|Source:||A.M. Best Company, Inc.|
More employers may turn to self-insuring their employees' health benefits in the wake of U.S. health care reform, which likely means more business for consultants and less commissions for brokers, industry experts say.
"This is clearly a 'who moved my cheese' moment" for brokers, said
"Some refer to us as a classic middleman -- between the insurance broker and the insurance company," Fleet said of AmWins, which develops, distributes and administers niche employee benefit plans through traditional brokers and benefits consultants.
But AmWINS' own wholesale business model most likely won't be impacted, Fleet said. The company is developing product solutions for brokers to offer to their clients, instead of brokers simply putting down health insurance rates "on a spread sheet and offering the lowest price."
Large employers generally self-insure their health benefits and mostly use the services of benefit consultants, said
But employers with as few as 100 employees are now looking to self-insure, said
More employers are looking to this method as they're thinking "'I'll be damned if the federal government is going to tell me what benefits I offer my employees,'" Fleet said.
The real issue is about employers understanding what their health plan is costing them, said Berardo. Health insurers are being conservative in their renewal rates as they now must cover dependents to age 26, for example, he said. There's risk for insurers "that there's not a lot of history on."
Employers face rising premiums and higher benefit levels and this "hostile terrain" between insurers and employers suggests that broker and agent survival will be challenging, said
Because self-insured employers tend to use benefit consultants, not brokers, this flight to self insurance may mean more business for consultants, Chockley said.
Brokers who seek to prosper will offer more than a shopping list of insurance rates, as 75% of all claims can be traced back to obesity and smoking, he said. Brokers who make wellness programs, for example, part of their overall solution package should find employers eager to use them, Stephenson said.
Brokers that don’t respond "are likely to land on the same refuse pile where the travel agencies increasingly find themselves," he said.
Usually, employers have a broker to which it pays commissions and/or a consultant to which it pays fees, Berardo said. Currently, brokers that serve large employers tend to receive retainer-type fees to provide advice related to the employer client's health plan, he said.
A standard commission on a fully insured group health plan is about 4% of premium, which translates to six figures a year, while consulting fees run anywhere from
Brokers can still provide a role in self insurance, another says. Most clients will have a hard time self administering and negotiating with health care providers, said
However, "consulting fees may more than offset the lost commission."