Tag Archives: Employee Benefits

What Sport is Your Benefits Business Playing?


NOTE: This was written in 2016 but don’t think I ever published it.

With firms like Fidelity entering the benefits business, others like Zenefits and Gusto raising tens to hundreds of millions of dollars, and the national firms continuing their rapid pace of acquisitions, one must wonder whether the benefits game is changing in a bigger way. Is all this money resulting in an improvement in the business? Are the rules of the game changing? Not only the rules, but one must understand what league they are competing in. And if the rules and competition change can one continue to compete? Is the price to compete greater than many firms can afford?

In business as in sports it is important to understand the rules of the game and what league you are playing in. How you staff your team and how you play the game will change as the rules and competition changes. And as we all know we don’t get to make all the rules and control how the competition plays the game.

To compete in an individual sport like golf you need a single talented person. In basketball, you need anywhere from 7-10 skilled people. In baseball, the number is around 12-15 while in football you need 20-25. At lower levels of competition, you generally have athletes playing more than one position. In high school football, I played quarterback, safety and was the kicker. In college I was the 5th best QB so I became a safety, and my kicking skills were such that nobody would have ever called me a kicker. At the professional level, you have very specialized skills and the number of skilled athletes you need to win is even higher. Some NFL teams even have two kickers, one to kick-off and another to kick field goals. At the professional level, you need 40 – 50 quality players.

In some businesses, all these rules also play out. To compete at the highest levels, you need more players with more specialized skills. Smaller firms have fewer employees often playing multiple positions. I heard this the whole last quarter where people would say, “I’m too busy, call me after the first.” So, their 2017 plans are on hold because they could not handle fourth quarter business while planning their 2017 or even starting their marketing or sales efforts. They are playing baseball with 5 fielders and don’t recognize it. Others however, in larger firms, have staff making their 2017 plans and do have the time to start their marketing and sales efforts. They have 9 players and a bench creating a competitive advantage.

How many benefits brokers wear the hat of the sales person, the finance person, marketing, and even service? In these firms, it is not possible to deliver the results that larger firms can deliver simply because of number of resources and skills needed to compete. Some larger firms also struggle because they have the numbers but because of their structure they don’t properly leverage their size or skills properly. I once spoke to a producer in a national benefits firm creating her own brochures. Certainly, not an effective use of time or skills. I am also quite sure the marketing piece did not have a professional quality.

I always felt that lead generation or telemarketing is a very different skill than sales or benefits consulting, yet in many benefits firms the person who dials for dollars is the same person that makes the sale and then does the consulting. They play the QB, safety, and kicker. And speaking from my own experience, most often not very well.

I started creating a list of all the things a benefits firm can do for themselves, their customers, and the employees of those customers, that would be of value that most brokers simply don’t do or struggle to do. If I were to start a benefits firm from scratch today this list would be my opportunity to be different in the market. At this time my list has 54 items on it. I know many benefits firms across the U.S. yet I can only think of one firm that is executing on many of the items on my list. A few others have the ability to do so but more than likely lack the vision. So, I believe the opportunity still exists.

With new entrants to the market looking to disrupt the current benefits community and driving desire to win I don’t think my 54 items will be a secret forever. The bar will get raised and raised again, in a way that the price to compete is more resources and more specialized skills. This often means more money. It can be equivalent to the difference between playing high school football and professional football. My quarterbacking skills would not have won me any games against the pros.

The benefits game may be changing faster and in more ways than people think or see. Sometimes these things sneak up on you and if it does you could be caught off guard, ill-equipped to respond competitively. There will surely be changes coming to the healthcare market from the Trump administration. These changes may be much different than most anticipate.

This benefits game may no longer be a golf event where a single skilled player can compete. It may not even be a basketball or baseball game where 5 and 9 players are adequate. It may require the army of a professional football team with 53 highly skilled players. The increased competition in sports and business is all around us.

You can choose to compete in places where there is less competition. Many assume this is in the small group market but there are a number of new competitors going after that business too. You can sell your business. You can also choose to build your team. To do so you can raise money and hire a team like Zenefits and Gusto. To do this you will need a unique product or value proposition that can scale. You can grow organically like a Fidelity or a Paychex but that takes capital, risk, and time. Alternatives would be sharing resources with your peers as we do at N4one.

So stop stocking your shelves with new technology tools or looking for that new idea at some conference. The technology vendors want to sell to everyone so you won’t end up with anything unique. And I couldn’t imagine finding some grand idea at a conference. I certainly wouldn’t share our secrets at some conference. Even if you found some grand new idea, getting this idea to market effectively will require resources that many benefits firms don’t have. The place to start is with a vision and a plan. Or you can call us at N4one. We have created a plan. Built an army. And we have 54 things or more we are doing that most others are not.

An Imagined Trump/Bertolini Health Care Discussion


Below is a conversation I imagine that could have happened between President Trump and ex-Aetna CEO Mark Bertolini. I would imagine this is a simplified version of a deeper conversation, but you will get it.

Bertolini – It is great to see you Mr. President.

President Trump – Same here Mark, how are things?

Bertolini – Things are great!

President Trump – Mark, as you know, health care costs are out of control. The costs are adding to our deficit and we will never control spending if we don’t wrap our arms around health care. And the citizens are beginning to really feel the pressure from these increased costs and higher deductibles. I know you have been leading the way on how to transform the health care business. What do you think we can do in the short term and long term to stop this trend?

Bertolini – Well, the number one problem is that employers are in the middle. This is a formula that can’t work and drives up costs. Until the consumer is empowered there is little chance to controlling costs. Also, in today’s environment the insurance companies make more money when people are healthy, and the health care providers make more money when people are sick. We need the health care system to be rewarded to keep people healthy.

Trump – How do we get the employers out of the middle? Everyone says you can’t take my health care away.

Bertolini – You need to eliminate the employer deduction for health insurance. As long as it is more beneficial from a tax perspective to buy through an employer than the employee buying directly, then you will have the employer in the middle. It isn’t even fair that an employer can get a deduction, but an individual can’t. Move the deduction from the employer to the employee and that will start the process to solving this problem.

Trump – The Democrats want Medicare for All. They have also don’t like the lower corporate tax rates. I have been talking to other Republicans and they are willing to trade off keeping the lower corporate tax rates and eliminating the health care deduction at the employer level. The Democrats also don’t like the fact that it is regressive. The higher income earners get a much greater deduction in pure dollars than lower income earners. If we move the deduction to the employee, they want to make it progressive. Someone making $50,000 may get the full deduction but someone making $500,000 may not get any at all. This is a compromise that could work.

Bertolini – We did the deal with CVS because we expect the employer gets out of the middle. As I said, we need to empower the consumer. If you move the deduction to the employee, you will essentially save the individual insurance market overnight. You know that right now employers are doing everything they can to dump bad risk on the individual market and you have an army of insurance brokers assisting in this process.

Trump – Well getting this done in the next year or so is going to be tough. Budget negotiations are brutal.

Bertolini – Is there anything you can do now?

Trump – Well I can work within the current laws and do something through Executive Order. What if I made an individual policy purchased through employer contributions tax deductible? I can do that real fast.

Bertolini – That’s a great start. It will put things in motion to start the focus on the consumer. Many employers want to get out of the health risk business. They would rather give employees money and just let them buy themselves. Insurance companies will start supporting the individual market much more if you do this.

Trump – After the next election we will need to pass a budget, and I think we will have to compromise and move the deduction from employer to employee. Democrats and Republicans are on board with that.

Bertolini – This will save the private health insurance market and empower firms like Aetna/CVS to really start focusing on the consumer. I always believed that the companies that provide some form of health care need to be in the risk business. The incentives need to align with the outcomes you want to get. This will do that and drive down costs.

Trump – Thanks Mark. You have been very helpful.

June 2019 – The individual Coverage HRA becomes a reality.

Possibility – Effective January 1, 2023 Deduction for Health Insurance Moves from Employer to Employee

 

What Comes After the Health Insurance Tsunami?


Anyone in sales understands the idea of whether you sell pain avoidance or pleasure. The statistics show, and it is my experience, that selling pain avoidance generates better results. In my last business I estimate that 75% of my clients became clients only after they suffered the loss of an important client. We have all heard the story of Blockbuster turning down the opportunity to buy Netflix for $50 million. I believe, regardless of the sales strategy, that most of us do what we do because we want to do something good for people. Selling pain avoidance may be a necessary evil at times though we do so somewhat reluctantly. Dealing with human behavior is part of business.

In my last article I wrote about, “The Health Insurance Tsunami is Coming – and It Will End Employer Health Insurance as We Know It”. The implication is this is bad because a Tsunami can’t be good, right? Well, in reality, I think what replaces the current health insurance system is going to be great. I come to work every day in my business doing as much as I can to make that happen. The tagline for my new company is, “Helping Employees Have a Better Day”. I really don’t think the current health care system does that. My 22-year-old daughter pays what is the equivalent of 90% of her health insurance premium through work for a $5000 deductible. It is not much of a benefit. The current system is very broken and does need to be wiped out.

Many benefits brokers I talk to hope I am wrong about the Tsunami because anyone protecting the current system may be wiped out. I am not hoping people are hurt. I actually think there is the possibility of a new health care system within our grasps that could really help millions of Americans. My preferred message to brokers would be “Let’s get together and fix health insurance to help millions of Americans”. That is really what excites me every day. We can do something great.

So, what is after the Tsunami? Imagine a world where health insurance and health care costs are 20% less than today. Insurance plans are easy to understand. There may be a small copay or deductible of $500 and then everything is 100%. I won’t need a medical insurance dictionary or call center to understand my health insurance or the health care system. My doctor has an incentive to keep me healthy. I get a text message from my doctor if I gain ten pounds and he asks to see me. My health data is collected on my watch or cell phone and proactively tells me what I should be doing to stay healthy. My insurance is mine and only changes when I choose to change it. I have easy access to all my medical information, and I choose who can have it. There are no claim forms. My primary care physician advises me on the best and most affordable prescriptions when needed. New health care innovations are readily available, and I can learn about them on my cell phone. There will be no need to ever negotiate health care costs or worry about balanced bills. And, believe it or not, this is not Medicare-for-All.

What replaced Blockbuster was Netflix. Netflix is better. I don’t have to get into my car and go to a store to rent something and then pay a penalty when I don’t return it on time. Netflix is better than Blockbuster, though many people who were somehow financially tied to Blockbuster may have suffered financial losses. It is an unfortunate by-product of progress.

This could be a benefits broker’s Blockbuster moment, but it doesn’t have to be. There are companies that will thrive because they help solve a major problem in America. My mission is not to help or hurt benefits brokers. The market doesn’t care what I think anyway. However, I have been promoting a health insurance and health care model that I believe can help our whole country. I think the market is ready for this change. The pieces are coming into place. We can be part of the solution, or not. So, let’s do it, because we can!

The Health Insurance Tsunami is Coming – and It Will End Employer Health Insurance as We Know It


By Joe Markland and Mike Davis

This article is being written after an open and honest discussion with my benefits broker friend Mike Davis this morning over breakfast. Mike is a 30-year veteran in the business who had already sold his first benefits business around 10 years ago. After some in depth thinking we drew the same conclusion as it relates to the employee benefits business. A tsunami is coming at the employee benefits broker and most don’t see it, but it is out there. This tsunami can reduce commissions from $30 PEPM to $15 PEPM overnight. For those not prepared it could be catastrophic, however for those prepared, there may be fertile ground on the other side. Regardless, it is coming.

Mike – While this is something I have thought of as inevitable for several years, this renewal season has somewhat sealed the deal in my mind. Large increases and even a non-renewal in a market where recent tax law changes are giving employers an “out” have made me conclude it is imminent. The problem with employer-based health insurance is the perpetual gamesmanship required to find a different or better risk pool. Solutions like hiding in the pool, self-funded, level-funded, referenced based pricing, captives, and associations are all short-term solutions designed to “game the system”. In reality, the types of plans or funding are segmenting the risk pool which contributes to the larger problem of rising health care premiums in America. Many don’t want to admit this, but we are all whispering to ourselves that this is the reality. As a result, health insurance and then health care is about to change in significant ways and distributors like myself need to act or get wiped out. The phase-out of the current system and opportunity to morph has just begun.

Joe – I have been watching this market for some time and have conducted webinars and written articles about the “Coming End to Employer-based Insurance”. I will be honest, I have taken many arrows from brokers who have not liked my message, though my message is simply based on listening to people like Mark Bertolini, ex-CEO of Aetna, and an advisor to Donald Trump. Both are saying that employers should not be in the middle of health care. Bertolini took action selling to CVS. Trump through Executive Order made an individual policy tax deductible and allows the Employer to use the HRA as a contribution conduit for their contribution. They spoke. I listened and acted myself by forming my new company, N4one HR and Benefits, that is designed to thrive whether the health insurance market changes or doesn’t.

We aren’t saying the sky is falling for the sake of selling fear. From others perspective the current employer-based healthcare market is already very broken. Employers and employees’ skies are already falling because the cost burden of health insurance is significantly impacting profitability and for the individual their personal financial health. For much too long the existing ecosystem of carriers, brokers, and administrators have simply pushed the costs around. And the argument that health insurance costs are high because the cost of healthcare is high will fall on deaf ears. Healthcare costs are high because the current health care financing models do not create incentives to control costs. Those incentives need to change which include empowering the consumer.

Employers are sick and tired of being in the health insurance business. Some have started the process of getting out by looking to offer individual products through an HRA. There will be some this year, more next year, and before long there will be a Tsunami moving to individual options. We believe that after the election the deduction for health insurance will move away from the employer and to the individual, ending traditional group health insurance forever.
People and businesses are slow to change. Employees at Blockbuster were Netflix subscribers and Blockbuster could have bought Netflix. We think this is your Blockbuster moment. The Tsunami is coming. We don’t know when it will hit but it could be much sooner than anticipated. It really doesn’t matter to a certain extent because if 5% of your clients want out and you don’t know which 5% then you need to address them all. This must start NOW as the renewal season has begun, and the law takes effect for this renewal.

We have built a model that we believe can help a broker not only survive but thrive when this wave hits. However, it takes careful planning, hard work, and flawless execution. This takes time and scale. Our model shortens that time and delivers the scale needed.

Mike – Joe has been talking about this for some time. I was a doubter too (as to so soon), but his predictions have come true. A simple stroke of the pen and the world has changed. It can change even more. His argument about market dynamics simply makes sense. I read 3 weeks ago of Cigna’s re-entry into the individual market, then the same last week of United. The ACO/Value Based tight network plans are emerging from commercial carriers and Health Systems as well. While difficult for an employer to choose one ACO plan that serves all, if each individual can choose on their own, the viability increases exponentially…not to mention the individual’s ability to purchase very rich or very lean benefits to suit their needs. Like you, I can’t take the chance that the market doesn’t change. As the saying goes, “Hope is not a strategy.”

Our solution requires three things:
• First, prepare for a world where you can handle twice as many clients with the same amount of staff. This can happen in a future world where service demand decreases substantially as it is supplanted by on-line/telephonic enrollment and member services.
• Two, expand your revenue capabilities by expanding your product/services capabilities.
• Third, market, market, market, the new value proposition to sever existing relationships

We think that the small brokerage firms with deep local knowledge and relationships, and entrepreneurial work ethic, armed with the technology tools and support can adapt most quickly…. yet they don’t have the capacity or capability to do this on their own without a significant capital investment. Our solution is to do this in a shared services model through our N4one HR and Benefits organization, which is an organic broker consortium that will grow and be directed by its’ members. This isn’t merely a technology buying group or scaled product procurement Broker Association. It is a business transformation company.

We are looking for just a few brokers per geographic area to bring a new model to market. Collectively, with a unique value proposition, professional marketing, and educated and armed professionals on the front lines, we can do something great for employers and their employees. However, it requires some clean thinking and a willingness to change. If interested give us a call at 508-498-7591.

I Can Make a Roast Beef Sub Better Than Subway


Every now and then an idea comes to my mind that I want to share. For those of you in sales, I am sure you can relate. Today I was making a pitch to a benefits broker on our new business and value proposition when he said, “I am all set. I can do that.” We all have heard that “I am all set” response before, even though we know the person may not know what it is we are really selling.

This brought me to my latest business thought which I used with my son the other day. I asked him, “Can you make a roast beef sub?”. He said “yes”. Then I asked, “Can you make a roast beef sub better than Subway?” He said “yes”, again. Then I asked, “Can you outsell Subway?” His answer was “No way”. Making a sub is easy. Making one better than Subway is not real tough either. However, outselling Subway would be extremely difficult.

I have known the broker I was selling to today for 10 years. He has had 3-5 employees in his business since I have known him. Conversely, I have another broker friend who had 5 employees in his benefits business 10 years ago and today has 55. (with no acquisitions). From my seat, the first broker has always been saying he could “make the roast beef sub”, thinking that he is “checking the box’ of products and services he could offer. The second broker, however, was building his “Subway”. These two brokers approached their business everyday in a very different way yielding significantly different results. If you were to read their websites, they say they do the same thing, but they don’t.

There is a difference between stocking your shelves with tools and resources for your business and delivering them to market in an effective way. I will go out on the limb and say many in the benefits broker world have been stocking their shelves with the latest shiny object for the past 15 years. All the vendors know this and sell to brokers who want to make sure they have the latest and greatest. Then when something doesn’t sell, they say, “I tried that, and it didn’t work.” Well maybe it didn’t work for them.

Having dealt with “I am all set” at least 3000 times over my career, I know how to deal with objections. Maybe they are all set, and maybe not. I am certain that many people can “make the sub”, however, few can build a Subway. So, ask yourself, are you making subs or building a Subway? In my last business I will say I helped people stock their shelves. The difference this time is I am helping them build their Subway. There is a big difference.

It’s Time to Turn Health Insurance Around


When employer paid health insurance became a tax-deductible expense in the 1940’s employers jumped in with the idea of providing employees a different type of compensation to attract and retain talent. I would bet they could not have imagined the health insurance world of today where the cost of health insurance significantly impacts profitability and employers are forced to deal with managing the health of their employees. The reaction of the industry insiders over the past 20 or so years, but even more so since the passage of Obamacare, has been to push employers even more into the path of this health care cyclone by having them take on even more risk and responsibility. Many have joined coalitions to perpetuate this misguided trend. I would contend that the reason for skyrocketing costs is the perpetuation of employer-based health insurance promoted by interested industry insiders. I say it is time to turn this trend around. It is time to move the risk and responsibility away from employers and onto where it belongs, which is the health care system and the patients.

I have written in previous articles that the two major financial frauds in the U.S. that are causing financial harm to millions of people are the costs health care and college education. In both cases, third-party payors fund the costs (often temporarily and indirectly) and the insiders have no incentive to stop the cost escalation. In both cases it is the system that drives costs up because there are few built-in incentives to control costs. And even those that try to control costs may be doing so with good intentions, but most continue to support the “system” that is designed to protect the status quo and drive costs up.

In the health insurance business, for the past 25 years we have seen many efforts to control health care cost. From HMO’s to PPO’s, claims management and prescription drug programs, wellness programs, and other incentives to modify employee behavior, have all failed. Over the past few years we have seen the proliferation of efforts to try to control costs by shifting more risk and responsibility to the employers who have often then pushed more risk onto the employee. Smaller and smaller firms have turned to self-funded plans. Deductibles have risen significantly for the employee. Many consultants have been promoting referenced-based pricing policies, that I think are “desperation” only policies. All these programs shift the risk and responsibility towards the employer and employee.

The insurance companies have also been shifting risk. They are using claims experience on smaller groups to adjust pricing when there is no statistically valid reason to do so. They “laser” underwrite, which means if a group comes up with a big claim and can’t move their insurance, they get a big rate increase and are told, “well, you have a large claim”. For self-funded employers they may change the insurance limits for that one claimant. This is not insurance.
Employer-based insurance policies are one-year term policies, meaning rates are adjusted annually for a period of one-year. Most small businesses can’t afford to assume the risk of a large claim and the increased premiums related to that claim, which is why they buy insurance in the first place. A one-year term policy for a group health insurance program is simply a flawed concept. Health insurance needs to be priced over a longer term like other high-risk types of insurance.

There are many benefits consultants pushing employers more into the health risk and responsibility business. They say, “you are in the health insurance business, get over it”. I contend that employers want out. Business owners don’t start businesses to be in the health insurance business. They don’t come to work wanting to control their health care costs. I say it is impossible anyway. There may be some stories of short-term success here and there but for the most part, they don’t want to be doing this and they shouldn’t be. The health of one’s employees should not be the risk or responsibility of an employer. They can care about an employee but not assume the risk. And then they hire an employee whose spouse is pregnant with triplets. As Mark Bertolini, ex-CEO of Aetna, said when asked at Stanford, “how do you create a more educated consumer…so they utilize the system appropriately”. He responded as follows, “trying to educate everybody on how the health care system works and the level of detail isn’t going to work”. The idea that employers and employees can manage health care and health care costs is a far-fetched idea. Ask anyone being rushed to a hospital in the back of an ambulance what they are thinking at that time.

The good news is that there is a whole new health insurance and health care system that is evolving that will turn things in the right direction. One of the catalysts to this change is the recent Executive Order by President Trump that will allow an individual insurance purchase through an employer-sponsored Health Reimbursement Account. This one change will remove the handcuffs from a system that needs to move the risk and responsibility into the right hands from the employer and insurance companies to the consumer and providers of health care. Health care will become more personal and less expensive. Health care will be more about keeping people healthy rather than fixing them after they are ill.

When imagining a new health insurance and health care system one needs to remove today’s version from one’s mind. The new system will be much different from today. Who employees buy their insurance from will be different. No more one-size fits all from employers. The types of plans will be different. No more PPO’s. Imagine no deductibles or copays and no paperwork. No more annual 10% increases in health care costs for employers or employees. Imagine knowing about an emerging health condition before it happens.

The time to change is now. Employers need to rethink the way they view health insurance in their organizations. They need to engage consultants who don’t support the status quo, which is the current system. It is time to turn health care around, so let’s be part of the solution.

Sun Life Buys Maxwell Health – So What?


Today it was announced that Sun Life acquired Maxwell Health. The first thing I asked was why? I don’t see the benefit to an employer or their employees. I see no benefit to the broker distributors. In fact, I hardly see a benefit to Sun Life. I can see the benefits to Maxwell if they either needed cash or their investors wanted out. I don’t really need to speculate around that here, but I am sure someone will tell me I am wrong. Someone please tell me why this is a good or even “relevant to the market” transaction. I will print it if the reason is sound.

If I am an employer, why would I want a technology solution coming from a single vendor? Technology to manage benefits, HR, and payroll should be owned by the employer, with no attachments. It should be something you invest in to make better every day. It should be engaging and provide employees with all the relevant company information that they need. In a survey I had done, the number one thing employees wanted to see via web or mobile in an employer sponsored HR system was how many vacation days they have left. Most employee benefits technology systems don’t track time off and those that do are bad at it.

As a broker, one would think you would want to represent the employer’s interests. You would want to have more options than representing a single vendor. And why would I need a carrier to bring me a technology solution as I could easily pick up the phone and find ten systems in one hour? Providing choice in health insurance, disability, and other benefits is an asset and the core to being an insurance broker versus an agent for a single company.
Other carriers are already out there providing a broad range of technology solutions. Many are providing discounts. This move by Sun Life could create a competitive advantage, to everyone other than Sun. In my business I could bring a dozen benefits enrollment systems, HR, and payroll to any employer, all with carrier subsidies available from many carriers. I have choice for technology. Choice of carriers. And subsidies for the employer if needed. It is easy to do, and I would add not a real differentiator.

Now if Maxwell develops something real special then maybe there could be something there. However, as I have learned from being in the technology business for years, technology is easily replicated. As the saying goes, “You can’t win or stop a technology war”. So, Sun Life better have a real lot of money to continue to fight the battles of this very active HR/Benefits/Payroll technology war that is going on. I would expect investments of over $100 million per year in their technology would be required simply to compete.

So, my assessment of this transaction is, So What? It is just more noise in a very noisy market that in my opinion doesn’t change the world a bit. (Other than for some employees or investors in Maxwell.)