Employee benefits specialists are not going to earn their commissions in the next two decades the same way they have in the past two decades. The Affordable Care Act has turned the world we have known upside down. Someone “moved our cheese.” The question is, where will you get your cheese now?
Defined benefit plans are essentially where a broker helps an employer decide the best benefit plan to fit the employer’s budget and bring value to the employees. The main problems with defined benefits are twofold: The employer has little or no control over future rate increases, and the employees are forced to take the benefits whether they are the proper fit or not.
A better, more cost-efficient and effective way to provide employee benefits may be to utilize a defined contribution strategy. With this strategy, an employer determines the employee benefits budget; employers also control increases to their budget. In a defined contribution strategy, employees shop for insurance products custom-designed to fit their personal household needs.
Perhaps the best part of a defined contribution strategy is the increased need for an employee to seek help and advice from a licensed broker. Because each employee’s needs are different from house to house, a professional broker’s services and knowledge are more in demand. In defined contribution, brokers now have a built-in reason to interview all employees in a one-on-one meeting. This interview is critical to complete a fact-finder, determine needs and make customized recommendations for the employees and their dependents.
In today’s world, the employee benefits specialist has a relationship with the human resources (HR) person and the boss. Together they decide what is best for all. In tomorrow’s world, the employee benefits specialist will have a relationship with each employee. Instead of having a 10 life group, the future broker will have 10 households.
Also in today’s world, brokers collect paper applications for a health plan, perhaps a dental plan, and maybe if they are lucky they get a third line of coverage in place, such as a voluntary benefit product. When the paper applications are collected, a 10 life group now has up to 30 different applications missing information (NIGO—not in good order!).
In tomorrow’s world, a broker will sit down and interview each employee (each household) with the assistance of a cutting edge, single data entry, cloud-based, client relationship management software package in which all of the applications are 100 percent IGO (in good order) for submission.
Additionally, brokers will be likely to sell more insurance because they no longer treat the small group as a single relationship but instead they view it as an opportunity to advise 10 households. Surely a proper interview will reveal many gaps in coverage and other needs from life insurance to supplemental sales.
Put another way, a single group may be good for a single referral, whereas a group of 10 households may breed 10 new referrals.
The future for employee benefit specialists is very bright. Over the past few years I have preached the following: Health insurance is the only thing in America required by federal law to be owned, and if you can’t afford it, we will help subsidize your premiums; if you don’t own health insurance you will be penalized.
What other widget in America makes these claims? None.
The Great Unintended Consequence
If an employer “offers affordable coverage” to an employee, the employee—and his dependents—are no longer eligible for subsidies. This consequence is real, and brokers (not navigators) are best equipped to solve this dilemma.
The solution may include a recommendation to drop the employer-sponsored group health plan. By not having access to an affordable health plan, the employee may now be eligible for subsidies—for the entire family. If you present a $1,200 qualified health plan (QHP) with a $12,500 maximum out-of-pocket to an employee (with a spouse and two kids) making $50,000 a year, you are not going to pick up an application. You will not make a sale because the coverage is too expensive, and who can meet a $12,500 out-of-pocket when they may only be putting $3,000 per month in the bank?
Instead, the employer should consider taking the cost of the employee-only coverage and designate this amount to a defined contribution, where the employer gives this amount to the employee and allows the employee to purchase their QHP via a health insurance marketplace (HIM). An HIM is just a website that you may use to place your link to your online QHP application. This very same HIM may also include links to your other online applications, such as dental, critical illness, life insurance and other insurance products you make available.
The Winners
In the defined contribution strategy there are no losers—only winners. The employer wins by gaining control over one of their most challenging expenses—employee benefits. The employees win because they are allowed to own insurance products that are tailored for their needs. The brokers win because they are able to increase their prospect base, improve their commissions through increased sales, improve their retention strategies with multiple products in one house, and pick up more referrals simply by exposing their services and knowledge to more people.
As a society, our ability to get information is measured by a nano-second. People are demanding more solutions that custom fit their needs. Dealing with an HR director and a business owner is no longer good enough. Addressing needs within a household puts the conversation on the kitchen table, not the board room table. Delivering predictable rate increases to employers satisfies their budget concerns. There are no losers in this defined contribution strategy.
