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The New Benefits Delivery System

Very few benefits agents and brokers would disagree that there are problems with our health care delivery system, even without the Patient Protection and Affordable Care Act (PPACA). The fact is that the dramatic inflation in the cost of health care over the past 10 years is a problem that must be dealt with. If we are going to survive as an industry, agents and brokers must take a more active role in helping solve the inflationary problem. This brings up the question, "HOW"? If we are going to be part of the solution, the first thing we have to acknowledge is that we have not been paying attention to the roots of the problem. Of the more than 10 factors that have a major impact on the cost of health care, brokers interact with seven of them: the uninsured and underinsured population; lifestyle abuses; the aging population; overutilization; defensive medicine; administrative costs; and even, to some extent, medical malpractice litigation. By not effectively educating and engaging the consumer (the employee), we have been insulating ourselves from these problems.

To begin to deal with these root causes of inflation, a metamorphosis must occur in our delivery system. If we accept that we have been part of the problem, and then assume that we can expect a different result by doing the same thing over and over is the very definition of insanity. The required change in the delivery paradigm, however, is the greatest marketing opportunity that the industry has experienced in the 35 years that I have been in the business. It will require us to make significant changes to our marketing strategy and begin working together as a team of professionals.

That's a revelation to most of us, but it's true. The PPACA is driving the industry to embrace a more consultative approach to benefits delivery that includes greater focus on plan design and communication. Whether it is through market expansion or fee-forservice planning, the traditional product-driven "spreadsheet" sales process is on the way out. Not that spreadsheets won't be needed, but as the broker takes a more consultative role, the spreadsheet will be relegated to broker evaluation for support of final recommendations, not for presentation to the client or prospect. Another change is that the primary point of sale will be with senior management (the CEO or chief financial officer) rather than with the director of human resources (HR). This is because to truly deal with some of the root causes of inflation, financial decisions need to be made outside the authority of the HR department.

Over the past few years, there has been an almost endless stream of articles dealing with the need for a more consultative approach to the sale of health and welfare benefits. However, very little has been offered in these articles to identify a structured strategy for doing this. In most cases, the ideas presented are just ways to redesign the product portfolio more creatively with fancier spreadsheets. If this is all that you are doing, you may become a statistic in the benefits delivery evolution/revolution. As much as it may disturb some veteran agents and brokers, this is a necessary change in order for us to survive and prosper into the 21st century, but the change will be beneficial. A similar transition was experienced by the life insurance industry between 1979 and 1986. The introduction of universal life (with resultant reduction in premiums and commissions) powered the transition from an industry controlled by rate-book and spreadsheet salesmen to one dominated by the financial planner who works as part of a team and does far more than just sell products.

So, let's get started. The heart of the consultative sale is problem-solving, and trust me when I say that premium inflation and benefit erosion will not be the only problems you will have to deal with to be consultative. You will need to deal with compliance issues on a variety of levels. This does not mean that we are to practice accounting or law, but we sure as heck can diagnose and refer. One of the most important keys to unlocking the solution to the inflationary problem is to promote consumer engagement in the design process. The private health care delivery system cannot hope to influence the cost of health care or deal with the uninsured problem without it. To do this, we must help employers develop a benefits partnership with employees. In this way we can create an environment that can positively impact the first seven core causes of inflation identified earlier. With employee participation, the broker can help employers develop a long-range "strategic plan" to combat inflation effectively, save on costs, recruit and retain quality employees, increase employee participation and mitigate compliance risks. Oh, and by the way, increasing participation is where the opportunity for our prosperity lies. The disability, life and supplemental medical insurance needs of the working middle class have been ignored since the life insurance revolution of 1979. According to LIMRA, this is a multibillion-dollar market. Unlike the oil industry, we are not prohibited from "drilling" into these markets except by our own reluctance to learn how. By developing a team of strategic alliances, the benefits broker can tap these markets with very little extra effort. The good news: the revenue potential is equal to what is currently being generated in employer-sponsored group benefits. For example, when I was selling benefits in the '70s and '80s, 60 percent of my benefits revenue came from voluntary worksite sales.

Becoming a Benefits Consultant

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 be innovative and creative in plan design strategy. In our business, we must deal with no less than 12 Internal Revenue Code sections (79, 104, 105, 106, 125, 129, 132, 137, 213, 220, 223 and 1563) and six nondiscrimination and privacy laws (the Americans with Disabilities Act, Consolidated Omnibus Budget Reconciliation Act, Employee Retirement Income Security Act, Family and Medical Leave Act, Gramm-Leach-Bliley Act and Health Insurance Portability and Accountability Act). How many can you name and explain to a client? Extensive knowledge and understanding of these complexities offer 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 certified public accountants, attorneys, financial planners, third-party administrators, carriers, enrollment firms and more.

Membership in the National Association of Health Underwriters (NAHU)-Would you choose a doctor or dentist who is not a member of the American Medical Association or American Dental Association, or an attorney who is not a member of the American Bar Association? Probably not. Then why are so few of us who are active in the health care delivery system not members of the NAHU? You owe it to yourself and the industry to protect our profession and keep yourself on the cutting edge.

A Structured Planning Procedure- This can be presented to a prospect or client to promote development of a multiyear strategic plan. The opposite 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 employers are no longer responsible for choosing core benefits for employees. They are educating their employees, so the employees can make wise benefits decisions. And who is the teacher? I'm sure you've guessed it. (See partnership flow charts on opposite page.)

Eight 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, then condensed in an executive summary of less than two pages (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. Again, this presentation should be condensed to a two-pages-or-less executive summary.

Plan implementation strategy-structured timeline and responsibilities for enrollment.

Enrollment-will include mandatory group meetings and individual meetings with each employee (education and communication are the keys to market expansion).

Annual review and update. Time and planning are required for all the things that need to be done to start to deal with the core problems of inflation and the uninsured.

Just a few of the tools that a long-range strategic plan can employ are:

• Defined contribution strategies

• Consumer-Driven Health Plans, Health Reimbursement Accounts and Health Savings Accounts

• Flexible Spending Accounts

• Core group plan options: medical, dental, vision, etc.

• Voluntary benefits

• Wellness programs

• Transportation and parking

• Long-term care plans

• Adoption assistance

• Employer risk exposure to identity theft (group legal services)

Developing a multiyear strategic plan also locks out the competition and takes the focus off the annual premium/ product struggles.

We must always remember that if we believe and take action, the problems we are facing are nothing more than the seeds of our opportunity for greater success.

Donovan L. Cooper’s focus on flexible benefits planning began in the 1970s. In 2003, he and his wife Sandie founded TRIFLEX Corp. ( He may be contacted at [email protected] [email protected].

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