According to Harvard Business Review and Gallup, the healthcare industry looms near the bottom of consumer trust by industry, specifically health insurance. The revelation is not that it rates low, but how low... just above government. Why? Either intuitively or directly people question whether the sales and marketing engine(s) actually have the consumer's best interest at heart.
This concern or lack of trust is well-founded. The financial incentives in healthcare are traditionally built to benefit the supply chain not the consumer. Hospitals, health insurers, pharmaceuticals, and brokers typically have a stake in higher premium and claims, not the other way around.
In a trust-critical service, the traditional benefits broker financial incentive contributes to the rising cost of healthcare insurance.
A Tale of 2 Brokers
I spent 15 years as a healthcare administrator. I served as the primary decision-maker or at least influencer on key decisions, including employee benefits. I’ve always dug deep into benefits in part because the companies I operated were on the other side of the healthcare finance coin. We were paid by the same systems we paid into. I had an early confidence in designing benefits beyond the typical offerings.
One early influence was Howard Weyers, founder of Weyco, a benefits agency at the time. Howard and Weyco rose to national attention in the early 2000s with his ground-breaking policy of not allowing employees to smoke… at all. We were a client of Weyco and he was gracious enough to take a couple of meetings with me as I was really interested in his message. He made it clear that he valued his employees so much that he felt responsible for their health and would do anything to help them stay healthy. In addition, he felt compelled that Weyco, given their business, should be the role model in health and wellness.
The combination of my confidence, background in wellness, job duties operating a healthcare entity and Howard, influenced me to continuously look at new benefits structure and insurance products. For example, the organization I led was an early adopter of health savings accounts (HSAs) around 2006 pairing with an advanced wellness program that is still in place today with some modifications. We were facing a significant increase on our traditional health plan. By choosing a qualified high deductible health plan (with HSA), we could put more money in our employees pockets (tax free) in the form of HSA contributions, pay less in insurance premium, and deliver a richer benefit.
Another example occurred around 2015. I had recently learned about a platform called “level-funding”. In short, level-funding looks and acts like a traditional fully insured product, but functions more like self-funding where the employer has an opportunity to get a return of premium with low claims. At our annual renewal meeting, I requested that our broker include level-funded plans.
When the renewal meeting occurred with the broker, we began the painful process of receiving the bad news. Our broker tried to anchor (sales technique) me with, “We just came from a 18% renewal. That was hard. Thankfully you are only 12%.” The broker starts going down the line of options, which were a combination of lower rates and what seemed like a greater degree of lower benefits, but no level-funded option. I asked about level-funding and the broker hem'd and haw'd about how it is new, he’s not seeing many groups being a good fit, we’d need to complete a health questionnaire, etc. Clearly, I was being steered away from it.
Nonetheless, I wasn’t prepared to present the 12% increase to the physician-owners without uncovering all options. We completed the steps for level-funding and had a follow-up meeting with the broker. The result: not only was the premium lower than the renewal, it was lower than the current year. After discussing pros/cons, we moved to level-funding with a warning from the broker that we’d probably see a big increase in year 2, which by the way did not happen.
In our final renewal meeting, I asked the broker, “So, we now have skin in the game (opportunity for return of premium), what can we do to protect that?”
His response was out of the side of his month walking out the door, “I don’t know, you could start a wellness program or something.”
The broker makes all the difference. On one hand, Weyco was out innovating to the point of some internal and external push-back. On the other hand, the second broker was -at best- conservative and entrenched in the norm. Ironically, both have inspired my current mission.
What is Broker Bias
Many health insurance brokers are entrenched in a commission-based model with contract overrides and contingencies (bonuses), a desire to provide account management support and use their quote/place producer license (licensed agent appointed to sell). They are a sales arm of the insurance companies they represent. No more, no less. They are influenced, or biased, by the insurer who pays them the most per contract and selling the most expensive plan they can.
How do insurance brokers get paid?
1. Sell the most expensive product possible
2. Keep their clients in 2-3 carriers to maximize overrides (bonus)
3. At renewal, when facing an increase, only offer products of a similar premium as prior year (not lower premium options).
4. Target groups with highest commission rate. Insurers often have higher commissions for groups of a certain size because they are very profitable in order to encourage the broker to keep the client fully insured.
Amidst broker bias, what is the value proposition status quo brokers are selling? Relationships and customer service reminiscent of "The Office". They may be great people to have a beer with, or like in "The Office", answer the phone and respond to issues. This outdated value proposition creates limited value for the client.
In the status quo model, how often has this happened?
Broker arrives for pre-renewal meeting and says, “Phew, just came from another meeting where the company is facing a 20% increase. Rough! Oh, don’t worry, we worked with your carrier and your increase is only 11%.”
This is a classic anchoring technique designed to calibrate your reaction to bad news. Don’t let that mask how you are really feeling. As the decision maker, an awareness to these tactics, biases, and influences opens the door to current and relevant value propositions.
How to Select a Benefits Broker
Traditional brokers are trained in the insurance product-centric, commission-based sales model. The more they sell at the higher premium, the more money they make. In the new model of benefits plan design, employers are looking for advisors who can put together a complex healthcare puzzle that infuses custom tools and resources to address 3 core areas: health literacy, healthcare navigation, and health financing.
Brokers are not immune to the systemic criticism of the misaligned and non-transparent healthcare system. To move out of the status quo, product-centric broker model, ask these questions:
- How do you get paid? (e.g. fee, commission)
- What percent of your book of business is various insurance carriers (top 3)?
- Do you take overrides (bonus for # of contracts) from insurance carriers?
- How frequently do you meet with your clients?
- What is discussed in client meetings?
- Tell me the last time you creatively solved a major increase?
- What is your client retention?