By Kent B. Utsey
Does the upcoming open enrollment season for health insurance bring risk or opportunity? It depends.
We are seeing the small-group market moving toward individual health insurance coverage. An Affordable Care Act-compliant, individual health policy solution for groups of fewer than 50 employees is now available. Both Anthem and Blue Cross/Blue Shield reported up to 12 percent of the under-50-employee market has migrated to individual policies in 2014 alone. The Blue Cross and Blue Shield affiliates alone lost more than 1 million members from their small group plans, Atlantic Information Services reported in February. In fact, fully 18 percent of those who enrolled on the public exchanges nationally were covered by employer policies previously, according to The Commonwealth Fund. And now that the Supreme Court handed down its decision in King v. Burwell, the migration to individual policies really is going to ramp up in 2016 and beyond.
Why are employers moving to individual policies?
- The savings produced by federal subsidies and cost sharing are too compelling to ignore.
- Employers realize this will get them out from under the ACA completely.
- The demand for quality. Broader benefit choices, higher levels of employee satisfaction with individual policies and plan simplicity make this approach very appealing to employers who want a competitive edge in recruitment and retention.
For many small businesses, a professionally managed individual policy approach is better, and far easier. It saves money and gives small businesses a way to provide even better benefits. The result: less money out the door, more satisfied employees.
Back to the question: Is it a risk or opportunity? If you ignore the trend, it’s a risk. Brokers already are reporting a loss of business to the individual market. But selling an individual policy solution turns that risk into an opportunity: It can be even better for you than selling group. Here are five reasons why:
- You can earn even more on each case. If you have your individual policy group cases professionally administered, you will earn commissions in addition to what you make on the policies. Depending on the third-party administrator, those commissions could be considerable.
- You reduce your financial exposure to dwindling group insurance commissions (or no commissions at all, as with Aetna and Cigna). Two streams of income are always better, because decreases in one can be counterbalanced by increases in the other.
- You get two new ways to grow your book of business. First, by taking business away from the brokers who aren’t prepared to sell an individual policy solution. Second, through internal client growth. Think of it this way: If you have 10 cases with 10 employees each, and you don’t know the employees, you have 10 clients. If you know the employees, you have 100 clients. Helping them with individual policies is how you get to know those employees and make them your clients. This leads us to the next reason.
- Cross-selling opportunities. You get to spend one-on-one time with each employee, helping them enroll in a health policy. It’s a perfect time to talk with them about voluntary benefits, financial planning, even property and casualty insurance, all of which could be paid for in a well-designed individual benefits solution.
- Broker of record (BOR) inoculation. It’s easy for a competitor to take over a group insurance policy: all they need is a letter from the group representative. But it’s almost impossible for a competitor to take over an individual policy group. How can they possibly expect to get a BOR from each employee? And if you are signatory to a plan management contract with the group, it can’t be altered without your approval. How’s that for job security?
An individual policy solution for the small-group market presents a huge opportunity for brokers and agents. But you need to be a stickler for compliance. In spite of what some vendors might say, the Tri-Agency notice 2015-17 is clear: employers absolutely cannot pre-tax payments for individual policies, and they absolutely cannot simply reimburse those employees who buy individual policies. But if they give employees the unfettered right to choose their benefits, and provide a way to forward those payments at the direction of the employee, an individual policy solution becomes a win-win-win. It’s a win for you as the broker, a win for the employer, and an absolute win for the employee.
Kent B. Utsey, BS, MBA, is founder and CEO of American Health Resource. Kent may be contacted at [email protected].