BENEFITS BUSINESS
As market choices shrink, prospects will
reward agents who offer value-added services
By Len Strazewski
"Fewer carriers than ever before are willing to look at the smaller companies of 40 lives or less, creating an extremely tight market for many of the clients in my area. As a result we are all going to the same well all the time for renewals or new coverage."
--Wayne Landwerlin
When health insurance carriers raise prices or back out of market areas, agents and brokers pay dearly in more than a few ways.
First, they need to cope with annoyed employers and explain their premium increases or outright cancellations. Then, they need to remarket the employee benefits program--and survive comparison with other agents competing for the same business.
Differentiation--standing out from the crowd of agents competing for the same corporate clients--can be a difficult and expensive proposition, explains Wayne Landwerlin, president of Group Insurance Associates in Metairie, Louisiana, an independent employee benefits specialist broker with seven employees. And the best way to accomplish it is to provide more and different services for less compensation.
"There are simply fewer and fewer carriers pursuing new business in employee benefits these days--and even fewer in my area," Landwerlin explains. "And the risk base is also shrinking as companies continue to reduce their workforce in response to economic pressures.
"Fewer carriers than ever before are willing to look at the smaller companies of 40 lives or less, creating an extremely tight market for many of the clients in my area. As a result we are all going to the same well all the time for renewals or new coverage."
How does this affect the competitive dynamics for agents and brokers?
"There are only about four major carriers providing group health insurance in Louisiana," Landwerlin continues. "So when an employer calls in several agents and brokers to compete on employee benefits business, we are all filing applications with the same markets. We are all using the same data to prepare the proposal and the underwriters are all applying the same criteria.
"No matter how many producers are competing--big brokers, independent agents or small specialty brokers--the results will always be the same. You can have six agents getting quotes, but they will all come back with the same four proposals and about the
same rates."
How does the employer choose which agents to reward with the business? That's the big question, Landwerlin says. "Absent any variation in rate or coverage--and there isn't any--it all comes down to the quantity and quality of value-added services. If you are going to get the business, you have to plan to offer extra services and absorb some additional costs."
Group Insurance Associates has built a portfolio of employee benefits business that ranks among the leading volume producers in the South--surpassing many of the regional offices of the large national brokers, Landwerlin says. But the competitive success comes at a cost. The brokerage also offers clients a range of administrative and support services that includes administration of COBRA benefits for terminated or resigned employees, IRS sec. 125 flexible benefits programs and flexible spending accounts, discount programs for ancillary employee benefits and services and patient advocacy services for key employees.
The brokerage provides some of these value-added services in-house, but most are available from third-party vendors at additional cost--some of which the brokerage eats as client acquisition costs.
"These extra services have become key components of our new client proposals," Landwerlin says. "When we submit proposals to our clients, we make sure they realize that they are getting more for their commission costs than the same policies and rates they are getting from every other agent.
"They are getting administrative services that will save them time, money and productivity in the office or consumer savings that will save their employees real dollars for vision care, prescription drugs, dental services or other needs."
One of the newest and most popular services Group Insurance Associates now provides to selected clients is Patient Care, a New Orleans-based patient advocacy service that functions as an ombudsman for covered employees, assisting with health insurance administration systems. Group Insurance Associates provides the service to as many as 10 executive employees of new clients and makes the service available to other employees at cost.
Patient Care "functions like a super service rep," Landwerlin says, "and helps get the clients to perceive us as much as a service vendor as an insurance agent."
However, the patient advocacy service is more than a marketing gimmick. The program has real value to employee benefits clients both for the human resources departments that administer employee benefits and individual employees, Landwerlin says.
When health care claims go awry or health insurance carriers bury employees with paper work, human resource executives or employee benefit managers take the brunt of the complaints directly, often responding to angry or confused employees in person--unless employees have other options.
Patient Care provides those other options. The one year-old company assists employees and individual members with coverage problems, claims issues, billing problems and care scheduling, among other typical complaints.
The service can also provide help with grievances and appeals, prescription drug problems, home health care services and general benefit information.
Costs range from $1.50 to $4.00 per employee per month, based on the size of the employee group. The company presently provides services for about 30 employers in 11 states and recently announced a national expansion.
Jane Cooper, president and founder of the company, says the patient advocacy services and related administration are becoming more important to employers as health insurance competition continues to tighten. Individual employees rely on Patient Care to resolve the health insurance problems that are becoming more frequent as carriers attempt to reduce costs and headcount.
"And more and more employers are looking to us to assist them with new HIPPA regulations that will require additional privacy safeguards for employers dealing with workers' medical information," Cooper adds.
"Employees are instructed to call us first, before pursuing problems with their human resources department and, in most cases, we can handle their health benefits issues faster and more efficiently, dealing directly with the health plans," says Cooper, a health industry veteran in Louisiana and founder of one of the state's first Health Maintenance Organizations (HMOs).
Cooper says the company reps can assist with a majority of employees' issues, more than half of which involve problems with claims filings or administration. As experts in coverage issues, service reps can also assist with benefits information and education issues that account for about 30% of all claims, she adds.
Working with agents, brokers and third-party administrators is a natural marketing channel for the firm that also markets directly to employers and individuals. "Agents most often serve as the packagers of health insurance benefits for many employers and patient advocacy services can be a power component to that package," she says.
The vendor recently received a preferred provider endorsement from the Louisiana Business Group on Health (LBGH), an employer organization representing 300 employers with more than 400,000 employees.
"We view Patient Care's services as increasingly important in today's managed care marketplace where insureds often have difficulty navigating the sometimes complex requirements of their health plans," says Butch Passman, president of LBGH.
Landwerlin from Group Insurance Associates perceives the growing client and consumer needs as an opportunity for his brokerage--one more way to differentiate his firm from the other agents down the street. *
The author
Len Strazewski has been covering employee benefits issues for more than 20 years and is employee benefits editor of Human Resource Executive magazine. He has an M.A. in Industrial Relations from Loyola University.