In politics, campaign after campaign has been run on "change". Most of the time, however, the politician fails to define what they mean by change. I guess we are no different in our industry. Over the last year, I have seen article after article that has noted the necessity of change for our industry to survive. The common thread of those articles stresses the importance of becoming more consultative in our marketing approach. But none that I have read has addressed HOW to actually develop a consultative benefits practice.
The fact is our, health and welfare benefits delivery system is embroiled in the most challenging time in its young history. We are confronted with high inflation and an increasing uninsured population. The threat of a government run single payer system or some other form of governmental control system is very real. There is no question, to survive, our health care delivery system must change.
I believe this transition is critical to preserving our industry. Over the past two decades we have seen a continual push in government for more and more social entitlements. One could even take the position that there are those in government that would like to see the United States become a Union of Socialist State Republics. To make socialism a reality, the first thing the government must do is to take away the insurance industry. By "killing" the insurance industry, the government can force the people to rely on the government to protect against the inevitable risks that face every human being, health problems, disability and death. The first and easiest step is to choke out health insurance.
In this article I will attempt to present a framework that brokers can use to develop a more consultative approach to marketing benefits.
Life Insurance 101
Before discussing what being a consultative benefits advisor requires, we should take a short history lesson from the life insurance delivery system which made a radical transition between 1979 and the mid-1980s. Life agents were forced to transition from a package sales process to a highly sophisticated consultative financial planning sales strategy. The health care delivery system could easily mirror that process.
Prior to 1979, the life insurance industry had seen little or no change in marketing strategy for well over 100 years. The primary marketing focus was young working families. The vast majority of agents utilized a product-driven, "packaged" sales track that was learned in their first month in the business. It was strictly "learn the sales track" and "see the people". The sales track was the same for the person with one month in the business as the one with 30 years in the business. The great differentiator agents promoted to prospects and clients was "SERVICE". Most life agents, at that time, were able to make a good living selling just one or two products. The primary focus was to sell whole life. Term insurance was reserved for the "termites" who couldn't or wouldn't buy the higher premium of whole life. The industry was having difficulty attracting talented people even though many carriers had respectable finance plans. Is this starting to sound familiar?
The impetus for the transition, however, was a bit different than the health and welfare benefits market. In 1979 E.F. Hutton got the first interest sensitive Universal Life product approved for sale. This was soon followed by a flood of other UL products. The cost of permanent and term products reduced dramatically. At the same time commission levels dropped as well. This forced those that would survive to expand their market to include a broad variety of products and develop a more sophisticated "needs based" planning approach. Voila, the emergence of the FINANCIAL PLANNER (and the death of the package salesman).
We in the health and welfare benefits market are now confronted with a similar dilemma. About as much has been done as can be to manipulate products and "manage" the cost of health care. We have seen transition from uncontrolled indemnity products to second surgical opinion and hospital precertification requirements. Then came the development of PPOs and other managed care constraints and finally the emergence to prominence of HMOs. Even after the development of all these managed care constrictions we are still unable to control the inflation and uninsured problem.
We have all heard that "Necessity is the mother of invention." This is as true now as ever. As mentioned earlier, to survive we must change. Therein lays the necessity. The good news is that by becoming consultative we have a tremendous opportunity to positively impact the cost of healthcare and reduce the number of uninsured. In the process, earn a much higher income than ever before. A more sophisticated "consultative" approach will also enable us to compete with other industries for top level college graduates. It will also enable new brokers to develop a challenging and lucrative benefits practice or to use needs based benefits planning as a springboard to a financial planning career.
Whether you are a financial planner or group broker, there has never been a better time to be in this market. This may seem to be radical and bold statement, but it is true! Let's examine why.
The Benefits Opportunity
For the innovative, creative, consultative broker, the market is ripe for the picking. What a terrific opportunity we have to become part of the solution rather than part of the problem. The design of most traditional benefit plans offers the consultative broker the opportunity to help the employer save money, implement better cost control mechanisms and improve the recruitment and retention value of their benefits all at the same time.
How can a consultative process help deal with some of the core causes of our current dilemma?
Well, let's take a look at some of the major factors that have an impact on the cost of health care:
1. Over utilization
2. Defensive medicine
3. Lifestyle abuses
4. Demographics, the aging population
5. Medical malpractice litigation
6. Uninsured and underinsured care (cost shifting)
7. Administrative costs (delivery system)
8. Medical technology advances
9. Pharmaceutical advances
10. Government regulations
11. Earthquake retrofitting (California)
The heart of consultative sales that will allow us to help win the battle for controlling healthcare cost inflation and reducing the ranks of the uninsured is CONSUMER ENGAGEMENT. The private health care delivery system cannot hope to influence the cost of healthcare or deal with the uninsured problem without it. Without consumer (primarily the employee) engagement the threat of a single payer system is almost inevitable and all that government control can do is ration a lower standard of medical care.
By helping employers develop a benefits partnership with employees we can create an environment that can positively impact the first seven of the eleven core causes of inflation (bolded). With employee participation, the broker can help employers develop a long-range "strategic plan" to effectively combat inflation, save on costs, recruit and retain quality employees, increase employee participation and mitigate compliance risks. Something we can be well compensated for if we are willing to learn how. But, "wait" you say, "we are already doing everything we can", "we are attentive to solving carrier problems and have sophisticated HRIS software systems to help HR. What more can we do?" The answer lies in understanding who our client really is. It is not only the employer but also the consumer, THE EMPLOYEE. The employer is a conduit to the consumer. If you feel that the employee is also a client, ask yourself these questions. What percent of my clients offer a supplemental life option and or disability options to employees? Do my client employees have supplemental medical options to allow a smooth transition to a CDHP with an HSA? How well are these benefits being communicated, if offered?
The transition of the life insurance industry to high net worth individuals has left us with a major revenue opportunity to compensate us for this necessary change. There was a tremendous void left by this transition which we have largely ignored – the life insurance and disability insurance needs of the working population. That is 70% to 80% of the working population who are employed by the group broker's clients. This untapped market has been estimated by LIMRA to be in excess of 100 billion dollars. Why then have we not "tapped" this lucrative market? Answers that I have heard vary but include, "I am making a good living selling group" or "It creates too much work" or "I don't have the time" or "it makes benefits too complex for the employee to understand" and many, many more.
What I can tell you is this. When I was selling group benefits, between 1975 and 1989, 60% of my benefits commissions resulted from addressing employees' individual disability and life insurance needs as well. Was it more work? Yes, I had to deal with the needs of the employer and their employees. Was it worth it? ABSOLUTELY. I never lost a client to a competitor and my employers always paid less to provide benefits than their competition.
Becoming a valued benefits consultant/advisor
What are the essential ingredients for developing a consultative benefits practice? Well let's examine that.
Education – Educational certification programs (RHU, REBS, CEBS, etc.) are only a starting point. We must constantly attend seminars and workshops to learn to be innovative and creative in plan design strategy. In our business we must deal with no less than 12 IRC Sections (79, 104, 105, 106, 125, 129, 132, 137, 213, 220, 223 and 1563) and 6 non-discrimination and privacy laws (ADA, COBRA, ERISA, FMLA, GLBA and HIPAA). How many can you name and explain to a client? Extensive knowledge and understanding of these complexities offers us the opportunity to "beat the system" legally and creatively.
Strategic Alliances – No one has all the answers. Good strategic alliances can provide a great resource of "intellectual capital" and can help produce new clients. Such alliances should include CPAs, Attorneys, Financial Planners, Third Party Administrators, carrier relationships, enrollment firms and more.
Membership In NAHU – Would you choose a doctor or dentist that is not a member of the AMA or ADA or an attorney that is not a member of the ABA? Probably not! Then why are so few of us who are active in the health care delivery system not members? You owe it to yourself and the industry to protect our profession and keep ourselves on the cutting edge.
A Structured Planning Procedure – This can be presented to a prospect or client to promote development of a multi-year strategic plan. The following charts show the basic differences between the traditional product driven "paternalistic" approach to benefits and a consultative "needs-based", "benefits partnership" strategy. One major change in a partnership is that the employer is no longer responsible for choosing core benefits for employees but to PROVIDE EDUCATION for their employees so they can make wise benefit decisions. And, guess who the teacher is?....I'm sure you've guessed it.
Elements of the planning process we utilize are:
- Discovery – a one page fact finder to identify risk exposure and planning opportunities
- Benefit Strategies Proposal – strategies to be evaluated (contains no product information)
- Employee Benefits Survey – input from the "other partner"
- Benefit plan analysis and risk assessment Plan Design Presentation – includes product recommendations and much more
- Plan implementation strategy – structured timeline and responsibilities for enrollment Enrollment
- Annual review and update
All of the things that need to be done to start to deal with the core problems of inflation and the uninsured require time and planning. Just a few of the tools that a long range strategic plan can employ are:
- Core group plan options both medical, dental, vision, etc.
- CDHP's, HRAs and HSAs
- Defined contribution strategies
- Flexible Spending Accounts
- voluntary benefits
- wellness programs
- Transportation & Parking
- Long-term care plans
- Adoption assistance
- Employer risk exposure to identity theft (group legal services)
- And much, much more.
Developing a multi-year strategic plan also locks out the competition and takes the focus off the annual premium/product struggles.
We must always remember, if we believe and take action, the problems we are facing are nothing more than the seeds of our greatest opportunity.