Tag Archives: benefits brokers

Benefit Advisers Must Actually Advise

Sales is the name of the game, no matter the industry, but some professions should focus more on providing sound advice and less on promoting new and trendy products. Many benefit brokers fall into that latter category, and I say this as someone who has been in the insurance industry for 25 years.

It used to be that group insurance brokers were more transactional. Get a good product at a fair price, provide some service, and your client is generally happy. Today, that same broker must create compliance initiatives, administer COBRA, FMLA, enrollment services, ERISA advice and some human resource functions. This new responsibility requires expertise beyond what’s needed to get an insurance brokers license, yet, like most entrepreneurs, we adapt. We must, however, get back to basics.

As group benefits brokers, we must turn our attention to the core mission of our profession today. That mission is strategic consultation and education for our clients, addressing the cost of providing healthcare in this country. It is, by far, the biggest driver of the increase in the cost of, and inability to afford, group health insurance.

Certainly, maintaining an awareness of professional trends has its benefits, and often a new offering can make a big difference for clients, but advisers need to dial down the reseller role and concentrate on imparting guidance to address core issues.

Next to payroll, the largest expense for most businesses is the cost of group health insurance. Yet many benefits advisers continue to go down the same old path by providing information on the same, tired, cost-shifting plans – this despite the fact that these plans’s premiums are rising faster than the cost of living.

See also: Benefits Advisers: It’s About to Get Real  

Benefit brokers need to begin educating clients on what is really driving premiums. One significant lesson that should be learned upfront is that joining a large insurance purchasing group is rarely the solution for small to medium-sized businesses, because savings are short-term for most. The dominant problem facing health insurance prices is the cost of providing care. It won’t cost less for a small firm with a staff of 10 for an MRI or maternity stay simply because it is in a pool of 5,000 employees. Although these multi-employer plans may show short-term savings, unless there is a marked improvement in the risk pool, as with every other group collective purchasing arrangement for healthcare, it fails. And, oftentimes these plans are dangerous self-insured arrangements where the employer, and sometimes even the broker, has little knowledge of the potential risk.

The need, from my standpoint, is for businesses to embrace measures that can result in less prohibitive healthcare costs, beginning with the use of telemedicine programs not owned by insurance companies. An eye-opening statistic from the American Medical Association indicates that over 70% of all emergency room, urgent care and primary care visits could be handled via telemedicine. This is a cost-effective alternative that will reduce the employers claims cost by a weighted average of $240 to $300 per visit. Offering telemedicine as a benefit not only decreases claims and keeps overall costs down, but the employees are less likely to miss work due to a medical appointment.

An independent second opinion program is another avenue to trim costs, yet a mere 19% of health care consumers get second opinions. This is head-shaking as a study conducted in 2014 by the Houston Veteran Medical Center and the Baylor College of Medicine estimated that 12 million people in this country are misdiagnosed annually. The study went on to show a change in diagnosis by nearly 15%, as a result of a second opinion and as high as 26%. The course of treatment is changed an astonishing 70% of the time. An independent medical second opinion program can provide simplified access to high-profile medical centers/teaching hospitals, specialists, etc. in collaboration with a patient’s attending physician team, often for little to no cost. Result: Employees are less likely to miss work due to a misdiagnosis or follow-up appointments. Consider, also, that the third leading cause of death in the U.S. is medical errors.

Offering employees a choice as to how they purchase prescription medications is another cost-efficient employer healthcare program. It fosters consumerism by deploying a comparative prescription drug environment and can lower cost for the consumer and the employer, sometimes substantially. Numerous online prescription drug programs can help members identify discounts, coupons and subsidies available for their high-tier prescriptions. Current and emerging technologies aggregate these programs so immediate access to potentially less expensive prescriptions drugs are identified and easily obtained by the patient. Also, some of these programs will have deductible and copayment assistance programs designed to keep people compliant with their medication regiments. Another easy way to reduce costs.

Employers need to weigh the worth of group health insurance against self-funding; if choosing the latter, always offer a reference-based pricing option. This plan recognizes that insurance company payments to hospitals can be as much as 300% to 600% more than what Medicare would pay. Reference-based pricing plans might pay the hospital just 50% over Medicare. If an employer or local market isn’t ready for this aggressive approach, there is a solid opportunity to educate about reference-based pricing.

See also: Reinventing Sales: Shifting Channels 

Those of us in the insurance and benefits industry have the responsibility to shed light on strategies that address the real drivers of cost rather than simply regurgitating what we are told are current industry trends.

Zenefits: Only the Start for Brokerages

As this election year unfolds, many are questioning what created Donald Trump. Why him? Why now? On the other end of the spectrum, the same could be said of Bernie Sanders. In the benefits world, I relate the political landscape to Zenefits and former CEO Parker Conrad. What is it that allowed Zenefits to come to be? As Zenefits now regroups to begin its post-Conrad journey, firms like Namely are getting press and stepping into the market in a similar way.

Some say Silicon Valley breeds arrogance and often enables young entrepreneurs to create companies and attack the market and competitors with a vengeance. These young guns want to disrupt the market and change the rules of the game to deliver something new and better.

See Also: How Likely Is Zenefits to Change?

Whether you agree with the Zenefits model or not, you can’t argue with its results. According to Bloomberg, the company’s revenue was close to $63 million annually as of the fourth quarter of 2015. This means:

• $63 million in customers fired their broker because Zenefits promised something their current broker was not delivering;
• $63 million in customers valued what I think is the equivalent of a $5 per-employee-per-month (PEPM) technology more than they valued the services delivered by their $25-$35 PEPM benefit broker; and
• $63 million in customers did not care that there was no local service.

While Conrad has left this stage, the conditions that allowed him to grow his business still exist. And I am sure the Zenefits executives and investors — including Andreessen Horowitz and Fidelity — are not going to let $63 million in revenue slip away without a fight.

What Zenefits accomplished is to let the world know there are many employers out there that value what Zenefits promised to deliver. In fact, according to industry analyst and marketing guru Mark Mitchell of the Starr Conspiracy, there was $2.1 billion invested in the human capital management technology and services space in 2015 and $600 million in the first quarter of 2016. As Mitchell said at a recent conference, “Those checks are being cashed.”

Soon, there will be a tsunami of new products, services and marketing in the human capital management (HCM) technology and service areas that are going to hit the market. Employers will be getting phone calls and webinar invites and attending conferences where these new solutions will be heavily promoted.

Case in point: Have you ever seen a TV commercial or heard a radio commercial about HR technology before Zenefits and Namely? This is a hot market, and as one venture capital firm representative said to me, “We are only interested in investing in firms that go after the benefits commissions.”

The commission is in play, and $2.1 billion in investment capital knows it. I have been in the benefit business since 1986, and many of the same problems still exist. Administration is still complex. Benefits are still confusing and are only getting more confusing. Costs are still going up. And now, in today’s world, cost shifting onto employees is creating financial stress on them. It is getting worse, not better. As long as the current market does not solve these problems, then there is an opportunity for someone else to do so.

In the political arena, whether Trump wins or loses, the conditions that allowed him to secure the nomination aren’t going away. Certainly, the millions who support him won’t disappear overnight. They are still Americans living in our society.

In the benefits world, whether Zenefits survives also doesn’t matter. The conditions that enabled it to enter the market and grow still exist. Employers still want what Zenefits promised. Managing benefits is still burdensome. Costs are still going up. People still don’t understand their health insurance. The market conditions have not changed. The opportunity for another company like Zenefits — or 10 of them or 100 of them — still exists. And while Parker Conrad is in the rear view mirror, others are coming. And it will be a tsunami.

This was originally written for Employee Benefit Advisor Magazine. The post can be seen here.

End of Health Insurers As We Know Them

I want to start by saying that I am knowingly writing an article that is going to throw fuel on a fire. Being from New England, this article strikes me as the equivalent of writing an article in the Denver Post that says New England Patriots quarterback Tom Brady is better than Denver Broncos quarterback Peyton Manning. Letters will be written. Darts will be thrown. So, I will make sure I put on my steel vest before I publish.

I already started writing on this topic, in a recent article titled, “Apple HealthKit – The Next Step to the End of Employer-Based Health Insurance.” In this article, I will provide a more detailed analysis of why the premise presented in my first article may come true — that within five to 10 years employers will be out of the health risk business. I will then provide a plan for what I think benefit brokers should do to prepare. Taking action may be the difference between those that survive and thrive in this new health insurance world vs. those that may struggle or even fail.

What do I mean when I say employers will be out of the health risk business? To repeat what I said in my last article, “By health risk, I mean the cost of the employee’s health insurance will not be priced by the employer. It won’t be a function of average age of the employee population, claims experience or any of the standard underwriting/pricing rules today.” In fact, health insurance will most likely become an individually purchased product, and the insurers of the future may not be the companies that dominate the market today.

As a consultant to benefits brokers, I educate them on technology and advise them on how they can maintain a competitive position. My future depends on brokers’ remaining significant, so I am as concerned about their future as any broker would be. If you study the significant market events over the past few years, you get a picture of what the future may be like. While many may think Obamacare is the big market change, I believe that the health insurance market is going to change much more dramatically and that, while the government may be nudging things along, competitive market forces will drive the change.

So let’s get to the point. I believe that within five to 10 years health insurance will be delivered primarily through staff model health maintenance organizations (HMOs). These will be Kaiser-like plans where the providers of care will also be the risk takers/insurers. Individuals will pay a fee directly to a healthcare system that will be responsible for the health, wellness and treatment of the person. Employers may still give employees money to pay for some of the cost, but they won’t be in the “risk” business. We are beginning to see this evolution today through the expansion of what people are calling accountable care organizations (ACOs). However, the future will go well beyond the limited risk sharing of today’s ACOs.

Four Catalysts to Change

If you had been in the health insurance business in the ’80s, you would say we tried this before, and it didn’t work. Well, today, things are different. There are four major differences that will be the catalysts for the coming changes:

Changes in consumer buying behavior

In the ’80s, employers often paid for 100% of an employee’s health insurance and a large part of the family’s. When cost wasn’t an issue for employees, they looked at access to providers as the No. 1 variable. So, all the HMOs and preferred provider organizations (PPOs) tried to expand their networks to appease more people. Today, cost is the No 1 issue. As a result, we are seeing networks shrinking to save cost.

Expansion of government health insurance programs, combined with the reduction in Medicare and Medicaid reimbursements to providers.

If I am a healthcare provider and am getting less money to perform services on a growing population, then I need to do things differently. I need to get money from healthy people and from people needing less care. I would also need to keep people healthy or provide care in more cost-effective settings.

Advancing mobile technology

With advancing technology, it will be easier for providers to have real-time access to a patient’s medical information. Things like weight, blood pressure and blood glucose levels can be measured in the home, sent via Bluetooth to a mobile device, and immediately be available to the primary care physician in the individual’s web-based medical/wellness record. Other health metrics will also soon be possible. Systems can automatically notify the responsible physician of any changes in the metrics that warrant attention. Information will help provide proper treatment in a timely manner.

Change in tax laws, allowing personally purchased insurance on a pre-tax basis

With Republicans taking over Congress, the idea of making an individually purchased insurance policy tax-deductible is now on the table. While this is not a necessary catalyst for change, it certainly would put the nail in the coffin and get employers out of the health risk business.

Not only is there a perfect storm forming for the coming changes, but I believe the majority of the participants in today’s healthcare market will welcome this change. We have all heard the saying that “healthcare should be between the doctor and her patient.” We know the government wants this. I think employers, employees and healthcare providers would want this, too. It is the insurers, and by extension benefits brokers, that may not want this. However, as we all know, there is little sympathy for the insurance companies.

Employers would want this because I don’t think employers got into the health insurance business after World War II to be in the position they are in today. While I don’t think they mind giving employees money to pay for health insurance, they don’t want their profit margins affected by the health of their employees. Bad claims experience, and their profits go down. Every year, they agonize over the health insurance renewal, deciding whether to charge their employees more or make changes in plans (delivering bad news, either way) or absorb increases in the business. I don’t think employers want to be in the wellness business, either. They may want to provide wellness programs to make people feel better, be more productive at work or boost morale, but not to control or reduce healthcare costs.

Employees want change, too. Do employees want their employers asking for things like health risk assessments? My health should not be my employer’s business. To me, there is a slippery slope as it is. I do want my physician to care about my health. I want my doctor to know my weight and blood tests and care whether I got a colonoscopy when I turned 50. I often joke that I get an email from Jiffy Lube saying that my car is due for an oil change, but my doctor never sends me an email to get a check-up, test or whatever is needed to keep my engine running the right way.

I believe doctors and other healthcare providers want change, too. They want to practice health care. This would include helping their patients make the right lifestyle decisions and keeping them informed about what is good for them vs. what is not. Providers don’t want the paperwork. They don’t want third-parties telling them what to do, and they are getting tired of reduced reimbursements from the government.

The Market Reacting

I am not the only one using the term “Kaiser-like.” Emanuel Ezekiel, one of Obama’s healthcare advisers, expects healthcare insurers to be obsolete by 2025. According to Ezekiel, “ACOs and hospital systems will become integrated delivery systems like Kaiser or Group Health of Puget Sound. Then they will cut out the insurance company middle man — and keep the insurance company profits for themselves.” (Source: New Republic – March 2014)

Now, I am not going to just listen to Emanuel as my source. I am listening to the market. Hospital systems have been acquiring physician practices and entering the insurance business across the country. In my own backyard, there was this acquisition highlighted in the Boston Globe.

State insurance regulators Friday signed off on Partners HealthCare System Inc.’s acquisition of Neighborhood Health Plan, a transaction that will put the state’s largest hospital and physician organization into the health insurance business for the first time.” (Source: Boston Globe September 2012)

In Massachusetts, this is very big news. Partners HealthCare owns some of the leading hospitals in the country, including Mass General and Brigham and Women’s Hospital.

Hospital systems getting into the health insurance business is not limited to Massachusetts. In New York, New Jersey, Pennsylvania, Maryland, Michigan and all across the country hospitals are getting into the health insurance business. (See Kaiser Health News.)

Concurrently, insurance companies are getting into the healthcare business. According to Hospital and Health Networks Magazine January 2012, the following insurers have made healthcare acquisitions:

  • WellPoint bought CareMore.
  • Optum bought Orange County’s Monarch HealthCare and two smaller independent physician associations (IPAs).
  • United Healthcare acquired a multispecialty group in Nevada in 2008.
  • Humana purchased Concentra, which provides occupational care and other medical services.

Aetna Making Moves

What I have find most interesting is the acquisitions by Aetna and some of the comments by CEO Mark Bertolini. Let’s first look at some of the comments Bertolini has been making over the past few years.

“The end is near for profit-driven health insurance companies. The system doesn’t work, it’s broke today. The end of insurance companies, the way we’ve run the business in the past, is here.”

“We need to move the system from underwriting risk to managing populations,” he said. “We want to have a different relationship with the providers, physicians and the hospitals we do business with.”

In his presentation titled “The Creative Destruction of HealthCare,” he states:

“Not too far away from now – in the next six to seven – 75 million Americans will be retail buyers of healthcare. And they’ll come to the marketplace with their own money and either a subsidy from their employer or a subsidy from their government. And it doesn’t much matter – they’ll be spending their money.”

Aetna is not just talking. If you look at Aetna’s acquisitions and partnerships over the past few years, you can see that Aetna is preparing for the future that Bertolini describes. The company has spent billions of dollars acquiring technologies that can be critical to the future in managing healthcare and healthcare information, including:

  • iTriage – Mobile App for employee to check symptoms – Find doctor – Make appointment
  • ActiveHealth – View and update personal health record (PHR) – Personalized alerts and content – Communicate with doctor
  • Medicity – Promotes coordination of care – Real-time patient data

(Source: Aetna 2013 Investor Presentation)

According to Aetna’s website, Aetna was ranked #52 on InformationWeek’s 2013 list of the 500 leading technology innovators, surging ahead of many of the top names associated with technological innovation. Aetna ranked first among health insurers.

To move to this new model, healthcare providers will need to add capabilities that insurance companies currently have. For example, hospitals provide care but don’t have the actuarial skills to price their patient population in the event they were to get into the risk business. Many also don’t have the capital to assume risk. Those with enough capital can simply buy an insurance company. Others will have to partner with an insurance company that has the capital and reserves to share risk and provide the needed services.

So if I am an insurance company, I can either buy providers to stay viable or provide some products, services or capital that the new healthcare systems will need. Buying hospitals or physician groups across the country can be very expensive. So it may appear that a company like Aetna is setting itself up to be the technology, actuarial, reinsurer and other service provider for these future healthcare systems. I won’t claim to know if Aetna thinks the market will move as far as I am saying, to a Kaiser-like model, but the company certainly is preparing for a different healthcare model.

Some may think that this is somewhat what insurance companies are doing today. Here is the critical difference. Today, the risk-sharing arrangements are still in a fee-for-service environment. In the future, a hospital system may be in close to a 100% capitation environment (where the system receives a set amount per period for each person covered by the arrangement). Provider systems that purchase these services or develop a risk-sharing relationship with an insurance company in such an environment can’t have two such relationships. They will need a single risk pool to properly manage the population and risk. There won’t be a Blue Cross version, a United HealthCare version and an Aetna version of a local ACO/staff model system.

A good example of healthcare financing is my own healthcare. Since I moved back to Massachusetts 16 years ago, I have had the same primary care physician and used the same hospital facility on a number of occasions. Yet I have had seven different health insurance programs. Assuming an average insurance premium of $10,000 per year for my family, over the 16 past years I have paid $160,000 in premiums. I understand insurance, spreading the risk and all the other insurance arguments about where that money goes, but think of how it could be different if all $160,000 went to the system that was actually providing care to my family and me.

What Benefit Brokers Can Do

Okay, so the world may change. What would I do if I were a broker today to prepare for this change? First, change does not happen easily and overnight. The whole country of healthcare consumers, distributors and providers will need to adapt. As a benefits broker, your buyer may no longer be the employer but the employee. If this is the case, then some existing services may not be needed.

  • No more risk analysis/actuary and underwriting
  • No more claims analysis tools
  • No more wellness programs to reduce healthcare costs
  • No more disease management programs
  • No more company medical renewals

Before someone points out the obvious to me, I will say that I do know that most groups with fewer than 100 employees are community-rated and those with more than 100 employees are experience-rated. Small employers are still faced with balancing budgets based on their healthcare renewal. This anxiety will go away.

Most of these types of services are a core competency of many of the national benefits firms and the larger independent brokerage organizations. These services are viewed as key differentiators. For these firms, change may be even more dramatic because providing these types of analytical skills is part of their culture.

So let’s talk about the things brokers can do. I am going to break this down to a list of tasks.

1.       Understand what the players in your market are doing – Brokers should start analyzing their local medical market and see what the providers are doing in this area. Have they made acquisitions? Have they created new partnerships? What is their leadership saying publicly? Whatever they say or do, believe them.

2.       Add an employee call center – Employers will welcome the support in helping employees move to a new environment. Provider systems will welcome and pay for the support in helping those same employees navigate the market.

3.       Add personal financial consulting – It is estimated that close to 40% of employees lose some productivity at work because of financial stress. The healthcare insurance purchase is going to be a major decision for an employee, and it should be made in the context of an employee’s entire financial position.

4.       Understand the new technologies – How many of you who have read this up to this point understand what Aetna’s technologies for the consumer are? Do you know how to “Bluetooth” your weight from a scale to a smartphone? The place of employment can also be a great place to help employees with technology to track health information. Could an employer have a scale at work that is Bluetooth-enabled to send a person’s weight to their smartphone? Could the employer have a blood pressure machine at work? How about setting up a private room with teleconferencing capabilities so an employee can consult a doctor face-to-face via the web without leaving the place of employment? Could a broker make himself available to consult employees one-on-one as to how this whole system will work?

5.       Develop technology engagement and education strategy – After you learn what you need to know about the new technologies, are you ready to deliver? I believe the provider systems (the new Kaisers) will welcome the opportunity to educate the population through the employer. At the employer level, you can reach a large amount of people fairly easily. And the employers will care that their employees understand this new healthcare delivery system. Employers don’t want stressed employees, because stressed employees are not as productive. I believe employers and these new provider systems will pay to help these individual consumers.

6.       Invest in new internal technology and processes – If your entire infrastructure is geared around engaging the employer, then things will need to change. Can you record a phone call? Can you engage in online chat with an employee? Are you prepared to sell individual insurance? To sell a high volume of individual policies and service employees, you will need extremely efficient internal operations.

7.       Start thinking about helping employers exit the risk business – Rather than advise employers how to control costs and mitigate risk, should you start advising them on how to get out of the risk business? I guess private exchanges and defined contribution plans are the start. However, if the healthcare market changes, the pace will accelerate because there will be more options for the employer to get out.

8.       Engage new providers – Carrier reps are always calling on brokers, but these new organizations may not call on brokers in the same way. You may need to reach out to them. If you have something of value for the new provider system, you will need to engage the carriers.

To move to this new model, it will require that brokers invest in technology and people. To attract the provider systems benefits, firms will need to have the services, size and scale to deliver. Most independent benefits firms either don’t have the capacity or capital to move to this model. They will either have to sell to a larger firm or join forces with peers who share the same vision and are willing to collectively invest in preparing for the future. The national firms and larger independent firms with the capital and resources will need to have the will to change.

In today’s environment, many brokers may not feel the need to make these changes. Other firms have already started preparing for a much different future. For example, several national firms have opened call centers for employees. Whether that is for a future market I have described, or simply to service employees today, I don’t know, but the centers are a sign that the benefits game is changing.

I may not end up being right with my market predictions, but my advice is to pay close attention. There is change going on out there, and I think a picture of the future is being drawn that looks much different from the healthcare market today.

A Wakeup Call for Benefits Brokers

More news from the technology front: Aetna acquires bswift. , shortly after Hodges-Mace announced the purchase of SmartBen. Last year, it was Towers Watson buying Liazon. Next year, it will be someone else. Is this just beginning of the dance where everyone in employee benefits needs to choose a partner? What does this mean for the benefits market and the benefits broker?

For some, the Aetna acquisition of bswfit may be strange. Aetna buys a company that provides technology that is used by its competitors and that handles enrollment for many employers that don’t have Aetna insurance. Similarly, Towers Watson bought a company whose products and services are distributed by its competitors, other brokers.

What most people aren’t realizing is that the world has changed. If you view this acquisition in the old world, where competitors don’t work together, you may see it one way, but in a new world it may look a little different — in many industries, companies that compete in one segment may be partners in another.

My message to brokers on this is to start thinking differently. Those who don’t will get left behind. The rules of the game are changing, and you don’t get to make all the rules.

I have been fortunate to have worked in some capacity with Mark Bertolini, CEO of Aetna, and Rich Gallun, CEO of bswift. Both are outside-the-box thinkers. Aetna has invested billions in technology preparing for what it views as a consumer-centric healthcare model. Aetna wants to reinvent the patient experience. To quote Bertolini, “We’re going to begin to change the healthcare industry by giving people tools they can put in the palm of their hand.”

Here is another quote from Bertolini that would make brokers pause. When asked about the future of healthcare, Bertolini responded: “There wouldn’t be plan designs. You wouldn’t need them. What you would do is invest in all those things that are necessary to keep people healthy.” You can see a full overview of the Aetna model by viewing this presentation from its 2013 investor conference.

Some may see the bswift acquisition as a benefits enrollment platform for Aetna. But I see this as another step by Aetna to execute on a plan to compete effectively in a new healthcare world. A world where consumers are in more control. Where provider systems are engaged in a patient’s wellness and not just proving treatment after the fact. Where health information and communication is moved via Web and mobile.

Bswift made a strategic move into the consumer-centric world through private exchange technology, with individual rating and decision support tools. Now it has paid off. This made bswift attractive to Aetna. Congratulations to bswift for a job well done.

So what does this mean for benefits brokers?

A few weeks ago, I wrote an article titled “Does Apple’s HealthKit signal the end of employer-based insurance?” Some may not relate Apple’s investment to the Aetna acquisition of bswift; however, I think they are related. Apple is clearly one of the top consumer technology vendors in the market. Aetna is driving consumer-centric healthcare. They are pieces of the same puzzle. It is a puzzle benefits brokers need to pay attention to because the market is changing around them. A carrier buying an enrollment vendor says one thing, Aetna’s and Apple’s investments mean something different.

The healthcare world is changing in a way that most brokers are not recognizing. Consumer-centric; mobile; doctors as wellness facilitators; employers out of the risk business? Maybe. So get ready.