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
The technology available to brokers today provides a level of support that was once unimaginable when it comes to marketing, advertising, quoting, and client interface. The proper use of technology provides brokers with an almost unfair competitive advantage. If you don’t already have a website, you are forfeiting literally hundreds of new prospects a day. A website provides an online storefront that allows customers to find and interact with you when they are most ready to make a buying decision, 24/7. Therefore, it is important that you have a quoting engine that allows you and your clients to instantly compare hundreds of different health insurance plans, benefits, and prices to find the plan that best meets a person’s individual needs. Increasingly business owners and individuals are showing a preference for working with brokers who offer online connectivity – even if only to request more information , a quote, or to communicate and resolve service issues. In addition, national carriers are looking for ways to streamline their operations meaning that they, too, favor brokers who leverage these new tools. If you are still submitting paper apps, you may not find yourself at the top of the carrier preference list.
4. Expand your portfolio of product offerings
Brokers and agents will no longer be able to depend on a few key lines of business to sustain success or drive growth. Beef up your business line and product offerings – but do so wisely, as your reputation, integrity, and relationship are at stake. Investigate and educate yourself about such ancillary plans as life insurance, short and long-term disability, HSAs, and Medicare. To get up to speed even faster, align yourself with associations and business partners that offer free or low-cost webinars and other support. And since health insurance exchanges will be an important part of your future, learn as much as you can about them now. After all, it is important that you position yourself with your clients as the “go to” person where exchanges are concerned. If you’re in California, look into the CaliforniaChoice Exchange, which this summer became the first exchange in the nation to top 20 million member months. In Connecticut, check out CBIA Health Connections; if in Massachusetts, become proficient with the Connector.
5. Communicate more with your customers
The highest-growth producers are also “high-touch” communicators. High-touch communication increases your image as a trusted advisor, which leads to increased retention and potential upsale to other client needs or referrals. Use all of the changes taking place in health insurance and health care reform as a reason to touch your clients on a regular basis with new information, new insights that make them smarter, or simply a friendly hello so they know that you’re thinking about them. If you are not already set up with an auto-responder system that automatically sends out regular messages to your clients and prospects, you are missing out on one of the most cost-effective direct marketing tools available. Check with your web site provider or quoting agency to find out what tools they offer.
Time and tide wait for no man, as the saying goes. Change is coming, so the time to prepare is now. Reassess your business plan, pare down unnecessary costs, and invest in new product education and new technology. These will be the keys to keeping your business and your world rock steady.
Ron Goldstein is president of Quotit, the health insurance industry’s leading online Individual and Family Plan quoting and enrollment service.