Embrace Patient Protection & Affordable Care Act With Innovation and Collaboration

Agencies focused on the day-to-day business of employee benefits know this legislation will hit hard and force change. A report released in June by the business consulting firm McKinsey & Co. stated, "The shift away from employer-provided health insurance will be vastly greater than expected and will make sense for many companies and lower-income workers alike."

McKinsey surveyed over 1,300 companies of all sizes and found that:

• Overall, 30 percent of employers will definitely or probably stop offering employer-based health insurance in the years after 2014.
• Among employers with a high awareness of reform, this proportion increases to more than 50 percent, and upward of 60 percent will pursue some alternative to traditional employer-based health programs.
• At least 30 percent of employers would gain economically from dropping coverage even if they completely compensate employees for the change through other benefit offerings or higher salaries.
• Contrary to what many employers assume, more than 85 percent of employees would remain at their jobs even if their employer stopped offering employer-based health insurance, although about 60 percent would expect increased compensation.

The less talked-about factor of PPACA is just how fast this forced change is coming. Depending on benefit effective dates, your clients are only two or three renewals away from government-mandated change in the main component of benefit spending. With this level of forced change quickly approaching, conducting business-as-usual is a poor strategy for success. If your thinking is, "My clients will stay with group medical because they want to have excellent benefits to keep and attract employee talent," the last bullet point from the above-cited research should give you pause. With the exchanges offering guaranteed issue health plans—subsidized or not—employer-based major medical will fade in importance. Finding Opportunity
On the plus side, voluntary insurance options will rise in importance. A full suite of group ancillary lines like dental, vision, disability, life, and even wellness plans can appeal to employers and employees alike. Employers may be receptive to funding or partially funding these enhanced benefits packages by using the significant savings they realize when they pull their dollars from health insurance.

Assisting employees at the personal level with needs such as permanent life, long-term care and annuities also will become a business-generating opportunity for agencies. For example: If you have 20 groups with 25 employees each, that equals 500 individual selling opportunities. If you could write life, long-term care, or annuities on only 25 percent of them, you would have 125 new policies written, or more than 10 per month over the course of a year.

To help you analyze these opportunities, consider conducting an agency self analysis. If you are an employee benefits-based agency, refer to bullet points one and two from the McKinsey research and run projections where your agency loses first 30 percent then 60 percent of its current group health commissions. (It is not out of the question that five or six years down the road there will be employee benefit agencies with little or zero group health on the books, particularly those agencies primarily working with groups under 500 employees.) Next, construct a functional model of how many sales of other insurance lines it will take to replace the lost commissions from medical sales.

Now write down all the categories of insurance and related service lines that your top 20 clients have or may have. Include as many as possible from both the life and health side and the property and casualty (P&C) side, and be specific. Include the employee's personal insurance needs as well. Then put your name beside every coverage your agency provides for each client.

This exercise will give you a hard assessment of just how deeply involved you are with every client. If you find only a couple of insurance products checked with your name, this might be a sobering moment for your agency. It will show that your clients may be getting advice from other agents, consultants or advisors—people who may be giving them conflicting advice and steering them away from you. Innovation Through Collaboration
You should view this as an opportunity for innovation through collaboration. First, talk with your clients and conduct a comprehensive insurance evaluation of their needs and current and possible coverages. Then proactively engage the other agents or advisors dealing with your clients and discuss the opportunity for collaboration. This can be done informally or—as I would suggest—in writing, detailing the relationship, cross-competing arrangements, referral compensation, and anything else you agree is important. There are many ways to receive compensation for referrals without breaking rebating laws or doing anything unethical. Take the agreement seriously, and create a strong document that is signed by both parties and notarized. Develop trust in these relationships and you may find yourself working off of very warm referral leads on a regular basis.

While this innovative networking building arrangement may seem most pressing for employee benefit-based agencies looking to enhance lost commission income, all agents or agencies can benefit. A qualified, trusted referral option enhances professionalism and often leads to other opportunities to sell.

Some multi-line agency managers think this collaboration already exists within their agencies, with the P&C agents bringing in the benefits agents and vice versa. While this is often intended, it is rarely accomplished. To see where your agency stands, have each side build its own client grid, then match them to see the overlap. Prepare to be enlightened.

Reviewing the McKinsey research and its implications for your agency is simply solid management practice. Keep in mind that an unstoppable force (PPACA legislation) is about to collide with an immovable object (the year 2014, when most of the heavy requirements impact). It will hit hard and fast and will clearly change the way insurance and services budgets are spent by your clients.

While there may be a crisis component here, there also are definitely numerous opportunities to be capitalized on through thoughtful innovation and professional collaboration. Agents, advisors and consultants, regardless of specialty, who take proactive measures to build their professional collaborative networks will be ahead of the game when 2014 arrives.