Emerging trends for pooled group advisers present new challenges
Employee benefits is an area where the status quo doesn’t last long. The market, social, economic and legislative context in which benefits are designed and delivered is constantly evolving. Those who work in this field are never bored; in fact, we seem to be the kind of people who enjoy the excitement of what’s next and the challenge of rising to the occasion.
Benefits and HR pros in the pooled group space can have an even wilder ride, as they deal with an additional layer of challenges that their colleagues in the corporate world never face.
Pooled groups, including trusts and associations, represent multiple employers that can have different goals, interests, price pressures and workforce profiles, among other things. The job of the pool is to meet these varying needs comprehensively to maintain a healthy, well-run collective that enables their member groups to offer high-value benefits at an appropriate cost. Pools serve not only the end-user (the employee) but also administrators from each participating member group. Even with no outside pressures this isn’t always easy.
However, some emerging trends may present new challenges to the stalwart pros who run pooled groups. The question for the pooled group community is: Are these current and potential trends causing you concern?
1 Ongoing challenge: Pilfering of groups. Employers that represent “good risk” are always in demand, creating competition for those groups. This trend has been gathering steam for some time, and we hear from group managers that pressure has mounted around both maintaining and attracting participating employers. Pooled group managers are focusing more on marketing as well as client management and retention techniques, along with a laser focus on ensuring they offer state-of-market service and delivery for all key stakeholders.
2 Emerging challenge: Group size impacted by COVID-19. This is a moment-in-time challenge that no one has dealt with before. As the U.S. economy shed millions of jobs very quickly, employer groups shrank because of layoffs and terminations. With a pool, the bigger the population of employees, the more a pool is able to manage risk and cost across its member & employer base. When employee population declines it can have a serious downstream impact on the group’s underwriting, potentially damaging the health of the pool. The hope is that group size bounces back as quickly as possible. However, with smaller numbers of employees, cost pressures may increase, further fueling challenge #1.
3 (Potential) Longer-term challenge: Healthcare plan innovations. On January 1, 2020, a new type of Health Reimbursement Arrangement became available—the Individual Coverage HRA. These HRAs allow employers to set up and fund accounts employees use to purchase their own healthcare insurance. One of the earmarks of the ICHRA is that it enables employers to create different classes of employees, making it possible to extend coverage to previously ineligible non-traditional employees like part-timers or contractors. However, it’s also possible to replace traditional group coverage with ICHRAs—effectively the polar opposite of the purpose of a pooled group.
For as long as there have been pooled groups, managers have faced challenges in maintaining the volume and health of the pool. It’s an occupational reality. Members sometimes turn over, especially when they are being actively marketed to by brokers, carriers, and other pools. The best and strongest will always survive and thrive, so pools need to focus on enhancing their relationships with member groups, their level of service and performance. That will help insulate against increasing competition.
Population fluctuations related to COVID-19 should not represent a long-term threat. However, pools should use this opportunity to take stock of their COBRA and other offboarding capabilities. While another pandemic will hopefully not be on the horizon, some pools found their benefits termination processes that worked well for “normal” offboarding failed the stress test of wide-spread layoffs and furloughs.
ICHRAs could be different. Because ICHRAs are a new development, uptake is just beginning and it’s impossible to predict when or if they will begin to supplant traditional group insurance coverage. Even if they prove popular among corporate employers, ICHRAs may not appeal to the types of groups that typically join pools.
Plus, pools provide more than just healthcare coverage, including other types of benefits as well as customer service for both administrators and employees. Those would be challenging for small groups to connect with outside the pool.
ICHRAs are a trend pooled groups should be aware of and monitor to keep a pulse on adoption outside the pooled community.