If there was ever a time for brokers and agents to reassess the way they do business, that time is now. Health care reform is here, and while its effects for every corner of the industry are just beginning to take shape, make no mistake that the changes legislated in Washington may rock your world.
To begin with, the new medical loss ratio requirement that takes effect in 2011 mandates that no more than 20 percent of premium dollars collected by a health plan can be spent on administrative costs – which, in addition to marketing and general administrative expenses, include commissions to brokers and agents. It is all but certain that carriers will rethink commission structures, especially in the individual and family plan markets, and that means a direct effect on your bottom line unless you, like the carriers you represent, can find a way to mitigate your losses.
Here are five good ways to do that.
1. Reassess your business plan
Now more than ever, formal business planning and long-term thinking is a “need to have” rather than a “nice to have.” Take this opportunity to assess the strengths and weaknesses of your business, and then make the necessary changes to decrease your vulnerabilities. Analyze existing and potential revenue streams, target markets, products sold, and selling methodologies. Look at your current customer base, market trends, and potential market niches you may be able to fill. A carefully planned business strategy can serve as a roadmap to guide you over and around the bumps that you and your competitors will encounter.
2. Get lean
For brokers who anticipate shrinking revenues, the most immediate solution may be to shrink overhead. Cut unnecessary expenses, but proceed with caution. Avoid knee-jerk reactions, and try to balance short-term success with long-term staying power. By taking an objective look at how you run your business and where your dollars go, you will have a better handle on which expenses provide a true ROI. Pare back those that don’t. You will have some painful decisions to make, but if done properly, you’ll emerge with a better, leaner, more efficient, and more profitable business.
3. Leverage technology