HAVE YOU LOST YOUR CONSULTANT TO BROKER COMMISSIONS?

There have been so many changes in the health insurance industry that keeping up with them is almost like playing detective, even for the most experienced of benefits consultants.

Twenty plus years ago it was common for a broker to have to shop thirty different carriers and compare hundreds of plan design variations and, a broker had to be a knowledgeable plan comparison consultant to earn and retain your business.

Even as near as ten years ago, there were many more insurance companies and a multitude of benefit plans to choose from, but with massive consolidation of the health insurance industry, there are fewer than ten brand-name insurance carriers with whom to do business.

1. On the one hand, fewer carriers with proportionately larger market share continue to leverage healthcare providers for larger discounts and generate lower healthcare costs, but;
2. On the other hand, employers and employees continue to pay double-digit premium increases and out-of-pocket expenses annually, contributing to the higher profits of today’s profit-driven carriers.

With less than ten insurance company’s controlling 75%-80% of the commercial market, it’s no wonder why so many “consultants” have turned “broker” and, it’s no wonder why so many employers find themselves getting far less value out of their broker-buck.

Further, as the dominant insurance carriers continue to amass market share, they are forging alliances with brokers through back-end volume/incentive bonus programs. Not that these bonus programs are without merit because if kept in proper perspective, they can translate to added value for the client  in that this is still a three-way relationship business between the client, broker and carrier. The stronger the relational ties are the greater the chances for better pricing, terms or conditions inuring ultimately to the benefit of the client.

Unfortunately, back-end bonus programs tend to blur the broker’s vision far too often when it comes to making a recommendation for change to a more competitively priced carrier or to a self-funded strategy especially if the broker/consultant shares in any bonus compensation to the agency firm. Additionally, with so few insurance companies to do business with, it’s become much easier for brokers to protect their books with the convenient ability to “shop the whole market” and close the door on the competition. Many times, this tactic is nothing more than a maneuver to manipulate the outcome at the expense of the client.

Is it any surprise then, why so many employers view brokers as nothing more than an extension of the insurance companies they represent them to? Even if the broker/consultant appears to be doing an adequate job, how can you be sure? What should you expect from a broker/consultant to begin with? Do you have a clearly defined set of core competencies that a broker/consultant must meet in order to earn and retain your business? If having access to the same handful of insurance companies that every licensed broker has is your primary prerequisite then perhaps you need to broaden your requirements to get the best possible representation to the market.

Selecting the right broker or consultant is crucial in today’s economic and highly regulatory healthcare climate. As a consultant in your employ, I expect an annual report card. If I consistently miss the mark then I expect my services will no longer be needed.

For a fresh new approach and innovative, non-conforming ideas on how I can save you money providing healthcare benefits to your employees and help you control your healthcare cost in the future, write: mark.capuano@skyinsure.com, or call me at 330-492-3373.

http://www.markcapuano.com. http://www.skyfi.com. This article may be reprinted with Author’s email, phone number and web address included. Copyright © 2005-2007, Mark L. Capuano. All rights reserved.