Category Archives: Agency Operations

Is Your Benefits Firm Built to Handle a Benefits Bear Market?


I often reference a quote from Mark Cuban that says, “Everyone’s a genius in a bull market.” When you think about the benefits business it has really been a bull market since I have been in the business, which is 30 years now. Everything seems to be going up, up, up, regardless of the quality of the product or service. Benefits brokers have benefited significantly, getting medical inflation raises for years. Admittedly they have also been adding more services, often at no cost. But this is behavior you see in a bull market. It is easy when the math is in your favor. However, do we even know what a benefits firm would look like in a bear market?

I know what a benefits bull market looks like. Companies good and bad are thriving. Money is spent fairly recklessly. Wages are often above the averages for similar jobs in other industries. There are trips and more trips. Everything is great. Those are the good parts.

Bull markets can also have some negative effects. Weaknesses in one’s business or value proposition aren’t easily recognized. Inefficiency is hidden. Complacency can creep into the organization. There can be a failure to recognize competitive threats. Common business practices aren’t practiced. And a belief that one’s world will never change can blind one’s vision of the future or reality.

But what does a bear market in benefits look like? What can cause a bear market? Commission compression? A move to fee for service? Government intervention including changes in tax laws? Obamacare collapsing? The budget deficit getting higher with rising health care costs being a big contributor? The MLR? Hospitals getting squeezed? Higher deductibles and employee contributions? All these factors appear to be present right now, favoring a need for change. Could it signal a coming bear market?

Warren Buffet loves bear markets because he thinks there are deals to be made. And it is bear markets that allow the cream to rise to the top. Bear markets eliminate a lot of competition. But do we really know who the superstars are? Can we tell the real genius from the bull market only genius? And what does a bear market benefits firm look like? Without really having been in a bear market I am not sure what one really looks like.

If a benefits bear market hits there will be opportunities. Opportunities for those who have anticipated changes; for those who built a model to sustain over the long haul; for firms whose infrastructure can adapt quickly to change; for those who have worked hard to expand their non-medical revenue reducing some business risk; for those who have differentiated their value proposition not by giving things away but by delivering products or services of value that an employer would pay for. Think about that one for a second. Of all those “value added services” a firm provides, what would an employer pay for and what would they pay? Would they pay anything at all?

Much like my financial advisor I don’t have that crystal ball. And it is hard to run a business when things you don’t have any control over can cause you chaos overnight. But hoping the benefits world doesn’t change isn’t a strategy. You also can’t put your head in the sand either. Recognizing business threats is a critical component of any business. Even Apple assesses business threats. So don’t let the first benefits bear market get you down. Some good planning can reap great rewards, even when the world changes. Or maybe we will have a bull market forever. Place your bets!

Webinar Invite – Growing Your Benefits Business by Leaps and Bounds


How does a broker go from 5 employees in their benefits firm in 2005 to 60 today without an acquisition? How does another go from 5 to 200 in just 8 years? Or another that generated $40 PEPM in addition to commission on a single account?

In this webinar we will get into the details of how some firms are skyrocketing while others struggle. We will show you the details of what these firms did to generate rapid growth, and show you how you can do the same.

This is a no-holds-barred webinar. If you want me to tell you what I think you are already thinking, then this is not for you. I am going to tell it like it is.

In this webinar we will answer the following:
• What are these brokers doing that is different?
• How they generate up to $20 PEPM above the regular commission?
• Why their model sustains any changes in healthcare reform?
• What is the difference between faking it and making it?
• The 3-year plan to a better future?

This webinar is a culmination of all others we have done. It puts things in a nice neat package and explains things in a different way. If you want to learn this formula, please click here to register.

Register HERE

The dates are September 9,13,and 16th at 12 noon eastern time.

This is for benefits brokers only.

How well do you know your customers?


In today’s environment where information is readily available and leveraging the web and mobile to provide service is an expectation, personalizing that service is also expected. When I buy an airline ticket I am asked how I would like to be informed of any changes (email, text, phone call). When I check into my preferred hotel chain they have my preferences and personalize my service. For some reason this type of personalized service hasn’t become the standard in the benefits business, or at least to the level of other industries.

I often reference the Wellness Newsletter I got from my broker giving me tips about pre-natal care. As a 54-year-old male this is not relevant and the email itself not only did not address my needs but in some way reflects poorly on my broker. It made me think he is really not that organized. Not only was the newsletter not relevant to me, but what my broker also does not know is that I already subscribe to a Wellness Newsletter directly from another online company. This newsletter sends me the information that relates specifically to someone my gender and age and is delivered at the frequency I want in the method that I want. I did not need a Wellness Newsletter.

On another occasion a broker I know provided an online HR Library to the HR person of an employer where the outcome was not what was expected. This HR person was on a committee for a company that also provided HR content on the web and she found many flaws in the product the broker delivered. It started with good intentions, but the outcome was not what the broker intended. Should the broker have known the HR person was on such a committee?

I can go on and on. People putting in enrollment systems to clients that already owned one but didn’t know it? Building benefit websites for employers that already had a regularly used intranet. I am not just pointing the finger here at others. In my own organization we struggle with the same issues when serving our clients.

All this reminds me of some stats I saw from a book published by Jack McKean titled, “Information Masters: Secrets of the Customer Race.” In the book he cites the following:

“Only 2% of the knowledge that organizations have about their customers is actually used.”

“Only 5% of the body of knowledge about a client is available digitally and indeed only 20% of the knowledge is recorded at all.”

What is amazing is that this book was published in 1999. The stats may not be the same today but it in many cases it is close to the truth. And of course this is not reflective of you and me. We are better than this.

It takes a lot of work to create a personalized service experience. You need technology to store and manage the data. You need a methodology to gather information and keep it current. You need processes in place to automate certain functions. You need people either on staff or through an outside resource to plan and execute such a strategy. It is a herculean effort.

In today’s environment most brokers provide service to the employer which could include HR, finance or the business owner. This has its own challenges but at least gathering information to personalize the service for a few people is somewhat manageable. Imagine the effort if we move to a consumer centric world where the services need to be personalized for the employee. What is the broker’s role in this environment? What would be the cost in time, technology, and resources, to deliver the experience consumers expect in today’s world.

From the employer’s perspective they have the same challenges. The expectations of how they are going to support their employees is changing. The needs of a 26 year-old with significant college debt are much different from a middle-aged employee preparing for retirement who may have health issues. These employers may not have the resources, technology, or capital to move their HR to this new level.

Many brokers say they provide such services but I have not seen it. Many do provide great service but not in the personalized way I am talking about. Relative to their peers in the current environment they may superior. But what happens when someone comes along and raises the bar? This happens often in many industries.

As someone in the technology consulting business I am seeing firms behind the scenes beginning to develop new models of service. Models that don’t exist today in the benefits world that can raise the bar. And it can raise it in a way that gives these firms a distinct competitive advantage that is not easily duplicated. Like providing benefits advice to a millennial on a Saturday afternoon via video conferencing. Some of these firms are traditional brokers but others are coming in from outside the industry. Those outside the industry love disrupting current business models. The health care business, and by extension the benefits industry, is a primary target because the capital running through it is so high it invites disruption. People want a piece of a very large pie.

Many brokers rely on relationships and are pretty sure their clients are loyal. I once saw a statistic that said that most companies think about 80% of their clients would be loyal. When employers were asked how loyal they were to their vendors the answer was 20%. This is a huge disconnect between perception and reality. One way a relationship can be severed is when a competitor brings in a better idea or better service. Companies like Zenefits displaced $63 million in commission business from many brokers with loyal customers. One told me he lost a 20-year relationship to Zenefits. So new ideas can be powerful.

I am not going to pretend to have all the answers. And I certainly look in the mirror when writing this because I am somewhat talking to myself too. But I have seen technology and models that can start the process to personalizing service for employers and employees. I have spoken to some companies that have started the process. I have seen the revenue models too. I don’t know when this “tipping point” will happen, but it will, because it is possible and the market wants it. And the opportunity is there for those who want to provide such services, but one must start. So my advice is to start. And start today because it is a big challenge.

Are You Too Comfortable to Change?


I don’t hide the fact that I think the benefits world is going to change. And when giving presentations I often refer to a quote by Steve Case from his book the Third Wave that states “Incumbents often fail because they underestimate the speed at which the future is approaching.” But something became evident today when talking to a broker about some of the changes going on in the industry when I realized that he simply did not want to change. More likely he didn’t want to take risks. Not everyone is a risk taker. In fact, very few take big risks.

I have heard at least once, or maybe a hundred times, that benefits firms are struggling with organic growth. The thing about the benefits business is that it is getting commoditized. I hear it all the time. I don’t always hear it from the business owners or the producers living off of a block of business and referrals, but I do hear it from the young producers who are dialing for dollars and knocking on doors. They are begging for differentiators but often the owners are living in a different world. And from the owners’ seat many don’t see the different challenges between what the veterans and what the rookies are facing as it relates to the competitive market.

To be competitive in today’s world it is important to change. To have a unique value proposition that is not easily duplicated is important. But change often requires taking risks. As Mark Zuckerberg says, “In a world that is changing really quickly, the only strategy that is guaranteed to fail is not taking risks.”

The thing is few want to take risks. I have pointed out new competitive threats many times to brokers who did not act until they lost business. In fact, over 50% of our new clients lose business after hearing about a competitive threat and not taking action. Losing business is a pretty big motivator. Yet most won’t act until they feel the pain.

I had one broker tell me his clients or prospects didn’t want one of the new HR technologies. I couldn’t imagine every firm in his market thinking the same thing. Anyways, what I didn’t tell him was that the reason I was calling him was because I was working with an employer that told me she decided not to choose him as a broker because of his technology strategy. Brokers often know why they lose clients but often don’t know why they lose prospects, which was the case here. Do you know why you lose prospects?

I have had people read my articles and ridicule me because of the message. Often I am just pointing out that there are some out there who say the benefits business is going to change. Zenefits, Gusto, and Namely are changing it. The CEO of Aetna says it is going to change. The government may also want it to change. All are a threat to the status quo. Sometimes I think that people don’t want to know these things. It is like having a lump in your side and you don’t want to check it out because you may think something major is wrong. If you ignore it, it will go away. Well, I don’t think so.

Change doesn’t happen because you wake up one day and say “I’ve changed”. And change doesn’t happen because you stock your shelves with a few more products or services that are easily attained by anyone. I see many people “pretending” to change but not really changing. And I say, “not really” because the changes I imagine brokers need to make aren’t easy. Many brokers are choosing “easy”, thinking they have made big changes. If the change doesn’t make you feel uneasy. If it doesn’t appear to be very risky, then many will do it, and they do. Then you are not unique.

Personally I think there are big opportunities in the benefits business. I would say more so that I think there are big opportunities in the human capital management business of which the benefits is a piece. But to capitalize on those opportunities one must change. And this change requires taking risk. Big risks.

So you can stock your shelves with new toys. You can do all the sales training in the world.  But what if insurance commissions were cut in half on January 1st?  What if the government made individually based health insurance tax deductible? What if Zenefits, Gusto, Namely, and Paychex are right and employers will switch brokers for HR and Payroll technology and services? That would require the type of change I am talking about. And if some of these things happen and you “underestimate the speed at which change is approaching” could you survive?

I don’t want to over-generalize but I think we have an industry where taking big risks isn’t the norm. Protecting the status quo is. But there are big opportunities for those that really want to take some risks and Challenge the status quo. Feel a little uncomfortable. Work a little harder. And have a lot of fun along the way.

I am going to finish by saying our new business, ProHCM is all about challenging the status quo. It is taking a big risk. It is different, very different. We are betting on and preparing for a future that may be approaching faster than most anticipate. I am looking for the blue oceans. So I will finish with a quote from another FaceBook employee, the COO, Sheryl Sandberg, “If you’re offered a seat on a rocket ship, don’t ask what seat! Just get on.” It could be fun.

Two health care stories – Which do you believe?


As a way to keep my knowledge of the benefits business current, I read many articles, attend seminars, webinars, and industry conferences, and read all the press releases and announcements. My Google Alerts sends me the news I want every day. One major area of interest is how the market is addressing the rising cost of health care. As I had written in a recent blog my company just got a 16% increase and I think we are reaching the tipping point. I am looking for the business models that can control the cost of health care.

What I have discovered is that there are two different narratives playing out in the market. One narrative represents around 95% of all the “noise” and the other just 5%. The 95%er’s consume the publications and have speaking engagements at all the conferences. They put out press releases almost daily and make wild claims as to how their businesses are growing. Yet I find myself believing the 5%er’s. Their message appeals to my logic and understanding of the business. I think there is hope that health care costs will come under control. However, their message is getting drowned out by the noise created by the 95%er’s which could lead to a false perception of where the health care market is going.

In sports there is a saying that “practice makes perfect”. Well that works if you are practicing the right things. If you practice doing something the wrong way you will master the wrong way. In this healthcare debate, discussion, or whatever you want to call it, if you spend your time listening to and believing the pretenders version of where they think the health care business is going you may actually change your business and start practicing the wrong thing. Who you listen to or believe may matter.

There is a better more believable story developing. One that has a chance of controlling health care costs. One that properly places incentives so that providing better care while reducing costs is rewarded. One that as a consumer myself I would find as a more attractive model than most of the current health insurance/health care models.

When people ask me what I think. I don’t sugarcoat things I simply say “I think it is a bad idea.” Don’t waste your time. Often they don’t want to hear this if they have an agenda. So here is what I think.

• Private Exchanges – Bad idea – 30-year old idea – that does not control health care costs.
• Self-insured for smaller and smaller groups – squeezes the balloon – temporary solution that does not control costs.
• Wellness Programs – Nice try – won’t control costs – may make people feel better – could improve productivity.
• Wellness Programs where you charge employees more who don’t take biometric tests – bad idea – employees will rebel. They should rebel.
• HSA’s – Needed but don’t not control costs.
• Large employers collaborating to negotiate with providers – Why? Is this what employers should be doing? Another squeezing of the balloon. What about the rest of us?
• Decision Support Tools – Help you choose the best high cost product that will continue to go up.
• Captives – Simply another risk pool where costs will still go up, up, up in time.
• ObamaCare – A joke. More cost shifting in the end. That’s why my costs went up 16%, again.

All these tactics simply squeeze the balloon. You can push the numbers around but the numbers only get bigger not smaller. Anyone who understands medical underwriting or actuary knows this is the case.

So who should you be listening to? Aetna and their CEO Mark Bertolini; Kaiser; Partners Healthcare; Intermountain Healthcare; University of Pittsburg Medical Center; Evolent Health; Apple. I am sure there are many more. These firms are painting a much different picture of the future of healthcare in America. However, I don’t see them at benefits conferences. They don’t publish in benefits magazines. They don’t make grand claims of having some new invention. They are simply trying to figure out a way to improve the health care system in America. What they have in common is they see getting the providers in the risk business as the solution. This moves the risk from employers and traditional insurers to the providers. They may not all be perfect but they are trying to bend the cost curve.

These two narratives are playing out. One continues to promote fee for service. The other promotes capitation to a much larger degree. I don’t know who will win in the end, because these stories are still being told. But I know what makes sense to me.

It’s Not About the Technology – Brokers are Getting Out-Sold


I have written several articles on “how to be different” and how benefits brokers are “stocking their shelves” with technology solutions (to be different). A more recent article was about how to build an enduring business which does require having a relevant value proposition that would be valuable even in 5 or 10 years into the future. In spite of all the new tools and resources that brokers are stocking their shelves with and their efforts to be different many are still losing business to other firms that often have inferior solutions, at least on paper. What has really astounded me is that many benefits brokers are simply being out-marketed and out-sold. I am surprised because most brokers believe themselves to be pretty good sales people. For the most part, I agree with them. However, I believe the problem is much deeper in most organizations, but this is a solvable problem.

The reason I am writing this article is because I have seen this too often. I have seen benefits firms with superior capabilities and even technology lose to companies like Zenefits because the sales person did not have the training to deliver the right message. Or in many cases the benefits firm did not deliver any message to their clients at all about some of their capabilities. How often does this happen? It is not the sales persons fault. Their firm loaded their company up with tools and resources but these became somewhat “trinkets” thrown on top of a fairly weak foundation. The success of many firms to date often has been the result of strong sales people but the world has changed. Old messages with little marketing and no clear vision will not win against focused organizations with a unique value proposition, a strong brand promise, and well trained sales people.

Whenever I meet a new broker I often ask the question about how they are unique. It is amazing how often I either don’t get an answer or the answer is “we provide great service”. I remind everyone that great service is rarely a measurable differentiator. And I guess if everyone says that great service is their differentiator then how can one be different when everyone says the same thing. It reminds me of the Yogi Berra quote where he said, “nobody goes there anymore because it’s too crowded.” Everyone provides great service and that’s how their different? Sounds like Yogi to me.

The problem I am seeing is not with sales. It is in marketing which includes brand building. It even starts with a lack of vision. And all this is combined with a lack a planning. How can one plan when there is no clear vision and brand promise. Even when there is a brand or vision that vision is rarely “lived” throughout an organization.

My best evidence of this was seen when I was working with a producer from a national benefits firm who showed me a brochure she was using. I asked her who wrote the brochure and she said she did. She said she had no marketing in her office and nothing came from corporate so marketing was left up to her. Imagine a national firm where all the producers had to create their own materials? What I am finding is that this is common.

When I got into the benefits technology business in 1998 I was the CEO of a dotcom company that raised significant capital. One of the best exercises I went through was with my marketing firm. Our whole campaign started with one simple question which lead to one simple word. That question was “If you were to give a sales presentation or drop off some brochure to a prospect what one word would you want them to use to describe your company two weeks after the presentation? That word or it could be a few words needs to “live” within your organization. It needs to emanate through your organization and everything you do.

OK, so what is the answer? As I mentioned in my recent webinar most brokers are looking on the outside for answers when the answers are the inside. It starts with a re-evaluation of your vision. As Simon Sinek would say it starts with “Why”. It really requires that one understands their purpose for doing what they are doing. Does everyone in your organization agree with your Why? Then one must build from there. The building of the brand and then the marketing pieces, website, and whatever it is that you may bring to a prospect. It will then require educating your team and training the sales people on how to deliver your vision. Your Why!

I believe most firms have not done this. At least I have seen little evidence of this. Most have been looking to the outside for their differences; for their competitive advantage. They attend every sales presentation from some technology vendor or other vendor that promises to deliver the answer to success. But the competitive advantage people are looking for is often sitting under their own roof. Yet, most can’t find it, because they are looking in the wrong place. As a result clients and sales are lost. And they spend more money, on more trinkets, wondering whether or not they have found the answer.

This change requires hard work. It takes an honest look at one’s business to see if there is an understanding of one’s Why. It does no good to lie to one-self on this one. Or maybe over time firms have wandered far away from their Why. So the whole organization does not act as one unit but as a bunch of individuals trying to figure things out themselves. So I ask you a few questions. How is your firm unique? What is your vision? Your Why? And does everyone in your organization live this? Good answers to these questions deliver great results. Bad answers are the reason most companies are out-marketed and out-sold.

Fee for Service for Benefits Brokers – It Changes Everything – And It’s Coming


Every now and then I see an article about the benefits brokerage business moving to a fee for service model. There are always a few comments from brokers who say they have done so and everyone should go fee for service. They make it sound easy. I would contend that moving to a fee for service business model is not nearly as easy as anyone may make it sound. I would also claim that those brokers operating in a fee for service model today may have somewhat of a false perception of the market. My theory, if I can call it that, is that while there may be some fee for service business in the market there still is no real price competition for benefits broker services. When price competition enters the market then we will have an industry that will then need to undergo dramatic changes.

Let me first address my theory about the lack of price competition. The benefits business, for the most part, pays brokers a commission. Regardless of the quality of the service two competing brokers will get the same compensation. It is an unusual business environment. Now some brokers have gone to a fee for service model. The false reality for those brokers, in some cases (I don’t want to over-generalize) is that those fees are often compared to what a broker is making on a commission basis. So one broker’s fees are not compared to another broker’s fees. The fees are compared to commission. Therefore price competition isn’t really in play.

There are markets (large group in some states) where fee for service is becoming more common. Even in those markets things are not mature. What I am basically saying is that employers are still comparing what the brokers are charging on a fee basis to what they were paying in a commission world. That commission world is still a recent memory and the fee they are now paying is often less than the commission they were previously paying. So things aren’t that bad as the fees are at least going in the right direction, from their perspective. This will change in time.

There are examples where fee for service have played out in a true competitive way. In NC the market went fee for service for large group a few years ago and in one quote to a municipality the incumbent broker quoted $25 PEPM and competitive prices came in at $9, $5, $2.50, and $2 for what was being presented as the exact same service. The incumbent was not even asked to be a finalist. This was true price competition and the market drove down prices significantly.

The reason I am writing this is because I think with Aetna moving to a fee for service model for their small group, and now purchasing Humana (if approved), we may see a much faster move to a fee for service model for all medical insurance sales. Another catalyst may be the upcoming rate battles between the insurance carriers and the Exchanges for the 2016 rates. What I am reading is that the carriers in many states are requesting rate increases from 15% – 35%. The federal and state exchanges are going to fight these rate increase requests and one casualty in this battle may be broker commissions. Carriers, to get their prices down, may move to the Aetna model of having the employers sign-off on how much they want to pay their broker. If this happens then you will have rapid price competition, something the benefits business has really never seen in the past.

In the comment section of one of the recent articles about the Aetna move to fee for service on the Employee Benefit Advisors website one writer said the following:

“Personally I believe that good agents who deliver real value should be cheering from the rafters. It is easy to talk about how much you are worth as an agent when the client has no idea what you are getting paid and no choice. Personally I hope that all medical carriers make this move. If they do I will get back into the group medical business.”

While this may sound noble the reality is that even in markets where people do deliver valuable services the difference in quality is hard to measure. Even those that provide good service will see margins go down and would not be cheering from the rafters. Price competition will impact all, both good and bad.

Most brokers have not had to operate their businesses with price competition. Price competition, in most instances, results in lower margins and thus lower profits. If margins are lower then the whole way benefits brokers operate their businesses may have to change. It will impact their staffing, the services they provide, internal operational practices and even incomes. The sales and marketing process will also change dramatically. Having to battle price competition is not a skill most benefit firms have developed.

I think there is a high probability that price competition will enter the benefits business and it will happen so fast most brokers will not be prepared or equipped to respond. It is best to anticipate this potential major business shift now. I have written a lengthy white paper titled, “A Path to the Future of the Benefits Business” that outlines the plan to compete in this new benefits environment. Benefits brokers may request this by sending me an email at jmarkland@hrtadvisors.com.