Health insurance agents have a tough job. Here’s why:
- To begin with, we’re selling an abstract product that most people find confusing. The insurance industry has its own language, one which most people don’t understand, and the only tangible thing members receive is a little plastic card.
- Second, health insurance is expensive. Even when the employer is supplementing the premium, it’s difficult for a lot of people to afford.
- To keep costs down, more and more people are choosing higher deductible policies with no up-front copayments, which means they’re unlikely to use the plan. For the majority of enrollees, the only benefit they actually use is the network discounts when they go to the doctor or pick up a prescription.
- And finally, taking the time to learn about insurance is pure torture for most people. Jellyvision Labs explains this well in their great e-book Beating Benefits Bewilderment: many employers and agents “mistakenly believe employees want insurance education. They don’t. They want to lie on a sun drenched beach drinking Mai-Tais. They want to go to the Superbowl. They want to be discovered on ‘America’s Got Talent.’ But they don’t want to learn about insurance. They may need to learn about insurance. The distinction is important.”
When we think about the number one reason companies offer health insurance and other benefits – to attract and retain quality employees – it does seem a little strange that they lead with a product that employees don’t want, don’t understand, can’t afford, and won’t use.
As agents, our job is to make sure our clients are actually getting something for all the money they’re spending. Here are a few tips:
Part of the problem is how brokers define themselves – as health insurance agents. This implies 1) that we can only help companies that want to purchase health insurance and 2) that that’s all we can help them with. We need to think bigger. Instead of defining yourself as a health insurance agent, it might help to think of yourself as an employee benefits professional. While not every company can or even should offer health insurance, all employers need to offer some sort of benefits in order to be competitive.
Shifting our focus from health insurance to employee benefits allows us to be more open-minded. We can ask our clients what their goals are in offering a benefits package and then determine whether health insurance is the best way to accomplish those objectives. Many times it will be; sometimes it won’t. Either way, if our job is to help the company get the biggest ROI possible from its benefits offering, we can get creative in our recommendations. Our license allows us to sell a wide range of products; health insurance is just one of them.
Most of the time, our clients will want to offer a group health plan, especially if their competitors do and it’s expected by their employees. But there’s a problem. As we already mentioned, health insurance is expensive, and offering a budget-friendly plan is a challenge for many employers. So dealing with the cost issue has been the number one priority for agents over the past few years.
As an industry, we’ve developed a number of strategies that attack the cost problem from different angles. If we think about what employers truly do when they offer health insurance coverage, they 1) pay a portion of the premium 2) for certain employees and dependents for a plan that 3) covers some of the cost 4) for a list of covered benefits 5) received from a network of providers. Most of our strategies address one or more of these items.
- Contribution Strategies: One way employers can keep their cost under control is by adjusting their employer contribution for employees and/or dependents. This is often referred to as cost-shifting, and it’s usually not well-received by employees. Another strategy involves moving to a defined contribution plan where the employer pays a set amount and allows the employees to choose among multiple plan options. This way, employees who want a richer-benefit plan can pay for the more comprehensive coverage while those employees who would prefer a lower premium can buy a plan with higher out-of-pocket costs.
- Eligibility Strategies: Another way employers can reduce costs is by offering the coverage to fewer employees. A management carve-out would fit into this category. So would increasing the new-hire waiting period, shifting employees to part-time, or hiring more 1099 workers. Brokers do need to be careful recommending any of these strategies, though. The employer mandate will eventually kill carve-out plans; waiting periods based solely on the passage of time are now limited to 90 days; reducing an employee’s hours to avoid offering health insurance could be an ERISA violation; and misclassifying statutory employees as contract labor can get an employer in trouble with the IRS and DOL.
- Cost-Sharing Strategies: This is the most common recommendation at renewal time. Over the years, our clients have tweaked the deductible, tweaked the coinsurance, and made all sorts of changes to the copayments. First, we increased the copays; then we went to split-level copays (different costs for primary doctors and specialists); then we got rid of them altogether and called it a consumer-driven plan. We’ve done other stuff too, like adding an Rx deductible or separating the “facility charge” from the “physician charge” in the emergency room.
- Benefit Strategies: Some of our recommendations have to do with the covered benefits. Offering an MEC plan to avoid the across-the-board penalty under the employer mandate is the most obvious example, but there are also “hidden” changes we can make to the plan, like removing expensive drugs from the formulary in order to save a few bucks on the premium. Additionally, many employers have been able to maintain their group health insurance by eliminating popular ancillary benefits like dental and vision coverage.
- Network Strategies: Finally, we’ve experimented with the networks in order to keep costs under control. Some plans cover in-network services only; others offer an “efficient” network option; and others, particularly in the individual market, have very narrow networks and require a referral to see a specialist.
This isn’t a comprehensive list. We could also add funding options – fully-insured vs. self-insured – to our list of strategies. And we could add timing strategies – would our clients rather play by the rules that were in place before the law was signed by staying grandfathered, the rules that existed between 2010 and 2014 by staying grandmothered, or the rules that took effect in 2014 by purchasing an ACA-compliant plan? But you get the idea.
As good as some of these strategies are at keeping costs under control, we do need to recognize the fact that many of them create an additional problem for employers: employees no longer like their coverage.
There are two sides to the ROI calculation – return and investment. Focusing solely on the investment side of the equation without considering employee perception can actually reduce the ROI for the employer. If employees no longer appreciate their health insurance plan, there’s really no reason to offer it.
Actually, that’s not true. There is that pesky employer mandate that companies have to deal with, and if the company’s sole motivation is to avoid the penalty, then employee perception is irrelevant. But that’s why it’s important to ask up-front what the employer’s goals are. If the employer truly wants to offer benefits as a recruitment and retention strategy, then we need to consider how the employees will react to our “solutions”.
Remember the Second Sale
Selling employee benefits is a two-step process. First, we have to convince the employer, then we have to convince the employees. That doesn’t mean that we need to do an enrollment meeting for the employees. We do, but there’s more to it than that. When designing the benefits package, we have to keep the employees in mind – that’s how we make sure they’ll appreciate their benefits and the employer will get a positive ROI.
Too often, brokers focus exclusively on ways to reduce the premium without considering the negative impact on the employees. For instance, an “efficient” network may require an employee to change doctors. Tweaks to the drug card could cost an employee an additional $40 or $50 per month. Eliminating the copays may reduce unnecessary utilization but may have the unintended consequence of discouraging employees from obtaining needed medical care. And dropping dental or vision coverage could take away the only benefits young, healthy employees are actually using.
This doesn’t mean we shouldn’t implement any of these strategies. On the contrary, many of them are necessary just to keep premiums at an acceptable level – without some adjustments, the employer might have to drop the group health plan altogether.
But when we make these changes, there are ways to soften the blow to employees. For example, if we get rid of the up-front doctor copays, adding an inexpensive telehealth benefit would give employees and their family members an alternative so they don’t delay treatment and wind up in the emergency room. If we reduce the formulary, giving employees access to another discount prescription network might help them save money on non-formulary drugs. If we start hiring more part-time employees, providing them with a few non-insurance benefits could help reduce turnover.
In short, the employer is our client, and we do need the employer to sign off on any strategies we recommend. But the employees are also our clients, and the success of the benefits package hinges on employee perception. So, in addition to selling the employer on the plan, we also need to sell the employees. Don’t forget the second sale.
There are a million ideas out there, and I’ll share some of those in future posts. But for now, it’s worth reiterating a few key points: Employers offer benefits to attract and retain employees, and our job as brokers is to design a benefits package, not just a health insurance plan, that will help employers accomplish this goal. While health insurance may be a key component of our benefits strategy, some of the recent changes to the plans we recommend leave employees with a bad taste in their mouths. They’re paying more money for less coverage, and for that reason many of them no longer appreciate their benefits.
We do need to keep the employees in mind in any recommendation we make to our employer clients. If one of our strategies creates a problem for the employees, something that will change their perception of the benefits plan, then we need to pair the strategy with a solution to the employees’ problem. True, this is sometimes easier said than done. But sometimes, the solution is easy and inexpensive, and when it is, not recommending it to our clients would be irresponsible.
This article was originally posted on LinkedIn. It also appeared on the freshbenies Broker Blog.