Voluntary Disruption

In Enhanced Benefits by Eric Silverman

Bringing the benefits portfolio out to the cutting-edge

“Disruptor” is such a loaded word, isn’t it? But it is a precise description of healthcare industry thought leaders like David Contorno of Lake Norman Benefits in Mooresville, NC; Mark Gaunya of Borislow Insurance in Boston, MA; and Andy Neary of The Olson Group in Omaha, NE. These healthcare rock-stars, among many others, have developed and adopted some of the most cutting-edge ideas and strategies to help transform how their employer clients view and fund health insurance, in ways that I have yet to see anyone write about when it comes to “voluntary benefits,” or as Nelson Griswold and I refer to them as – “enhanced benefits.”

How do you disrupt a side of the employee benefits industry that isn’t likely to have commissions disappear anytime soon, and where rising costs are not adding extreme pressure to a company’s bottom line or an employee’s paycheck? Sure, you could charge an employer a consulting fee to lessen employee cost and offset your reliance on commissions, but then you’re asking an employer to help fund the implementation, education, and enrollment of benefits that are purposely designed to be employee funded with no outlay of employer funds.

What about technology as a disruptor? Benefit administration systems and enrollment platforms have become so advanced and sophisticated that we now have multilingual avatars that can educate employees on the value and need for enhanced benefits through quick and simple white board videos in an interactive and (artificially) intelligent format. Each year, technology continues to develop and impress, and is certainly a disruptive force that challenges the status quo, making this type of technology a positive disruption to our market.

Brokers: Adapt and Innovate

Nevertheless, I would argue that the most influential disrupter to our industry must be the willingness of the broker community at large, to adjust, adapt and embrace our ever-changing market. Let’s face it: Whenever a market changes, there will always be innovators who drive the change, early and late adopters who follow those innovators and help steer the change, and those who dig in their heels and turn a blind eye to the change.

I’ve found that most benefit brokers fall into one of four categories with respect to how they approach enhanced employee funded benefits. Which category do you fall into?

1. Generally, ignore these benefits unless a client inquires or asks about “voluntary benefits”
Most clients don’t proactively inquire about these types of benefits; so it’s typically prompted by one of your potential competitors or a large carrier sales rep knocking on their door and giving them a great idea. This is more of a reactive stance that comes with low risk and minimal revenue growth to the broker.

2. Outsource to a single insurance carrier, and allow that carrier and their enrollers to handle everything
While this is a more proactive stance, it does come with higher risk due to a large quantity of carrier reps who are often perceived by the broker community as not being very professional or experienced. Further, this approach typically delivers minimal broker revenue due to confusing and non-transparent compensation structures that may also result in lower revenue shares and commission splits. In addition, this approach is not carrier neutral and agnostic, which can sometimes prevent customizing the plans to the client needs, nor is it in the overall best interest of your employer client and their employees. For the most part, product is usually placed with little to no regard to the current benefits already installed due to minimal, if any, collaboration between the broker and the carrier rep. Of the brokers who try to be proactive with their recommendations and installation of these benefits, this approach has still, widely, been considered the standard over the years and is the exact area of our industry that is ripe for the most dramatic disruption.

3. Hire an in-house vice president of “voluntary” or an equivalent
Very proactive, with high risk and mid-to-high long-term revenue potential. The ROI is dependent upon hiring the ‘right’ person and the time it takes to ramp-up sales. Typically, a firm spends $100k+ on a base salary, plus sharing commissions, bonuses and all the other costs of doing business. The upside is keeping 100% of the revenue and available compensation in-house. The downside comes with fixed costs and overhead, as well as the need to retain enrollment firms that may charge upwards of 80 percent to 90 percent of the total compensation, which can be a recipe for disaster. This approach is the most challenging to execute and make profitable in a reasonable amount of time – leaving a large propensity for failure and the broker reverting back to categories one or two.

4. Partner with a carrier-agnostic benefits boutique with decades of proven experience in the enhanced benefits industry
They may have staff with carrier and retail experience; so they know how to position the products and expand the client relationship while representing the primary broker’s interests. It’s also essential and more efficient for both your brokerage and your clients if your partnering firm has a large national footprint with in-house distribution and an enrollment arm. This approach is extremely proactive, comes with medium risk and minimal to no overhead, while providing very high short- and long-term revenue potential. The risk level is mitigated as your partnership and trust evolves, while complete carrier compensation transparency is paramount – a true disruptor within this space. Your partnering firm must also hold top carrier contracts with volume-based carrier underwriting concessions that extend to you, your brokerage and of course, your clients.

As you think about what category you may fall in, know that you’re not alone. Adopting one of the more proactive approaches may prevent you from losing revenue to one of the many thousands of cold-calling carrier reps who are soliciting your group clients every day. After all, your clients have hired and trusted you with their healthcare decisions – isn’t it time to embrace the enhanced benefits industry and guide your clients properly by eliminating benefit redundancy and wasteful employee overspend, while capitalizing on a new revenue stream that you’ve been missing out on for years? Whether you choose to outsource to one specific carrier, bring it all in-house, or partner with a carrier agnostic firm – I suggest you choose to be proactive.

The New Bottom Line

While I realize that your primary client conversations emphasize employer-paid benefits and cost-containment strategies, don’t lose sight of how implementing a proactive approach to enhanced benefits can be perceived as rounding out the complete consultative picture. With that in mind, I encourage you to consider adjusting your firm’s goal to be more strategic and systematic by bringing enhanced employee-funded benefits to the forefront of your client conversations. This is not only best for your employer clients and their employees, but it’s also a missing revenue stream for most brokers who may have been more reactive in the past. This reactive approach is what allows carrier reps or other broker competitors to plant a flag within your client’s business. Never forget you’re the trusted consultant and adviser who your clients vet, hire, and pay to give them well-rounded, unbiased and complete advice on all things benefit related – including enhanced employee-funded benefits.

Remember, simply making your decision as to which approach you’re going to adopt is the most challenging part of the equation – once your decision is made, the doing is effortless. Happy hunting!