Status quo brokers are not helping clients
Benefit consulting is not so different from any other business in that profitability is often the key driver.
The issue with this is that a profit-driven mentality limits creativity, simply because creativity requires time and effort, which minimizes overall profitability.
There is a reason why many national broker firms will leave the majority of their clients fully-insured in the 250-500 employee range, while being fully aware that these employers could save millions by self-funding and implementing the correct cost-containment strategies.
This would seem counterintuitive, given the amount of extra work it would create for the broker. In fact, the broker may find that it places a limitation on the volume he or she can write in a given year.
What’s wrong with this picture? If these firms are able to successfully convince employers that self-funding is not an option due to risk and volatility (which I hear all of the time), they can collect 5%-6% of the total premium, amounting to hundreds of thousands in commission, and refrain from doing a darn thing thereafter.
As a second generation benefit adviser taking over the consulting practice for my father, I quickly realized that our firm needed to do more than your average broker in order to compete with the large broker shops.
After many strategic planning sessions and countless hours of research and traveling, we have not only identified ways to differentiate our firm, but also methods to actually address the root of the problem for clients in a meaningful way that enhances the employee experience while making a substantial impact on their bottom-line.
It has turned into a passion and an obligation for us, more than simply a differentiation tactic. Five years ago, when I placed my first group into a captive (collaborative self-funded employer pool), I realized that I was going to do five times the amount of work for the same or slightly less broker compensation.
This was a demoralizing reality, considering that I was saving employers hundreds of thousands and sometimes millions of dollars by doing the right thing, but I was not being rewarded financially for my efforts. I could have written a dozen 50 – 100 employee, fully-insured groups and used very little creativity in the time it took me to manage two self-funded cases with the right cost-containment tools.
As I think about the root of the problem, which happens to be a lack of transparency in the healthcare industry in conjunction with dramatic price increases from pharmaceutical manufacturers (and hidden PBM profits), I cannot simply shift the blame to benefits consultants. But, status quo brokers are not helping the situation. They’re only enabling the problem from a different angle.
Next generation benefit firms owe it to their clients, to their country and to themselves to invest the time necessary to identify and implement solutions that address the root of the problem, not simply those that align with their financial interests.
If this type of change does not take place on a large scale, the cost of healthcare will inevitably become unmanageable, but this does not have to be the case. There are solutions to contain the problem at hand. You have to decide whether you are going to be a part of the solution or maintain the status quo and allow the problem to become exponentially worse.
Rine will speak further on this topic at EBA’s Workplace Benefits Renaissance on Feb. 28 in a session entitled, “Adviser Transformation: The Next Generation.”