As we entered 2006, you couldn’t help but notice the myriad forces steering the benefits industry. Not since the rise of managed care has change been so irrepressible.
Technology is certainly one of the big catalysts. For benefits brokers selling group and voluntary products, there are five key trends driving the use of technology for both agency management and client service.
1. CDHP adoption. Adoption rates of consumer-driven health plans vary by region. Our survey of 283 companies from 41 states reveals 32% of businesses of all sizes plan to offer a CDHP option–that is, a health savings account or health reimbursement arrangement. Most of these employers are located in the Midwest and Southeast.
Brokers in regions that have been slow to adopt must be prepared to act quickly. In the Northeast, the number of employers currently offering HSAs (13%) is very low. However, that number doubles (26%) when asked if they are planning to offer HSAs this year. Once interest is demonstrated, adoption will move rapidly, and Web-enabled access to information and plan options will become a critical requirement for success.
2. Commission compression. Being a benefits broker is not as profitable as it used to be. Broker commissions will continue to shrink as carriers look to capitate commissions on a per-head basis and consumer-driven health plans, which pay lower commissions, gain market share. Shrinking commissions will require brokers to become more efficient to maintain profitability. Sure, client relationships will still require nurturing, but to compete, agencies must run as tightly as possible.
Technology will play a major role in achieving peak effectiveness. Brokers will demand quality solutions and expect extensive support and training. New technological developments in the areas of agency management and employee self-service are improving benefits practices across the nation. The best agencies will possess a broker-centric agency management system and set up portals for benefits management and employee self-service.
3. Mergers and acquisitions. Banks and large brokerage outfits continue to gobble up smaller broker firms to acquire instant market share. To combat the giants, some agencies have banded together to strengthen their collective resources. Firms that want to maintain profitable independence are better able to do so if they provide more effective client service and are more cost efficient. Agencies with a strong command of the latest technology will be more successful in a highly competitive environment.
Similarly, those looking to be acquired can improve their valuations by becoming technology-enabled. Having data organized in an agency management system instead of spreadsheets and paper can be very appealing to a potential buyer because it enables a smooth transfer of data. Also, employer clients who are entrenched in a broker’s technology solution are more apt to stay on board when their broker is acquired.
4. More than simple education. Many workers will be offered consumer-driven health options for the first time this year. Our survey reports that 66% of managers believe employees are going to need a lot of support, both in getting started and continuing the option. And just 26% feel that employees are currently capable of managing benefits on their own if given the right tools. Brokers will have to deliver interactive decision-support tools to promote healthy enrollment levels that will generate the expected cost savings for companies.
These companies are looking to online tools for communications, account tracking and for support of education, planning and incentive programs. Respondents ranked health plan communication and plan comparison among the most critical online tools. The quality, not just the existence, of a benefits portal will make the difference between a well-executed consumer strategy and a lackluster result.
5. Customers demand more. Corporate clients are asking for more from their brokers. To deliver the level of service required, brokers have been shifting from intermediaries to consultants. The role of consultant requires a more sophisticated level of involvement, which, in turn, requires use of more advanced tools to provide greater depth and breadth of service.
As payroll providers, banks and other service vendors fill the void for benefits technology, complacent brokers gradually will lose their foothold with clients. To remain irreplaceable, brokers not only need to deliver benefits technology solutions to clients but also should employ a portal to communicate easily with clients daily. Such portals can arm a client’s human resources staff with potent research tools and enable the broker and client to share documents and messages in a secure environment. In addition to a portal, some brokers may choose to e-mail newsletters filled with timely content to stay top of mind. Those who capitalize on these ideas will elevate customer service to a new level of sophistication.
Clearly, technology is one of the keys to brokers thriving, particularly in an environment of decreasing commissions and greater plan complexity. And in an industry where brokers essentially are selling the same services, successful brokers need to stand apart from the rest. All trends point to technology as an integral part of the answer, whether it’s for internal efficiency, client communication, task automation for clients or self-service for employees.