Steps to move beyond the benefits status quo

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Could you win new business delivering reductions in your clients’ year-over-year benefits costs of 10, or even 20 percent? Benefits advisers around the country are getting such results by breaking this insane status quo.

These results require a new approach to benefits, a different way for advisers to work with their clients and for employers to purchase and manage healthcare for their employees.

“I am beyond frustrated,” one veteran Florida broker told me. “I’m out of tools to help my clients. Every renewal, I’m now forced to carry an increase into every client. It’s miserable for both of us.” The benefits status quo offers an increasingly expensive example of Einstein’s definition of insanity: Doing the same thing but expecting different results.

Could you win new business delivering reductions in your clients’ year-over-year benefits costs of 10, or even 20 percent? Benefits advisers around the country are getting such results by breaking this insane status quo.

The more advanced next-generation benefits strategies require time and effort to master but here are two essential and much-easier-to-implement steps.

Compensation transparency

Next-generation advisers act in a consultative role that requires the client’s trust. One of the biggest obstacles to becoming a trusted adviser is the traditional carrier-paid compensation model — whether commission or a per member per month fee — which poses two critical problems. First, since we all work for whomever signs our paycheck, brokers who take a commission check work for the insurance company. Period. Second, your clients rarely know how or how much you get paid on their account.

Moving to an employer-paid fee-for-service model, whenever possible, is the obvious solution, so your clients now know whom you work for, how you get paid, and how much you are paid. This transparency instantly will improve your client relationship and is foundational to your becoming a trusted next-generation adviser.

Alternative funding

Fully insured health plans will never reduce your client’s cost of healthcare, necessary to produce premium reductions at renewal. The carriers’ financial model, especially under the ACA’s Medical Loss Ratio (MLR) rules, requires cost increases in healthcare to drive up carrier revenue to increase their profits. It’s simple economics.

So next-generation advisers, whenever possible, are moving their small- to mid-market clients into alternative funding with level-funded plans — but only those plans that return to the employer unused claims dollars at the end of the plan year. Of course, not all groups will meet the underwriting requirements of these plans. But those employers that do qualify will pay only for the healthcare their employees actually use, saving themselves the difference between premiums paid and claims paid, less the administrative fees.

But alternative funding is merely the beginning, not the end. The best level-funded plans incorporate proven cost-containment programs that manage the healthcare supply chain — the medical procedures and healthcare services that employees buy — to reduce the cost of healthcare and, thus, the cost of the plan itself.

These best-of-breed level-funded plans are saving employers 10 percent or more of their year-over-year benefits spend. For example, an employer paying $1 million in premiums for a fully insured plan in 2018 would pay just $900,000 or less in 2019 for a level-funded plan, providing the company with $100,000 – 10 percent savings – in free cash flow.

Moving your compensation to a fee-for-service model and moving your clients to alternative funding are first steps to begin adopting next-generation benefits. These alone are earning advisers a rush of new business, as they win accounts from brokers stuck in a rut. Move beyond the benefits status quo and make next-generation benefits your competitive advantage.

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