All the big brokerage houses are offering employers a private exchange coupled with a defined contribution plan. Here's how the independent adviser can do the same thing, along with why you should.
Thanks to health reform, the employee is taking over the decision-making role that the employer has traditionally played, ushering in a consumer-centric future for employee benefits. As one benefits decision maker is replaced by many at a company, you need to monetize this opportunity and remain profitable by selling benefits directly to the employees. I've written before about brokers who are opening retail insurance stores while many others are turning to worksite voluntary benefits to make this leap. A private exchange with a defined contribution plan is another consumer-centric strategy.
On a DC plan, the employer provides the employee a specific amount of money to be used for benefits. The employee then purchases health insurance and supplemental health and life benefits. With no employer-sponsored carriers or plans, control and decisions shift to the employee.
Since DC plans also provide the employer a predictable benefits spend, employers maintain control over their benefits costs and can plan without the volatility and crippling uncertainty of not knowing future benefits costs.
Take Walgreens' decision to send some 160,000 employees to a private exchange - this will spark intense interest in DC plans. I predict employer consideration of such plans will explode within 12 months, driven by 2014 renewal increases, employee pressure for access to the government-run exchanges and employer realization that DC gives them control of their benefits spend. So this is your time to get ready.
How you can do it
For you, the consumer-centric opportunity lies in providing the employer with a private exchange for their employees so that you can benefit from their benefit purchases. As the new benefits decision makers, employees need ready access to a marketplace with limited carrier and benefit selections and an easy enrollment process.
Remember, an exchange is simply a marketplace where consumers can purchase insurance. To take advantage of the consumer-centric opportunity with defined contribution, you must be able to help your clients implement a DC plan and you must have a private exchange ready to send your clients and their employees.
You don't have to be in the large-group market to deploy a private exchange. There are private exchanges that specialize in the under-250 market. Here are four key elements to look for in the process:
1) No monthly per-employee exchange fee;
2) Strong broker support with training and tools for both marketing the exchange and setting up the DC plan;
3) A user-friendly interface with effective benefit communication;
4) Access to individual health policies, as well as access to the public exchange through the private exchange for subsidy-eligible employees.
Moving an employer to a DC plan and the employees to a private exchange can be a huge win-win for everyone, including you. With the right exchange, you and your firm are positioned to win big in the consumer-centric world.
It's about to become a consumer-centric benefits world and the number of customers you will have to sell to remain profitable is about to explode. Will you be ready?
Griswold is an agency growth consultant and author of DO or DIE: Reinventing Your Benefits Agency for Post-Reform Success. His Agency Growth Mastermind Network helps agency leaders reform-proof their firm. Reach him at (615) 656-5974, nelson@InsuranceBottomLine.com, or through 21stCenturyAgency.com.
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