Employee benefit brokers can do plenty to set themselves apart from competitors, such as offering a wide array of products, providing top-notch customer service and making strategic partnerships. Those become even more critical when only a few carriers control the health insurance market the broker is operating within.
Lack of competition among carriers “hurts the small consultant,” says John Cook, the Chicago-based business unit president at CBIZ Benefits and Insurance Services. If the price of coverage is the same, brokers have to find other ways to retain clients and increase sales, he says. “It’s a battle of resources and creativity.”
Since passage of the Affordable Care Act, clients are seeking help with compliance and legal issues, Cook says. Actuarial support is another service that brokers must be able to give their clients, he says. “Most consultants are not actuaries,” Cook says. “If they don’t have that resource, they may not be leveraging the best rate for their client.”
Less competition also gives carriers more leverage over health care providers, which could lead to narrowing of networks, says Jim O’Connor, CEO of CBIZ Employee Services Organization. “It also can put brokers at risk that are heavily reliant on carrier commissions as carriers move to reduce/eliminate the broker commission expense,” he says.
“Brokers will need to evolve to provide more services to clients, adopt to a fee-based model and diversify their income streams through ancillary lines and voluntary benefits,” O’Connor adds. “Brokers will also be smart to get more involved in self-insurance, which can be very advantageous for the right employers, and moves [the] broker and employer away from the traditional insurance carrier market.”
Maine ranks as the state with the least competitive large-group health insurance market, according to business intelligence data analytics firm miEdge. Using Form 5500 Schedule A reporting data on premiums as of September 2015, miEdge ranked each state (plus the District of Columbia and Puerto Rico) based on a combination of how much of the large-group market is controlled by one carrier and by the top five carriers.
For Maine, Anthem accounts for 80% of the market share, while the top five carriers control 97.55%. Wisconsin, on the other hand, is the most competitive state with the top carrier, Blue Cross Blue Shield of Illinois, making up 27.42% of the market share, and the top five carriers accounting for 57.93%.
When more carriers are operating within a market, insurance companies are typically more flexible — such as offering more wellness resources or providing rewards to employees who meet certain goals, Cook says. “Those types of things become not as important when there’s not competition,” he says. “We would all like to see more competition.”
That’s because a competitive market benefits both the broker and the consumer, says Joseph Deacon III, a consultant at Deacon and Deacon Insurance Agency. “Like any other product or service, the end-user benefits from the availability of options in a competitive market,” he says.
“Unfortunately, while the ACA was supposedly designed to spur competition, the exact opposite has happened across the United States,” Deacon adds. “The nuances of the law have led to rampant carrier consolidation, and many carriers deciding to exit certain markets.”
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