OK, I’m officially sick of all the speculation and hand-wringing about Anthem’s acquisition of Cigna and, before that, Aetna buying Humana. Stop the naval gazing. If I may be clichéd, get your eye back on the ball and your head back in the game.

Sure, the consolidations likely will have a negative impact on employers, reducing their plan design options and, by definition, their carrier choices. And as a benefit professional, you get to deal with this. It’s part of your job.

But, I wrote previously that, unless you own stock in one or more of these carriers, all this consolidation really doesn’t matter to you as a benefit producer or agency owner. “Are you serious?” you might ask in disbelief.

I am most serious. Here’s why it doesn’t matter to you. These transactions — which may or may not even be allowed by the regulatory cops, although my money is on “yes” — are just a continuation of industry trends that I have been predicting for more than five years.


The key trend for you is “disintermediation.” A big word that just means you’re getting cut out of the group medical transaction. Oh, you can negotiate a fee for managing the renewal and the carrier will be nice enough to collect it. But, soon, the only group medical commission you’ll be seeing will be on old commission statements.

Also see: “The antidote to Zenefits.”

Aetna in 2011 began the move to fee-for-service, ending commission on large-group business wherever brokers could charge fees. Other carriers have followed suit. Beginning with July 1 renewals, Aetna just went to fee-for-service on small group business in every state that allows brokers to charge fees. And Aetna will soon own Humana. How good do you feel now about your Humana commissions? Do you doubt the other carriers will be close behind?

‘Buh bye’ to small-group medical

And soon there won’t even be much small-group medical to get paid on. In a recent meeting with brokers, Blue Cross Blue Shield of Texas predicted that 80% of small-group business would be gone within five years. Seventy-percent of group medical in under-50 life groups will disappear and 90% of that in under-10 life groups. These small groups will migrate to self-insured plans or, in most cases, defined contribution arrangements.

The BCBS official added that, in high-level conversations with two of the three largest national medical carriers, there was unanimous agreement on these points. In fact, all agreed that the movement was happening faster than anyone thought. I think five years is way too optimistic.

Now consider that the under-50 market represents 96.2% of all businesses in the U.S., according to the U.S. Small Business Administration. Yes, 96.2%. Can we now agree that most medical commission is going away, even if the carriers were to continue to pay commission, which they aren’t. Disintermediation.

How much more proof do you need?! Commission will be gone soon. Move to fee-for-service. Or start selling life insurance, if you can’t live without commission. My very smart friend, Joe Bucci of benefits advisory firm gbac Inc. in Connecticut, makes the point that, by still paying commissions, medical carriers are holding brokers back, keeping them from evolving into fee-based advisers and consultants. The commission yacht may have shrunk to a dinghy, but as long as there is a piece of flotsam to cling to, most brokers will hang on to their commissions and refuse to move to a fee-for-service business model. But very soon there will be nothing for brokers to hold, not even a lifesaver.

Also see: “Why the Aetna-Humana deal signals the need for a fee-based model

Soon, it will be sink or swim, and swimmers will have to move to a fee-for-service business model … but then there will be no commission cushion to ease the transition. They’ll be forced off commission cold turkey.


There’s other reason all the consolidation of medical carriers doesn’t really affect you. It just accelerates another trend: the commoditization of health insurance. From guaranteed issue to community rating, mandated benefits to limits on plan design, it’s become almost impossible to differentiate yourself from other firms on product or price. Going from five national carriers to just three will only exacerbate the problem.

The point is, your dependence on the medical carriers — and their value to you and your business— has about run its course. It’s now time to step away from the carrier and your addiction to medical commission. It’s time to move your benefits firm into the 21st Century. Come on in, the water is fine.

Here’s how to move to a fee-for-service business model. First, measure the value you currently bring to a client, add to that value where it is most needed (strategically diversify your portfolio), determine what your value is worth to the client (set a fee schedule), announce (market) your value to your clients and prospects, identify your prospect’s greatest needs and pain points (sell consultatively), and then provide the prospect a solution in exchange for a fee, which they gladly will pay in exchange for the value you bring.

Incidentally, some of your value almost certainly will be in helping the client develop their benefits strategy … it’s not like you’re leaving the employee benefits space. You’re just reframing and enhancing your value so you can justify and be paid a fee for services rendered. Now your relationship with the client is totally transparent.

I’ve written elsewhere that Zenefits is getting letters of record from employers who don’t know what value their broker brings, so they’re willing to get rid of the broker in exchange for the value that Zenefits offers. If your client is paying you a fee, they know your value and wouldn’t think of firing you to get some HR software, no matter how zippy.

You may think I make this sounds too easy. I never said it was easy. But it’s important work that will transform your firm into a reform-proof 21st Century Agency. This is your future.

So some of the biggest medical carriers are consolidating. Good for them; great for you. You don’t need them any longer. Your future begins here.

Starting to feel better about all this? You should. Surviving and prospering in the post-ACA world means you’re becoming the consultant, the adviser — the trusted adviser — that you know you should be and that your clients want you to be. Thank Aetna and Anthem. By accelerating the inevitable, they’ve done you — and the industry — a favor. Welcome to the 21st Century.

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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