Divorce lawyers will tell you: Lack of trust and
Most benefit advisers agree that
One sign is that they use measurement methodology and evaluations that do not account for new market conditions. Another is that they confine relationships to a close group of "vetted partners" rather than utilize the full extent of the market. Others include underutilizing advanced technology and failing to engage in self-education.
The rise of the alternative funding marketplace provides employers with real-world examples that there is a better way to handle employee benefits. Below, we've identified five scenarios wherein old-school benefit brokers are being dumped by employer clients.
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1. High cost of fully insured plans continues to escalate
Today's employers are realizing that from their perspective, a fully insured plan is a raw deal. The employer pays a fixed premium amount, regardless of the amount of healthcare services they use, while the insurance company assumes all financial risk and keeps unused premiums. Ultimately, the insurance company comes away from the fully insured arrangement with far more than the true cost of medical and Rx claims. Old-school brokers who peddle fully insured plans are experiencing pushback as more employers realize that fully insured plans tend to cost them 10% to 15% more than self-funded plans – a percentage expected to rise.
A convergence of factors, including
2. Increased awareness of the benefits of alternative funding among employers
For employers fed up with fully insured health plans, it's difficult to ignore the noise their mass migration to alternative funding solutions is making across our industry. In fact, 72% of employers are actively using or considering adopting an alternative funded plan. The past five years have seen rapid growth in rates of captive insurance participation and the percentage of employers adopting level funded plans
Employers that have transitioned to alternative funded plans are saving on healthcare costs, gaining greater control over their plans and gleaning insight into claims for more informed decision-making. They are satisfied with alternative funding solutions, and raving about them at industry conferences and in social media posts. We can't blame fully insured employers for asking peers to recommend a forward-thinking benefit adviser who will help them gain entry into the promising world of alternative funding.
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3. Rise of the accountable captive
Alternative funding solutions are not just becoming more popular, they are growing more sophisticated. Take captives, for example. Captives are a common choice for employers dipping their toe into alternative funding. In a captive, the employer pools risk with like-minded employers to increase their power. In addition to efficient risk management, employers in captives enjoy enhanced claims safeguards and the potential to keep unused premiums.
Captives come with many benefits, but most contribute to adverse risk retention by incentivizing all employers to remain in the captive, regardless of whether their actions support the captive's sustainability. This can inspire accountable captive members (also known as 'good risk') to leave the captive, continuing the cycle of adverse risk retention. A savvy benefit adviser can help their employer client sift through the wealth of captive options to find a captive model that promotes accountable member behavior. Progressive captives reward accountable employer behavior with incentives such as renewal rates, the distribution of underwriting surpluses and favorable contractual terms. Good risk is encouraged to remain in the captive and unmitigated addressable and avoidable risk is pushed out, solving for adverse risk retention.
4. Innovative advisers are more inclined to leverage time-saving technology
In addition to knowing what to look for in a captive insurance model, a proactive benefit adviser is more likely to be aware of tools that can help streamline the request-for-proposal (RFP) submission process and connect employer clients with the health plan that matches their needs. For example, he or she might know that they can submit a single RFP for any fully insured, level-funded or self-funded group to a progressive alternative funding marketplace, and they'll receive a recommended alternative funding solution based on sophisticated risk matching less than three days later.
Aligning with a benefit adviser who leverages tools like these is particularly helpful as the world of alternative funding evolves. Case in point: a small but expanding number of progressive carriers are employing artificial intelligence underwriting tools focused on employers and even doing away with individual health questionnaires. Sometimes called "app-less" level-funded products, these integrated plans can be very valuable for employers. However, submitting an RFP often requires benefit advisers to dedicate hours to carefully crafting individual RFPs for each carrier's portal. With decline-to-quote rates for app-less level-funded products an estimated two to three times higher than for traditional markets, automated processes can save benefit advisers hours of work.
5. Fiduciary duty is top of mind
Ever look for a sign that you should dump someone? Employers tied to old-school brokers don't have to look much further than recent news headlines. In 2024, Johnson & Johnson, the Mayo Clinic and Wells Fargo were accused in class-action lawsuits of failing to manage their health insurance benefits in employees' best interest, a violation of the Employee Retirement Income Security Act. The lawsuits underscore the importance of employers choosing a trustworthy and knowledgeable benefit adviser – someone not motivated by greed who will connect the employer, and by extension their employees, with quality health services and a network of reputable vendors.
Dumping an old-school broker for a progressive and sophisticated benefit adviser is not just a step toward cost savings; it's a move that can protect an employer from devastating legal repercussions and reputational damage. Employers need a benefit adviser who operates ethically and honors his or her fiduciary duty to reasonably avoid negligence when performing their role responsibilities.
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How to keep up your game
Amid escalating costs, closer legal scrutiny and increased awareness of and accessibility to alternative funding solutions, employers are dumping their old-school brokers for savvy, forward-thinking replacements who can introduce them to better employee health plan options. For benefit advisers interested in remaining competitive in a shifting marketplace, becoming the ideal has never been more attainable.
Benefit advisers should look to develop or align with a progressive alternative funding marketplace that grants them access to education, legal support and integrated product configurations, followed by support with implementation to ongoing management. For example, the marketplace might offer training courses so they can get up to speed on alternative funding and a comprehensive suite of customizable sales collateral to help them communicate the value of various alternative funding options to employer clients. The marketplace also might offer streamlined RFP submission and sophisticated risk matching to ensure the adviser pairs clients with the best possible solution for their needs. When partnering with an alternative funding marketplace, advisers can rest assured that they are connecting employers with reputable solutions that have been thoroughly vetted.
The market is about to see an influx of employers looking for more from their health plan and their benefit adviser. Ethical advisers who educate themselves on the unique appeal and opportunities of the evolving world of alternative funding will be well-positioned to make quality connections.
