The passage of the Patient Protection and Affordable Care Act was the wake-up call our industry needed. On March 23, 2010, brokers woke up to realize that our livelihood could be wiped out with a swipe of the President’s pen. However, for far too long, many of us were reluctant to face the other threats that existed on traditional business practices.
It’s my belief that the era of the six hour per year broker is over and we need to adjust our services and way of doing business in order to survive in today’s post-health care reform environment. But what does that mean? With more than 25 years of experience in the health and benefits industry, I have signed on as a Be Advised blog contributor who plans to help answer that very question.
If you’re a broker with tough questions, I’m here to provide unbiased answers and feedback to help you take the next step in adapting your business. Feel free to leave your question in the comments or reach me directly at firstname.lastname@example.org.
Question #1: Why is there all this talk about moving small to mid-market clients to a self funded arrangement; is this really a viable option for control health care costs?
This question has started to come up more and more frequently. I firmly believe that we are seeing brokers move their clients to self-funded arrangements for a host of reasons, but two critical factors bubble up to the top.
First, the anticipated shift is primarily driven by the desire to avoid costly reform provisions that introduce health insurer premium taxes and medical loss ratio constraints on fully insured products, both of which insurers are likely to pass on to employers in the form of higher rates. Second, some midsized employer focus group participants say self-insuring offers greater flexibility and creativity in areas such as benefit design, health and wellness incentives, and care management programs.
The opportunity to deliver a high-quality benefit at a controlled cost is well within reach through careful structuring of the self-funded approach. Still, self-funding still may sound scary to some employers, especially in a climate of high-cost medical care. Maybe you are thinking that your client cannot afford to take the chance of having an employee need high-cost services. Fortunately, there are strategies to help reduce the risk when taking on self funding, including:
1. Using medical stop-loss insurance to protect severity and frequency of high claims.
2. Using alternative funding strategies.
2. Insuring organ transplants separately.
3. Addressing specialty pharmaceuticals.
4. Managing dialysis treatment carefully.
5. Encouraging employees to manage chronic conditions.
A more consultative in approach to benefits is essential now more than ever. There is a lot of confusion around health care reform and where there is confusion, there’s opportunity for us to play a key role in shaping the landscape. Self-funding strategies are an excellent way to start!
Question #2: How do you suggest benefit professionals continue to build their book of business in this very difficult market?
Contrary to popular belief, health care reform has made way for new business opportunities for brokers in a number of market segments. My best advice is that brokers should strongly consider diversifying their offerings to provide value-added services to clients, in turn becoming a partner, rather than a vendor. A few suggestions on how to get started:
- ERISA plans – the self-funded health plan. The enactment of ERISA in 1974 allowed employers to act as insurers and exempted them from many state regulations and mandates. Today, this is a large, mature market with nearly half of working Americans insured through employer-based self-funded plans. In fact, the vast majority of employers with more than 200 employees self-fund and almost all of those employers purchase medical stop-loss insurance to protect against potentially catastrophic claims.
- Retiree Drug Subsidy. With the reduction in the value of the subsidy for Medicare Part D, companies are eager to hear about alternatives for their retirees. Agents can work with key partners or provide a number of options that are economical and shift the administrative headaches and balance-sheet liabilities away from employers.
- Supplemental Programs. As Medicare absorbs the $500 billion in cuts that were factored into the financing of health care reform and the state-based exchanges put together their menu of plans, consumers may become dissatisfied with the coverage alternatives. Just as Medigap policies evolved to take care of shortfalls in Medicare coverage, limited medical plans may become the go-to supplemental coverage that gives consumers more options.
- The CLASS Act - While the CLASS Act benefits don’t make sense when doing a cost benefit analysis, it does bring Long Term Care insurance (LTCI) to the forefront. It also forces employers to decide whether to opt-in or out of the program and brokers can play a role in those discussions by being first in line to tell the story. There is a tremendous opportunity to demonstrate better alternatives, including private LTCI programs wrapped around the CLASS Act.
Times are tough for benefit professionals, and agents who try to conduct business as usual may be left behind. But those who get creative, try new things and continue to focus on bringing value to their customers can position themselves for an opportunity-filled future.
Fleet is president of AmWINS Group Benefits, a Charlotte, N.C.-based wholesale broker of comprehensive group insurance programs and administrative services.
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