, HRM training, and myriad other services that employers need and are increasingly being outsourced to qualified third parties.
You are already at the table handling a portion of their needs. Shouldn't you be adapting your offerings to address your clients' changing needs? If you don't, someone else will. And they won't stop until they have the total account.
I realize that for many of you, this takes you way outside your comfort zone. But going out of business won't feel so comfortable either. With so much uncertainty, your clients need your expert advice and counsel now more than ever before. They need a trusted adviser. You can fulfill that role if you utilize this approach.
You need to have a process that you can communicate to your clients and prospective clients that will instill confidence and that ultimately build consensus within their management team. The beauty of this is that you can create new revenue streams in the process by charging consulting fees and earning commissions on voluntary product sales. And in the process you will be writing yourself into the script for the next three to five years from a client retention perspective. Now that's a winning strategy.
Kwicien is managing partner at Baltimore-based Daymark Advisors. He can be reached at
