Tag Archives: health care

Employers Must Demand More from Their Broker

This is Part 1 in a two-part series about what employers should expect from their insurance brokers. Part 2 in the series will be forthcoming soon.

Setting The Stage
The world of health care finance is changing and the role of the health insurance broker is changing just as rapidly. The role of a trusted advisor is more important than ever. Health benefits for any size employer demand a benefits professional who has the client’s best interests at heart. Employers must explore current benefits offerings and demand a package best suited to their needs.

Voluntary benefits, self funding, and Consumer Directed Health Care are just a few of the many options every employer must discuss with their broker. Many employers are also demanding that their brokers account for their income.

The days where brokers were paid a commission by the carrier and counted on a regular double digit raise simply by telling the employer to re-enroll are gone. Some carriers are changing their compensation model. Instead of paying a percentage commission they are paying per head, also known as a capitation model. This model eliminates the automatic pay raise brokers have been experiencing and forces brokers to explore other options to replace lost revenue.

Employers should insist on a written agreement outlining the broker’s commissions and the services they will receive. A good broker will help an employer design a plan, market the plan to carriers, and analyze the costs and benefits of suitable plans. Beyond that, some brokers may handle open enrollment, resolve billing and claim issues, and help communicate with employees, but it’s essential to clarify such expectations up front.

If your company is self-insured or experienced-rated, retain a competitive broker group to periodically conduct an independent market pricing comparison. You will pay a consulting fee for such services, but the initiative may result in significant savings.

Discussions regarding containing health care costs have traditionally focused on educating and influencing the employee consumer of health insurance. But now, as soaring costs and growing complexity have become the norm, employers too need to educate themselves in order to understand how brokers are compensated and how they can reap the most value from the employer-broker relationship.

Technology As Differentiator
Just as the Internet has empowered consumers, so has it empowered health insurance brokers. While once the task of acting as conduit between insurance company and policyholder required long administrative hours, computers now allow broker and insurance company to instantly transfer information.

Still, time saved by computer must be made up by competing for a limited and educated client base. The new technology has in part driven a trend towards specialization: brokers are marketing themselves as specialists in a given industry. One might be the specialist in non-profit health insurance while another may specialize in the travel industry. This allows brokers to be aware not just of policy options but also of the typical wants, needs and budgets of a given industry.

What directions technology will propel the industry will be revealed only with time. One thing that remains clear is that Americans do not want to worry about their health coverage and will look to experts for help securing the best service at the right price.

Every broker has the best service and every broker offers the best products, just ask them. What differentiates a broker is their technology. Not only the technology a broker uses in their office but more importantly the technology the broker provides to the employer groups. Most brokers are very reactionary. They provide technology to their clients only when the client demands it. All parties — employers, employees, Third Party Administrators, carriers, and brokers — must utilize technology tools.

Benefits administration software, COBRA administration tools, HRIS, and consolidated billing services are just a few of of the technology tools used by brokers and their clients. The days of brokers providing quotes and enrollments are over.

In the next article in this series, we will explore in more detail how top brokers are using these technologies to run their business.

So Do We Really Need Health Care Reform?

Health care reform in the form of PPACA was signed into law by President Obama on March 23, 2010. Now more than a year later it is still a significant matter of discussion. The House and the Senate continue to discuss whether or not we need it. Yes this topic has its political sides and strong supporters on both sides, but few seem to get to the real issue, “do we really need it?” Health care reform has been widely discussed for most of the past forty years. Many have feared its coming, others have anxiously awaited it. Now that it is a reality, it continues to dominate much of the discussion.The key reasons for wanting health care reform have included:

  • Significant numbers of uninsured and underinsured individuals (i.e., more than 40 million or about 1 out of 7 individuals)
  • High expense of health care services in excess of 17% of the GDP (i.e., more than 1 out of 6 dollars spent on healthcare)
  • Need for improved quality in healthcare (i.e., continuing medical errors as reported by the Institute of Medicine leading to more than 130,000 deaths per year)
  • High rate increases for insurance products limiting the public’s ability to purchase insurance

Most of these reasons are inter-related. The high cost of care forces up premium rates which in turn impacts the ability of individuals to obtain health insurance. This in turn stresses our excellent health care system with the large number of individuals without health coverage, sometimes leading to more than expected medical errors.

Although more needs to be done, PPACA attempted to deal with most of the above issues. It enabled the creation of exchanges to maximize the availability of coverage options to those without coverage. It created a mandate to force individuals to obtain coverage. It provided a significant subsidy for those who could afford it the least. It attempts to fold in to the current Medicaid and Medicare system many, and hopefully most, of those without coverage. It created a concept known as value based reimbursement to improve quality and minimize medical errors. It instituted loss ratio limits to constrain the prices of health insurance products. All of these were attempts at trying to get at the key issues. Were they enough? Probably not, but many of them were focused in the right direction.

The big question remains, do we need health care reform? Did PPACA do enough in the right direction to be worth the effort and expense to continue it? Although this, on the surface, seems to be a simple question with strong supporters on either side of it, it remains a challenging question.

One of the biggest issues inadequately discussed is the second bullet above which deals with the percent of GDP spent on health care. Yes we all know how expensive health care is, but have we seriously considered the economic impact of increasing health care costs. Although I am not an economist, I have spent most of my professional career studying the health care system at both the micro and macro levels. I understand that different sectors of the economy are continually in battle for their share of the economy. Whenever one sector grabs more than its fair share, the rest of the economy essentially fights back wanting it back. For years this has happened without concern. The economy has demonstrated amazing levels of elasticity, responding to new demands, new technology, etc. As long as the economy was strong there seemed to be an endless supply of resources for any sector of the economy.

However, as the economy has become more sluggish, dollars more scarce, with more concern about the economy’s viability, there has been increasing concern about sectors of the economy that are consuming more than expected or more than desired. In the past several years the discussion about elasticity of the general economy has become more common. In a stagnant economy, one without growth, some economists have raised the perspective that the residual elasticity might be as low as four or five percentage points. If true, this suggests that there may be no more than four or five percentage points of the economy available to any current sector without an offsetting reduction by another sector. Most projections for the health care sector show continuing increases with demands for more than four or five percentage points by 2014. What does this mean? This simply means that health care could by itself consume all of the available elasticity by 2014. This is delayed with a robust recovery in the economy, but still presents a serious problem if the economy fails to rebound. The impact of an economy without any additional elasticity is its inability to respond to needs for resources. Without available resources sectors of the economy will potentially decline and die. In our “just in time” economical world, the economy relies upon smooth transition and free access to resources. Without this serious economic problems emerge.

The bottom line is that we need to conserve the available elasticity of our economy to preserve our economy. To the extent that any sector is consuming more of the economy than its reasonable fair share, that sector needs to be restrained to protect the economy. Perhaps the biggest reason for health care reform is this restraint. Without it, our economy is at significant risk. We as a country cannot afford this economic risk. We need health care reform, there is not doubt. However, we need to thoroughly question whether or not adequate controls exist in PPACA to restrain the health care system’s desire to consume more than its fair share.