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Benefits Business Employee benefits goes high-tech To be competitive, agencies must master benefits administration technology By Len Strazewski
If it wasn’t tough enough to keep up with the rapidly changing world of employee benefits plan designs, state and federal regulation, and cost containment strategies, agents and brokers have a whole new territory to learn: technology. The technology of employee benefits delivery and administration is evolving as fast as or faster than the coverage it maintains, say agency management specialists; and the producers who cannot deliver or at least advise their clients about the latest in benefits technology may be at a disadvantage. Property/casualty agents and brokers who are trying to build a bigger employee benefits book of business may be at an even greater disadvantage as they may be forced to invest more time and money in learning and acquiring exclusive employee benefits technology. The pressure comes in part from the evolving role of agents and brokers. Producers are under more pressure than ever to provide more than just insurance policy marketing, explains Joseph Thomas, vice president of sales and marketing for Vertafore Benefits in Windsor, Connecticut. Vertafore provides employee benefits agency automation services to more than 15,000 agents and brokers and 300 insurance companies. The company will change its name to AMS Benefits this month to reflect its relationship to AMS, a property/casualty agency automation vendor. “Competition continues to become more intense for agents and brokers who are trying to specialize in employee benefits,” he says. “As costs continue to increase and new benefit techniques gain popularity, agents have to do more than just put the coverage out for renewal and deliver the best available price. They have to be able to advise their clients about the latest techniques, educate them in their use and provide them the technology that allows their clients to put the techniques into action.” Agents and brokers who have avoided dealing with the technology of benefits delivery and administration are already at a disadvantage, he notes. “For a long time, many agents avoided making a commitment to a benefit administration technology or a vendor. Their decision was simply ‘no decision.’” But now, COBRA and Flexible Spending Account (FSA) administration, consumer-directed health plans and Health Savings Accounts (HSAs) are among a growing number of services that require automated delivery and administration, he says. “You simply can’t administer these services on paper any longer. They are too sophisticated and require too much ongoing management. We are already at the stage where most employers expect their agents and brokers to deliver a complete package of coverage and technology,” he says. Agents and brokers who have not allied themselves with one of the popular employee technology vendors or third-party administrators that already have such partnerships may soon fall out of contention for the renewals of even their long-standing clients. Property/casualty agents may also find the complexity of the employee benefits business to be greater than their other lines of coverage. The employee benefits area lacks the standardization that the property/casualty industry has already achieved. “There’s not such a thing as an ACORD form for employee benefits,” Thomas says. “We are trying to develop that kind of standardization for employee benefits, but we aren’t there yet as an industry.” John Gedney, president of Online Benefits, Inc., in Uniondale, New York, points to several employee benefits markets that are driving the rapid adoption of employee benefits delivery and administrative systems for agents and brokers. Online Benefits markets the Benergy line of agency management and employee administration technol-ogy and has more than 450 agency and brokerage customers. Consumer-driven health (CDH) plans are receiving national media attention, he notes, but their rate of adoption varies by region. “Due to underwriting variations around the country, CDH plans are not all alike from region to region. The carriers have been very conservative in their underwriting and, as a result, a CDH plan in New York City may or may not be as good a deal as a CDH in California.” But once insurers iron out their underwriting strategy and develop the Internet-based information systems that drive the plans, agents and brokers may have to adapt quickly and be ready with the administrative technology these systems require. Region by region, adoption rates could explode soon, he says. When CDH plans catch on, driving premiums lower, agents and brokers can expect their commissions to fall as well. To maintain their profit margins, agents and brokers will have to become more efficient by automating their own management and market technology as well as coverage, he says. “Many workers will be offered consumer-driven health options for the first time this year. Brokers will have to provide interactive decision tools to promote healthy enrollment levels that will generate the expected cost savings for companies,” he says. Agency consolidation will continue, Gedney adds, as agents and brokers struggle to deal with the increasing complexity and service requirements of the employee benefits business. “Technology-enabled firms are better able to maintain profitable independence as they provide more effective client service and are more efficient. Likewise, those looking to be acquired can improve their valuations by becoming technology enabled,” he says. Gedny also agrees with Vertafore’s Thomas that increasing competition requires immediate adoption of employee benefits delivery and administrative technology. Corporate clients are demanding more from benefits brokers, he says. In order to deliver the level of service required, brokers are shifting from intermediaries to consultants. Gedney says that this change of role requires a more sophisticated level of involvement, which, in turn, requires use of more advanced technology tools to provide greater depth and breadth of service. More players are entering the field, he adds. “Employers are already interfacing with other vendors such as payroll service providers, banks and outsourcing companies that are beginning to offer administrative technologies that cross over into employee benefits. If agents and brokers cannot offer similar services, they risk losing their trusted advisor status with their clients.” Agents and brokers who do not choose among employee benefits technology vendors as business partners may want to develop their own technology services—or run the risk of falling out of contention. CheckPointHR in Edison, New Jersey, provides human resources and employee benefits administra-tive services to a wide range of corporate institutional clients that include the American Stock Exchange, Starwood Capital, Acculabs and Quintum Technologies and specializes in small to medium-sized companies, says President and co-founder Tim Padva. A related brokerage company, the Wilshire Group with offices in New York City and in the Florida cities of Clearwater and Ft. Lauderdale, provides more traditional insurance marketing services. Padva says the company needs to provide both levels of service to keep up with the changing world of employee benefits. “Everyone in the business is aware of the evolution going on in health care and health benefits delivery. From health care claims management to consumer-directed health plan fund manage-ment, employers are recognizing their need for more advanced administrative technology.” CheckpointHR began providing Internet-based human resource management systems five years ago and has continued to enhance its system to meet the growing complexity of services that employers require, ranging from payroll management to benefits administration. Padva says the contemporary service offerings keep the company on the cutting edge of the employee benefits competition. “This is a whole new era in employee benefits marketing. Agents and brokers can’t just send out a paper newsletter to their customers and expect to be at the front of the line. Employers expect the latest in technology and we have to be able to provide it along with our more traditional insurance services,” he says. * |
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