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A New Breed of BrokerBy Marty Trussell

Power to the people?How health care reform could result in the disruption of the group health insurance industry.

PPACA“The Patient Protection and Affordable

Care Act (ACA), if enacted as written, could redefine the market for health insurance with a speed and significance never before witnessed in this industry, and rarely seen in any other.”

- Deloitte

The way it was

What’s ahead?

Individual Markets• ACA could increase the market size for

individual health insurance by more than five-fold by 2020.

• Raising the number of individual policy holders to 72 million.

• Even if most of these are newly insured, a transformation of this scale will impact the existing group health insurance market.

Source: Deloitte

ACA Overturned?

Employer-Provided In U.S., New Low of 44.8% Get Healthcare From Employer

Wal-Mart Dramatically Reduces Health Coverage

A precursor?“If Wal-Mart’s decision is a precursor of how employers intend to manage their healthcare costs, the downward trend in employer-based healthcare will likely continue.” -Gallup

Part-time employees no longer qualify

“After trying to mollify its critics in recent years by offering better health care benefits to its employees, Wal-Mart is substantially rolling back coverage for part-time workers and significantly raising premiums for many full-time staff.”

– New York Times, October 20, 2011

We Are All Weird

Death of the mass-market“The mass market –which made average products for average people— was invented by organizations that needed to keep their factories and systems running efficiently.”

–Seth Godin

Death of the mass-market• Mass is dying “because human beings

have figured out how to be productive, and we have gotten more productive over time.”

• In other words, consumers now have the means to exert their individuality, or weirdness, and seek out products and services accordingly.

One size fits all• It wasn’t that long ago that health

care benefits came in one size and one shape. The employer decided on a few deductible and coinsurance options and that was the packaged offered to everyone from the shop floor to the executive suite.

Three flavorsWhen the “triple option” (HMO, PPO, Indemnity) was introduced employees were given some choice, but still only three flavors.

More discretionToday, consumer-directed health plans (CDHPs) offer another option and the accompanying account-based plans (FSAs, HRAs and HSAs) offer even more discretion in how health care dollars are spent. Further choices are also now being offered by many employers in the way of voluntary benefit programs that supplement core coverage.

More Weird

More choices• “Technology and innovation is making it

easy and affordable for individuals to choose their own coverage from a variety of options,” said.

• “Private health exchanges will likewise allow employers to offer far more choices than have previously been available in a group setting.”• - Josh Hilgers, President of Health Partners America

Defined ContributionOver the next decade, we are likely to see a shift in health insurance in the U.S.: So-called defined-contribution plans will gradually take over the market, shifting the residual risk of incurring high health-care costs from employers to workers.

- Peter Orzag, Former Director of the Office of Management and Budget

Defined ContributionLiazon Secures Inks $18.2m for Expansion and New Products

April 25, 2012

Insurers invest a majority stake in Minneapolis-based Bloom Health to expand choice and flexibility of employers’ and employees’ insurance options

Sept. 20, 2011

Defined Contribution1. Employers will step put of the role of

selecting and purchasing health coverage for their employees.

2. Employers will establish a plan to provide a fixed amount of tax-free dollars to employees so they can purchase their own individual health plans.

3. Private Exchanges will become the marketplace where employees go to purchase health insurance.

Defined ContributionTo brokers this means:

1. No more group sales

2. Need to learn to sell one-to-many

3. Needed: A new Breed of Broker

Success Success in the individual market is based on providing affordable products and services via offering customers the chance to select the product feature tradeoffs that best match their anticipated healthcare needs with their pocketbooks.

- Deloitte

Success The likeliest path to meet this set of requirements is with process and product configuration innovations at enrollment, supported by customer management, informatics and segmentation that result in new levels of customer intimacy.

- Deloitte

Success All of these innovations are likely to be built on new information technology platforms.

- Deloitte

What’s a broker to do?

First, don’t panic.

Role for Brokers

Final HHS Rules Give States Wide Latitude on Agents and Brokers in Exchanges

Role for Brokers

Final health insurance exchange regulations released by the Obama administration give states wide latitude in carving out a role for agents and brokers.

Role for Brokers

Final health insurance exchange regulations released by the Obama administration give states wide latitude in carving out a role for agents and brokers.

What’s a broker to do?

1.Assess where you are as a business (SWOT)

a) Who are your clients today?b) How likely are they to move to defined a

contribution plan or offer a private exchange?c) If they do, how can you add value?

What’s a broker to do?

2. Assess your current resources

a) Do you have a potential private exchange partner/defined contribution partner?

b) What is happening in your state? Who are the players?

c) Should you build/buy your own private exchange technology platform?

d) Do you have the training and skills necessary to even discuss these options with your clients?

What’s a broker to do?

3. What else?

a) Do you have the resources within your organization to affect many one-to-one sales? (Trained enrollers, call center, website, etc.)

b) Do you have access to voluntary products that can generate additional revenue from each sale?

c) Do you have a CRM system to help manage and grow individual customer relationships?

What’s a broker to do?

4. Study the Disruptors

a) Identify and study the “disruptors”. They may start out with inferior solutions aimed at economically unattractive segments of the market, but they will eventually get it right.

What’s a broker to do?

5. Want to Keep Selling Group?

a) Learn about self-funding

b) Partner with a good TPA

Thank you.