Vole 1, o. ne Benefitsroco Finally - Oliver Wyman...( Biggest Benefits Selling Expo ever – A recap ) Vole 1, o. ne BenefitsrocoFinally on board only a year aFter writing oFF obamacare,

( Biggest Benefits Selling Expo ever – A recap )

Volume 11, No. 6 | June 2013 | BenefitsPro.com

Finallyon board

only a year aFter writing oFF obamacare,our latest HealtH care survey sHows brokers

aren’t willing to be leFt beHind.

PRINTED COPY FOR PERSONAL READING ONLY. NOT FOR DISTRIBUTION.

June 2013 | Benefits Selling | BenefitsPro.com 43

By Nick D’Addezio and Dan Lyons

What a difference a year makes. When we surveyed benefits professionals early last year, they remained

dubious about the Patient Protection and Affordable Care Act, with roughly

two-thirds of them predicting the legislation would be scaled down or

overturned altogether. Just 12 months later—12 months that included a

Supreme Court ruling in favor of PPACA and an Obama victory at the polls—

they’ve changed their tune. Now nearly 80 percent of benefits professionals

believe PPACA will be implemented fully sometime next time. >>

ReadyingReformfor


PPACA IMPLEMENTATION EXPECTATIONS

42%45%

40%

50%

25%

33%

22%20%

30%

15% 16%

2% 1%

10%

%1

%

1

42%

25%

33%

15%

45%

6%%22%

%2% 1%0%0%

Implementedlargely in

current formand timeline

Implementedon a delayed

timeline

Implementedin scaled down

form

Overturneddue to political

inuences

No opinion

2012 survey2013 survey

AVERAGE COMMISSION EXPECTATIONS

21% 20%

11% 15%

80%

100%

29%

28%12%

40%

60%

5% 9%9%

16%26%

0%

20%

2014 (Expected)2012

Decline >50%

Decline 0-25%

Dec

Dec

Decline 25-50%

DecDec

No changeNoNo

IncreaseIncInc

Do not know

THREATS TO BUSINESS MODELPercentage of respondents who consider technology or innovation a moderate or large threats who consider technology or innovation a moderate or large threat

73%

71%

State run exchanges

Federally run exchanges 71nges

68%

64%

Private exchanges (group)

Direct to consumer models

Private exchanges (individual) 63%

60%

48%

New market entrants

Transparency tools

0% 10% 20% 30% 40% 50% 60% 70% 80%

Though the formal launch of the public health care exchanges is still months away, new distribution models (including private exchanges in addition to the promised public ones) already have begun to disrupt the benefits marketplace. Producers are bracing for subsidized exchange marketplaces, rating standards, essential health benefits, and several new insurance taxes and fees, all of which go into effect in 2014.

Payers are moving in several directions. Some are strengthening their relationships with producers. Others, meanwhile, are taking more of an “arm’s length” approach, slashing commissions and letting the channel compete against emerging distribution mechanisms. The channel is in need of a fresh, new approach to maximizing value if brokers are to meet the needs of clients and insurers.

With that in mind, we took advantage of this year’s Benefits Selling/Oliver Wyman 2013 Health Care Survey, to ask nearly 400 benefits professionals how PPACA would change their business models post-2014 and what strategic changes they were considering. We asked them to predict what “value add” will look like in the post-reform world and how they’re planning to compete. Here’s what they told us.

Disruptive threats of the ppaCaMore than 70 percent of respondents believe public health care exchanges pose a moderate or large threat to their business. The exchanges, of course, boast a massive competitive advantage for consumers who qualify for subsidies, but benefits professionals also fear automated functions such as transparency tools and decision-support mechanisms will erode the

June 2013 | Benefits Selling | BenefitsPro.com


value provided by brokers in their capacity as advisors.

And although producers have had a few legislative wins lately (for example, requirements that commissions be equal on and off the exchange), they’re still concerned about the convergence of new distribution models, MLR limits, and increased regulatory scrutiny of price.

Consequently, producers expect all of these factors to continue to put downward pressure on per-unit commissions. More than half of respondents (54 percent) expect medical commissions to decline in 2014, compared to just 40 percent in

2012. About a quarter of respondents expect declines of 25 percent or more.

the payer Distribution paraDoxThe next few years will be a confusing time for health insurance customers, thanks to a variety of PPACA-related and non-PPACA-related factors, including new benefit and rating standards, group erosion, an influx of the previously uninsured, and the rise of Medicaid. Employers and members alike increasingly will need the sort of guidance producers have provided traditionally. Payers understand that—but they also need to maintain reasonable profit margins

amid the constraints of the changing marketplace. They’re working to define their distribution strategies and understand how producers fit into them, but they haven’t yet seen a clear demonstration of the long-term value of producers, and they need that to justify additional investments.

For their part, benefits professionals remain cautiously optimistic, at least in the short-term, with 77 percent predicting payers will either maintain or improve relationships with producers in 2014. But the picture is less clear in the long-run. Payers are still evaluating their options, and producers, especially in the small group and individual markets, need to determine how to differentiate themselves to meet stakeholder needs in the new post-reform market.

Delivering more valueRespondents expect total compensation to become increasingly dependent on consultative fees as commissions continue to come under pressure. In response, producers are starting to make some hard decisions on the direction of their business, including what products they’ll sell and what services they’ll offer in the future.

In this year’s survey, 46 percent of respondents said they expected to place less emphasis on health insurance as a core offering in the post-reform market.

For those who continue to stay involved in health insurance, producers say that different service models and strategies will be the key to maintaining current business levels. They plan to focus on providing more value to employers and payers to capture additional volume and diversify into new revenue sources.

INSURER-BROKER RELATIONSHIP EXPECTATIONS100%

23%

80% 38%

40%

60%

39%

0%

20%

0%I will increasingly become a

strategic partner with insurersMy organization’s relationshipwith insurers is not changing

Insurers are scaling backthe relationship

COMPENSATION MECHANISMS

6%6%

7% 15%4% 6%

80%

100%

83% 73%40%

60%

0%2012 2014 (Expected)

20%Perc

enta

ge o

f tot

al co

mpe

nsat

ion

CommissionsComm

Consultative feesCons

Bonus programsBonu

Referral splits



Producers are considering several new value-added roles, including:

1) Group reform consultant: In this role, the producer will consult clients prior to renewal, allowing them to better understand how reform will affect cost and coverage. Nearly half of producers expect to make non-traditional benefit recommendations to group customers in 2014. This approach is largely a higher touch expansion of current producer roles, but it hinges on deep PPACA expertise while incorporating analytical tools and scenarios to help customers make optimal decisions.

2) Group-to-individual facilitator: PPACA’s affordability provisions and subsidies should lead to significant migration from group to individual coverage post-2014. And that will give producers a potential new role in helping to manage member transitions. Although preserving group coverage is still the top priority, it’s no surprise that producers welcome the opportunity to help clients and

payers shift eroding group coverage to individual. Nearly two-thirds of agents said they hoped to remain the agent of record for group members who moved to individual coverage. And although only about 20 percent of respondents have yet seen specific group-to-individual re-enrollment strategies from payers, expect that number to rise: Payers are actively evaluating 2014 retention strategies for segment transitions.

3) Value-added integrator: Given that the PPACA will increasingly commoditize core medical products in the small-group and individual markets, producers hope to capture additional value by diversifying their revenue base. They plan to offer customers a broader, more integrated suite of benefits with goal of selling adjacent coverage options and helping clients find integrated, holistic product bundles. In our survey, producers pointed to life, disability, dental, and vision insurance as the supplementary products they expected to sell the most of in 2014.

Key leaDership questionsAlthough the shape of the 2014 market is becoming increasingly clear, there is still a plethora of questions producers need to answer if they hope to compete effectively. These questions include:

• How quickly will my market shift to new retail distribution mechanisms?

• Will my state implement an effective public exchange marketplace? If so, what is my role within this new channel?

• Should I develop my own private exchange capabilities?

• How will new value-based payer/provider relationships and care models such as ACOs affect my business?

• How will big box retailers like Wal-Mart, Target, Rite Aid, etc. change the way health care is bought and sold?

• Will consolidation be required to provide value-added services at scale and effectively compete in this new environment?


Greater focus on

health insurance as a

core offering

17%Not Impact focus on

health insurance

36%

No opinion

1%eringcore offe

%17%s on

ce

Less focus on

health insurance

as a core offering

46%

EXPECTED PRODUCER FOCUS ON HEALTH INSURANCE POST-REFORM

POTENTIAL POST-REFORM GROUP PURCHASE DECISIONSRespondents who will make these recommendations to groupsho will make these recommp ndents whho will make

7%7%

7%

9%

10%

10% 20%

Private Exchange/ DC Platform

Maintain bene�ts at potentially higher prices

Maintain price and bene�t with limited network

P i

MainMain

Buy down bene�ts to reduce costs

endations to groenda

M iMain

Buy dBuy d

Public SHOP Exchange

Priva

P bl

I will not be writing group business

PublPubl

I ill

Drop coverage – employees purchase individual

I willI will

D

Change employee contributions

DropDrop

ChanChan

30%


Because local markets will respond differently, no single blanket strategy will work for all producers. Developing the right strategy will require a deep understanding of a local market’s current and future dynamics, a keen awareness of current position and organizational gaps, and the flexibility to adapt to payer and customer needs as the market evolves.

looKing aheaDThe next 12 months will be a time of significant change, and producers believe they can play a vital role in advising stakeholders how to navigate it. They expect to provide value-added services to their clients, connecting client demand with the best options the new market offers.

But success will not come easy. With continuing commission compressions, new disruptive distribution models, and well-capitalized innovators eager to enter a large and broken healthcare space, only the nimblest producers will find a place in the future market. Those unwilling to adapt, and those that cannot demonstrate that they provide high value to all stakeholders, will be increasingly marginalized and ultimately forced to exit health care altogether.

Producer response to groupto individual transitions

Producers who have seenPayers re-enrollment incentives

Re-enrollmentcompensation expectations

YesNo

FACILITATING GROUP TO INDIVIDUAL RECAPTURE FOR PAYERS

65%

83%

17%

Remain “agent of record” for those on exchangesRemafor tho

OtherOther

Not focusing on group to individual dropping

Other

Not foindivid

Refer individuals transitioning out of group coverage for referral fee

for tho

Not fo

Refer Referof groof gro

24%

5% 6%

Similar to individual commissions for new business

Similacomm

Other

Similar to individualcommissions forrenewal business

me

commfor ne

Similacomm

Through a per policy bonus or referral structure

Other

renew

ThrouThroueor refe

47%29%

18%6%

YesNo

83%

17%

Traditional ancillary products (Disability, Life, Dental, Vision) will be the most popular non-medical diversi�cation options post-reform

Disability Insurance

Life Insurance

Dental Insurance

Vision Insurance

Property and Casualty Insurance

Behavioral Health

Disease Management

Financial Planning

Long-Term Care

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Percentage of business

POST-REFORM ANCILLARY PRODUCT SALES EXPECTATIONSWe will write a lot

POST-RWe w We will write some

uraance

ANCILLARY WWe w We are not planning to sell

SALES EXPEWe a

20%

12%

48%

35%

33%

53%

14% 44%42%

19%6%

63%58%

18%36%

38% 7%

33% 12%

55%

55%

34%43%

10%5%

56%52%

(#77402) Reprinted with permission from Benefits Selling. Copyright 2013 by The National Underwriter Company doing business as Summit Business Media. All Rights Reserved. For more information about reprints from Benefits Selling, visit PARS International Corp. at www.sbmediareprints.com.


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Vole 1, o. ne Benefitsroco Finally - Oliver Wyman...( Biggest Benefits Selling Expo ever – A recap ) Vole 1, o. ne BenefitsrocoFinally on board only a year aFter writing oFF obamacare,