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The Post-Reform Broker

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Abraham Lincoln has been quoted as saying that good things come to those who wait, but only things left by those who hustle. The first person who took the initiative to open a gasoline station when Henry Ford started rolling cars off his production line would certainly attest to that fact. As it has always been, success comes to those who look for where a market is headed and then get there first with products and services.

The provisions of the Patient Protection and Affordable Care Act (PPACA) have changed the entire structure of American health insurance and have given health insurance brokers good reason to be concerned about their role in the industry. Now, much like that gas station entrepreneur, brokers need to uncover new business opportunities and develop strategies that position them not only to survive, but also thrive in the era of post-healthcare reform.

There are three ways for brokers to stay relevant amidst all the changes:

  • 1. Become a valued consultant
  • 2. Take advantage of emerging opportunities
  • 3. Stay current by working closely with professional associations

Think Like a Consultant

It’s time for brokers to stop relying on the price game exclusively and begin looking for solutions to real business problems. To start, brokers should take steps to deepen their industry expertise to demonstrate to customers their value as benefit consultants. By becoming well-versed in data analytics — things such as the cost of x-rays or hospital stays from one institution to another and the changing dynamics of the federal law, brokers can shift their role from salesman to consultant; becoming a partner, not just a broker and/or vender.

Some companies may need help to understand the comparative economic impact of the new options. Therefore, the new role of the broker is to help them explore new opportunities, such as ways to increase coverage affordability while still meeting government mandates. In this way, the function of the broker must shift from spreadsheet salesman to trusted partner.

The bottom line is that the new healthcare law is complex and companies are in need of sound advice. A good broker will be smart to listen to the customers and focus on providing problem-solving strategies instead of concentrating solely on the price.

Seize New Opportunities

One side effect of reform is that supplementary and voluntary benefits are expected to thrive as employers look for affordable options to attract and retain employees. Aside from wellness, vision and dental plans that employers will want as they are affordable and can fill the gaps left by lower cost standardized products in government-run exchanges, why not step way outside the box? Other opportunities that brokers can bring to their customers include:

  • Support for ERISA Plans. Nearly half of working Americans are now insured under employer-based, self-funded health plans. This number is likely continue to rise as more companies begin to self-fund to avoid the projected hike in insurance rates. Brokers can make the most of this by offering several options to keep costs at bay.
    • Stop-loss coverage is more critical than ever. Finding the right carrier, making sure the coverage is seamless and negotiating for the best rate possible are all services employers will look to their brokers to handle.
    • Brokers should encourage customers to purchase insurance products to cover specific risks, such as organ transplantation, which has an average cost of more than half a million dollars for a single transplant.
    • To keep the system running smoothly, brokers should recommend periodic audits of the administrative processes within self-funded plans.
  • Provide Options for Retiree Drug Subsidy. The change in the tax treatment of the Retiree Drug Subsidy has caused many employers to seek alternatives. One option that a broker can offer is the Employer Group Waiver Plan or EGWP (pronounced Egg Whip). An EGWP allows an employer to contract with the federal government as a Prescription Drug Plan (PDP) sponsor, receiving a capitation fee directly from the government.
  • Guide Co-Op Arrangements. Brokers can also find opportunities in working with the nonprofit insurance pools funded by the new legislation. These co-ops will be looking to identify third-party administrators and other services, and brokers should be the ones to help explain the intricacies and establish stop-loss coverage. A successful broker will pay close attention to the customer’s needs and then conduct research on their behalf to help set up the co-op.

Stay Current with Industry Issues.

By working closely with professional organizations, brokers can begin to influence regulators to change how they view broker services. For example, the medical loss ratio provision requires insurance carriers to spend a specified percentage of premium revenue on either reimbursement for clinical services or on “activities that improve healthcare quality.” As it stands now, sales commissions to brokers are typically seen as unnecessary administration costs, but there is an argument to be made that their activity – enrollment assistance, claims advocacy service, billing and collection – serves to promote healthcare quality.

As they say, with change comes opportunity. Now that the economy has started to recover, we are beginning to understand where the insurance industry fits in the new structure for American healthcare. Despite the drastic changes, brokers are positioned to survive and flourish, but only if they stay sharp, keep up with developments and demonstrate creativity in how they do business.

Samuel H. Fleet is President of AmWINS Group Benefits of Warwick, RI, a leading wholesale broker of comprehensive group insurance programs and administrative services. Sam can be reached at sam.fleet@amwins.com

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