The Affordable Care Act (ACA) has brought about big changes in the health insurance industry, and brokers must adopt new roles and offer innovative solutions to remain competitive. At the same time, the complications of providing health benefits are spurring more conversations among C-suite executives, who now rely on their brokers to help control costs and provide competitive advantages. Employees themselves are still adjusting to their roles as consumers as they take on more costs and risks in the retail healthcare market.
These changes have created great opportunities for adaptable brokers. The growing demand for voluntary products, in particular, has brought hundreds of new players into the field, expanding the need for new and robust revenue streams. It is no longer a question of if, but when, clients will purchase voluntary benefits, and firms need to be proactive in offering them. Direct competition with other brokers isn’t the best approach, however. For most firms, the most successful, sustainable business model is to partner with trusted experts in voluntary products.
Voluntary Benefits: A Non-Negotiable
Three trends have driven the recent growth of voluntary benefits, and providing them has become all but essential for forward-thinking brokerages. Employers are facing higher group health care costs, with 49 percent reporting that controlling costs is a top business objective.[i] Employees are paying more, with 81 percent experiencing an increase in the family coverage contribution.[ii] And among brokers, 57 percent report that rising healthcare costs is the top issue affecting their clients’ decisions.[i]
For employers, the need to control costs is driven by operating expenses and labor costs, both of which have sharply increased since the ACA’s passage. Benefits play a major role in prospects’ job decisions, and 59 percent of workers actually prefer jobs with slightly lower pay and more robust benefits packages.[i] Employees also expect education and support for those benefits, and that support requires additional personnel and technology.
On the employee side, contribution costs are rising across the board. In 2014, workers paid an average of $4,823 for family coverage including deductibles and copayments, average employer-sponsored premiums rose to $16,834, and roughly half of employees had to pay less than $1,000 for out-of-pocket expenses.[i] [ii]
As for brokers, 89 percent agree that rising health care costs are directly impacting their clients’ abilities to offer benefits. Fortunately, 48 percent of employers report that they’ll be relying more on their brokers to make benefits changes in 2015, and brokers themselves say the top reason their clients would consider voluntary is to offer a wider range of options.[i]
Ultimately, offering voluntary benefits is one of the most financially viable ways for employers to improve worker satisfaction and reduce turnover in the post-ACA environment. Brokers who sell voluntary products are more likely to increase their client bases and grow their sales, and those who don’t are twice as likely to experience declining sales. Not surprisingly, a majority of brokers plan to increase their voluntary benefit revenue in 2015, and 45 percent expect their proportions of voluntary sales to increases within the next 12 months. [i]
So why aren’t more brokers placing a greater emphasis on voluntary benefits? For starters, most have only recently entered the market. Forty percent have been selling voluntary benefits for less than three years, and 20 percent have sold them for less than one. Other oft-reported reasons include a lack of client interest, a lack of broker familiarity and the view that the new offerings won’t lead to significant financial gain.[i]
Perhaps the most common reason for avoiding voluntary, however, is fear and distrust among fellow brokers. Voluntary products can be a tough sell compared to ACA-mandated health benefits, and they typically require significant explanation and expertise on the part of the broker. Many firms don’t staff those experts in-house – at least not yet – and they’re often reluctant to open their books to brokers who do know the ins and outs of voluntary. The fact of the matter is, though, if you don’t introduce voluntary benefits to your clients, someone else will.
Collaborating with Trusted Partners
The solution to this dilemma? A new, collaborative business model that begins with picking the right partners. Clients are going to demand voluntary benefits sooner rather than later, and brokers can position themselves for greater sales and ongoing business by working with trusted experts in life, disability, dental, vision and supplementary medical insurance. Rather than opening their books to third parties, however, firms can find the most success by bringing those experts in house. Current personnel focus on their areas of expertise, while new team members help to joint-sell and educate clients.
This model has already produced excellent results for several reasons. First, it allows a brokerage to pull voluntary benefits out of the appendix of a proposal. Instead of an add-on, these extras become integral components of a client’s overall package. Second, collaboration allows for deeper, more thoroughly designed medical plans that cut costs for both employers and employees. With the addition of certain voluntary benefits – tailored to the needs of specific groups of workers – other benefits may be scaled back. Third, collaboration leads to greater participation. Instead of signing up for voluntary products separately, employees can work with one firm to enroll in all of their benefits at once.
Ultimately, these advantages lead to higher commissions and revenues, as well as greater opportunities to cross-sell and expand into 401ks, property and casualty insurance and other products clients often need. Just as importantly, collaboration leads to ongoing business for all parties involved. Well-established brokerages can gain new business and better satisfy current clients by updating their offerings. At the same time, voluntary experts can contribute to thorough, well-rounded proposals that are likely to result in renewals. In the increasingly competitive post-ACA health insurance market, cooperation is the key to sustainable growth.
This article summarizes a webinar hosted with David Fisher, Voluntary Benefits Division, and Justin Phipps, CBC, Employee Benefits Broker at Gus Bates Insurance & Investments. The webinar entitled “The New, Game-Changing Model for Selling Voluntary” was the second in a series presented by Aflac. The “Thrive from 2015 to 2025” broker webinar series aims to address the ongoing changes in the health insurance industry resulting from the Affordable Care Act (ACA) and how brokers can take advantage of their new role as health benefits advisors. To learn more, visit aflac.com/thrive2025.
[i] 2015 Aflac Workforces Report, a study conducted by Research Now on behalf of Aflac, January 2015
[ii] The Kaiser Family Foundation and the Health Research and Educational Trust, Employer Health Benefits study, 2014 Summary of Findings