At this point we are approaching the end of the year, and many of this year's key renewals have been handled. Undoubtedly your time has been consumed with all the day-to-day tactical activities required to manage your business and to retain your clients. And in all likelihood you are beginning to get used to the potential impact of health care reform and whatever the "new normal" will be.
The vast majority of benefit advisers, however, still seem to be in denial. Yes, they have acknowledged that the enabling (or perhaps "disabling") legislation has been enacted. But they continue to act like it will have no impact on their clients' decisionmaking or on their business operations.
Do you believe that? Do you think this is the time to play the ostrich game and continue to act like it's business as usual? It's time to act like your business life depends upon it ... because it does!
Here's what I tell my clients: Plan for the worst and hope for the best.
What exactly does that mean? Assume that group health commissions will decrease in the next 18 months. What will they be? Well, we don't have a crystal ball, but in several states, group health commissions were 2% prior to the enactment of the health care reform leguislation. So that might be a good working assumption for business planning purposes.
Can you run your business on two points of compensation? Well you just might have to get used to it. And it's better to plan for it now, as unpalatable as that might be, than to be shocked into reality when you get that fateful announcement letter.
It's better to be pragmatic and plan for this outcome instead of wishing and hoping and praying - only to find that within 30 days your revenues have dropped by 50% or more.
Still not convinced that a revenue decline of this magnitude is possible? Well, consider that with the advent of insurance exchanges, individuals and employers will be able to purchase health insurance online and there will likely be no commission payable on that coverage. That makes 2% sound decent, doesn't it?
Of course, you will have the option of continuing to serve as your clients' broker and handle all their service issues for no compensation.
And did we mention that either a government-run health care exchange or a quasi-governmental agency will be handling claims? If you think Medicare and Medicaid are customer-focused and render great service, you're going to love how an exchange will function.
Can we agree, then, that your role is going to change? It's not going to be about accessing products. It never was, but it definitely will not be going forward.
Your clients need your expertise, advice and counsel. They are confused and anxious, and rightfully so. It's difficult to comprehend all the mandates and the ramifications when the administrative guidelines have yet to be published. Various requirements established by the legislation will be challenged in the courts. And selected provisions in the legislation could be amended or repealed. The bottom line is that we will all be adrift on a sea of uncertainty for the next two to three years.
As a result, there isn't an employer out there that's not willing to talk to an adviser who seems to have some information or some process for coping with all this change. And that includes every one of your clients as well!
So do I have your attention yet?
Denial is not going to change the certainty of the change that lies ahead. So where do we go from here?
For forward-thinking benefit advisers, all this uncertainty creates enormous opportunity - if they are prepared to seize it. Once you can wrap your mind around the possibility that what I have described is in fact probable, you will realize that you must take action, and you must take it now.
You need to evaluate your current business model and consider the possibility that you may not be paid commissions on group health coverage much longer.
So how can you monetize the client relationships that you already have? You have already incurred the client acquisition expense, so how can you generate revenues going forward?
One possibility is to begin to migrate toward a consultancy model in which you are paid a fee instead of a commission. It may not be one annual fee per client either. More than likely it will be a per-employee, per-month fee for advice, counsel, service, advocacy, etc. While it may vary by state, the range we hear being discussed most frequently is $18-$22 PEPM. Let me know if you are hearing anything different than this.
So where should you start as you consider transitioning your practice to a consultancy model? Well, one thing you can do right now is to engage all your clients in a dialogue from a strategic perspective, rather than remaining on the tactical level.
What exactly does that mean? Start by a leading a strategic discussion about what your clients want their benefits programs to look like in the future, and which elements are most important to them and their employees. Ask open-ended questions about what they want to accomplish with their benefits programs over the next three to five years. You can lead this process and thereby gain more control over your client relationships.
Notice that I'm not talking about plan design, products, vendor selection, specific technology solutions, etc. That will come later. Rather, I'm advocating that you utilize a needs-analysis approach. This process will culminate in a written document that you can help to create for your client that will provide direction for all benefits-related decisions. If you need help, contact us for further guidance.
And all those tactical decisions will be based on the individual client-specific needs that you uncover during your or strategic planning - or "discovery" - sessions. After all, if you don't know where you are going, any road will take you there. By creating a "road map," however, you will be articulating each client's important issues and strategic requirements for their benefit program, including their budgetary requirements and contingency plans.
Creating your future role
I realize that for many of you, this is taking you way outside your comfort zone. But going out of business won't feel so comfortable either. With so much uncertainty, your clients need your expert advice and counsel now more than ever before. They need a trusted adviser.
You can fulfill that role if you utilize this approach. You need to have a process that you can communicate to your clients and prospective clients that will instill confidence and that will ultimately build consensus within their management team.
The beauty of this is that you can also create a new revenue stream in the process, by charging for facilitating the strategic planning session and drafting their benefits strategic plan. And you will be writing yourself into their script for the next three to five years. Now that's a winning strategy.
Kwicien is managing partner at Baltimore-based Daymark Advisors. He can be reached at email@example.com.
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