Benefits Products & Services

Que sera, sera

Whatever it will look like, brokers prepare for 2014

By Thomas A. McCoy, CLU

Today's benefits brokers look toward next year's health insurance mandates with the sense of inevitability, mystery and hope conveyed in the 1956 song "Que sera sera," popularized by Doris Day. They'd like to have a better idea of what the future will look like under the Patient Protection and Affordable Care Act (PPACA), but with 10 months until mandatory coverage kicks in, the government has yet to clarify key elements of the public health insurance exchanges. Whatever will be, will be.

While they wait for government regulations to be spelled out, brokers who have a serious commitment to employee benefits are doing more than waiting to see what the future will bring. They are looking for ways to prepare their clients now.

Take, for example, Senn Dunn of North Carolina (featured in a profile story on page 36 in our January issue). Two years ago, in a discussion of the changes that could come about under mandatory health care insurance, CEO Gray McCaskill described his firm's approach this way: "We're running to the fire."

Senn Dunn is a property/casualty-based agency with close to 150 employees and four branch offices. It's been around since 1927, but entered the employee benefits market only 14 years ago. Since then, its benefits business has grown to 40% of the firm's revenue. About two-thirds of the agency's property/casualty customers also are benefits clients.

Benefits brokers know that employers, especially those that are vital, growing companies, cannot afford to turn their backs on health insurance. Employees rank health insurance as their most important employee benefit, according to a 2012 survey by the Employee Benefit Research Institute and Matthew Greenwald & Associates (more than three times as important as second-ranked retirement savings plans).

James Duever, president of Cloverleaf Consulting, a six-year-old benefits-only consulting firm in Schaumburg, Illinois, foresees opportunities in the new law. His clients include groups of 2 to 500 employees, and he is preparing them for changes under PPACA.

"My approach has always been to build consultative relationships where my clients see us as an extension of their company," says Duever. "Under PPACA we will be able to help them steer their ship, depending on the choices they want to make. Most of the employers we work with value their employees. None of them are saying, 'I can't wait for the (federal or state-run) exchanges so I don't have to deal with health benefits anymore.'

"Right now, it's a slow, methodical education process," he continues. "A lot of the rules are still being written. We're just educating clients up to what we know today. Next month a new rule may come out, and then we'll educate them some more."

Duever says the new law may open up opportunities outside his client base. "I've run into several businesses that don't offer any benefits. Some of those people working there have insurance through a spouse or Medicare or Medicaid. But some of them don't have anything, and as of January 1, 2014, they're all going to have to have something. We don't know yet if we, as brokers, will be allowed to be navigators on the exchanges; but if we are, we could participate there, or write individual policies."

Help from a wholesaler

Duever partners with Flexible Benefit Service Corporation (Flex), a benefits wholesaler, for both group and individual health products. Flex provides Duever's firm with access to group products from Blue Cross, Aetna and Principal, as well as TPA services and help with flexible spending accounts and COBRA services. Flex offers these services as well as access to other markets and tax-advantaged products to some 5,000 brokers on a national basis.

John DiVito, a 30-year veteran health broker, co-founded Flex in 1988 as a retail group health broker with a special emphasis on Section 125 plans. From the start, the company lived up to its name—adapting to new products and building expertise with health savings accounts (HSAs), and health reimbursement arrangements (HRAs) as these were introduced to the market.

"With each change in the tax code, we embraced it and marketed it," says DiVito. "In the year 2000, we changed our marketing approach and began operating as a wholesale general agency with retail health agents as our customers."

DiVito believes that brokers who worry about changes coming under PPACA and abandon the health marketplace will miss significant opportunities in the next few years. "They just have to continue to find ways to provide valuable services to clients," he says.

Flex has introduced a new tool—a private health care exchange—that it hopes will help brokers do just that. The exchange, called InsureXSolutions®, is designed for employers who otherwise would not offer group health benefits to employees. It functions as an online health insurance marketplace featuring products of several insurers. The employer makes a fixed contribution towards each employee's benefits; the employee, who also can contribute toward the purchase, then makes the benefits choices from a menu of plan offerings. Flex's exchange is currently available in select states.

"We think there's a big market for a private exchange, whether it's for health insurance or any voluntary benefits," says DiVito. He points out that Aon Hewitt and Mercer have already rolled out private health insurance exchanges. Aon is offering a private exchange to 90,000 Sears employees.

Flex's brokers operate primarily in the small- to medium-sized market. "For employers with between 2 and 100 employees, we think our exchange provides an attractive way to deliver health benefits that fit individual employee needs," says DiVito.

Because Flex has administered defined contribution-type health plans for a long time, DiVito believes it is well situated to administer the mechanics of the private exchange for employers and employees—once the government provides a few guidelines on Affordable Care Act requirements.

DiVito explains the process this way: "We'll ask the employer to set up the funds that employees will be allowed to spend on their health care insurance choices, and we'll track those dollars. Once the employee enters the online exchange, using an ID number, we'll know who they are and the dollar amount they've been given. The employee will be offered choices within the plan tools we provide. They can either shop based on the premium dollar amount the employer has provided or a specific benefit that they seek. It will show them a litany of plans and carriers.

"Then, as the employee finishes making selections, it will say, 'According to your choices, you've spent x dollars with this carrier. Here are the dollars that are either left over or you'll owe.' Then all that is reported back to the employer.

"If the employee is overwhelmed and needs help, they can call our call center, and a licensed representative can help guide them through the process."

If all these decisions sound like too much for an individual employee to handle, or too much for a broker to have to sell to an employer, remember that it wasn't all that long ago that the retirement plan business was turned upside down by the conversion from defined benefit pensions to defined contribution plans.

Communicating with workers about their retirement plan went from "Here's what you'll get every month for the rest of your life" to "Here are your choices of investments; let us know how much you want to contribute and how to invest it." It wasn't always easy for employees. But they got through it. Most benefits brokers who handle 401(k) and 403(b) business for their clients are glad they weathered that transition.

Our guess is that after two or three years of the coverage mandates under PPACA, the benefits brokers who continue to bring good, and sometimes different, health care solutions to their clients will be well rewarded.