Brokers -- Were Commissions Your Titanic - Started-Off Strong And Then Sank?
Benefit Brokers face a potential disaster. Employers and Carriers are demanding more and more services in the face of PPACA without the traditional compensation generated from Health Plans. Shifting to a Fee Based Model may be their life saver!
Employee Benefit and Insurance Brokers, Carriers, and Commissions were a perfect fit for many years! Last week we looked at an Overview of the “Future for Brokers under PPACA/Obamacare. As promised, this week, we will look at the first component of re-tooling that future: “SHIFTING INCOME GENERATION TOOLS.”
The keys for Broker survival and implementing a Fee Based Model is the ability to provde Employers a deliverable set of Strategies and Solutions (http://www.benefitplace.biz/
Historic Overview - Carriers, Brokers and Commissions
In the past Carriers produced the Plans and Services; the Brokers were the Distribution Channels; and the Employer, Employee, and Individuals received service at no apparent cost. Carriers paid generous commissions and Brokers were well compensated for their Services. PPACA/Obamacare, HHS Guidelines and Regulations, MLR, and other market dynamics have changed this paradigm. Commissions generated from the Group Health Insurance Plans no longer can support the services required from the Brokers by Carriers and Employers.
In addition to the above disruptive changes, other market changes have been evolutionary. These include:
Distinguishing boundaries for Carriers and have broken down.
Core Benefits (at times called "True Group Plans"), ie. Health, Dental, Vision, LTD, etc. and Voluntary/Worksite Plans (at times called "Payroll Deducted Plans"), ie. Gap Plans, STD, Critical Illness, Cancer, Hospital Income, Universal Life, Pet, etc. have all become a matter of "Choice" for Employees - All are now essentially Voluntary.
Core Benefit Carriers have diversified into the Voluntary/Worksite Markets. There are now a plethora of Carriers offering a wide variety of Plans, Programs, and Services.
Core Brokers are now offering Voluntary/Worksite Plans requiring a greater focus on the Education, Communication, Enrollment, and Data Management Processes.
Voluntary/Worksite Brokers have integrated traditional Core Benefits into the mix of Plans they offer Employees through Employers. These include: Health Plans, Dental, Vision, HRAs, HSAs, etc.
Enrollment Companies compete for the Voluntary/Worksite Commissions.
Payroll processing companies like ADP and Paychex have entered the Brokerage markets and compete for Commissions.
Distinctions between Group Plans and Individual Plans are fading.
All of the traditional boundaries are going down!
The Future - There is a Life Preserver!
The Question - What is the Future for traditional Brokers under PPACA/Obamacare and the other changes outlined above?
The Answer - Brokers need to shift from Commissions to a Fee for Service compensation model! The reasons and justifications for this shift include:
Employers are accustomed to having the broker provide the research for quality, well-priced plans; plan design to meet the mix of employee needs; and implementation with no obvious out-of-pocket costs for the services. Commissions no longer support these activities.
Employers more than ever require "Trusted Advisors" - Brokers - to provide Strategies and Solution for Plan Designs.
Employers need "Trusted Advisors" to assist with Compliance Issues - Dealing with PPACA, HHS, DOL, EBSA, IRS, etc.
Commissions from Core Benefits are disappearing and the income from Voluntary/Worksite Plans can no longer support the above services and the implementation of the Plan Designs that require substantial Education, Communication, Enrollment, and Data Management.
Employers are accustomed to paying for Professional Services, ie. Legal, Accounting, Consulting, Financial Planning, etc. Due to an historic lack of transparency, Employers have little awareness of the traditional Broker's Commissions or their deterioration.
Employers lack the internal capacities to meet the demands of PPACA, etc. and to avoid penalties for not being in compliance with all of the new regulations.
Most Employees are accustomed to an Employer based Benefits/Insurance model. While the Employees have reluctantly accepted contributing more and more to the cost of the Benefit Plans being offered by Employers and to making informed Choices among Plans, they expect the Employer and the Broker to provide the Menu of Choices.
Most Employers require competitive Employee Benefits to compete for and retain Employees. Employers are accustomed to, and require, trained professional assistance.
HR Departments are already overwhelmed with the hiring, training and retention of Employees. They have become dependent on the Broker's assistance.
Hiring a full-time Benefits Staff to assist in dealing with Compliance Issues, Plan Design, and Implementation would be inefficient and expensive for Employers.
How can Brokers begin making the shift to a Fee Based Model for Suvival!
Open lines of communications with Employers. Outline the services you have been providing and what is required with the new regulations and guidelines under PPACA/Obamcare.
Tell them that you have Strategies and Solutions for dealing with PPACA and offering Employee Benefits!
Explain that your Broker compensation/
Discuss the Employer's major concerns and fears. Generally these are: 1) What is the cost of offering benefits on an ongoing basis? 2) When do the PPACA rules kick-in for my Company? 3) Do I need to offer Health Coverage under PPACA? 4) Given the number of Employees I have, what are the new requirements?
Discuss a Fee for providing the Answers, Strategies, Solutions, and Services they require to meet the Needs and Price-Points of the Organizatiion and the Employees.
Now is the time to begin contacting existing accounts to discuss the above. Contact potential Clients! Employers have been bombarded with confusing media about PPACA/Obamacare. More than ever they the need the input from a "Trusted Advisor" offering Strategies and Solutions (http://www.benefitplace.biz/
For more information Email - max@benefitPlace.biz or Call Phil at 216.577.5579