Tag Archives: Health Insurance Marketplace

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.

The Launching of Our New Company – ProHCM – A return to our Why


When we (my brother Jerry, and soon after, my current partner Don Rowe, and I) started our business in 2001 I remember thinking about how noisy the benefits technology market was. There were so many benefits type technology vendors calling on benefits brokers that most people’s heads were spinning. The mantra of the day was “use my technology” and you will have a competitive advantage. And the vendors would sometimes directly say, but more often simply imply, that “if you don’t use my technology then I will partner with the broker down the street and take your business”. I really hated that sales strategy though it worked for many. The vendors capitalized on the brokers fear of losing business. 

When it came to things like benefit websites I wondered if anyone would ever use them, or more so, if anyone cared if anyone used them. I remember one broker telling me he was spending $100,000 per year on benefit websites. I asked him why he was wasting so much money when you can buy the same thing for $10,000. He said, “it doesn’t matter, it helps me win business”. Is that what this market was all about? I didn’t want any part of that. Here we are 15 years later and 76% of employees still don’t understand the term co-insurance, so I guess nobody is looking at them.

Our mission was never to just sell technology. What we really wanted to do was use our knowledge of how to apply technology to solve a business problem and our knowledge of the HR technology space to help employers simplify the administration of their Payroll, HR, and Benefits and expand employee self-service. This would free up time in HR, enabling staff to work more strategically and have more time for their employees. It would also deliver a communication and administration system to help employers bring new products and information to their employees. Over the past 15 years we have helped over 1000 employers find and implement HR technology solutions. Technology was the tool but our goal was to help get better outcomes. We really wanted to make things better for employers and employees.

It had also been our vision to help employers help their employees create better work-life balance and be happier at work and/or at home. If you are going to work hard to get through life I guess you deserve to be happy. I often tell the story of an employee of mine, a 23-year-old single mother, who one day called me crying because she could not get to work. Her car did not pass inspection because her tires were bald and she did not have the $500 for new tires. I proceeded to give her my credit card to buy new tires so she could get to work. I imagine my father, who with my mother, raised seven kids and often worked three jobs six and a half days a week had his share of stressful days, though he did not show it. And I wonder if he had an outlet when things got tough. He did this for 40 years. I don’t know how he did it.

I am not telling this story to let you know how nice a guy I am because I know this type of story plays out regularly in businesses across America. The bigger story is that most employers know that employee happiness and stress impacts productivity. And as an employer you hate to see hard working dedicated employees struggle to make it through a day. Life is not easy and one’s personal life and business life often conflict.

One problem is that over time we somewhat strayed from our initial vision. In Simon Sinek’s book, “Start with Why” he says your How’s and What can change but your Why’s should not. Unfortunately, we slowly strayed from our Why and became a technology consulting business and not a business that actually helped employers simplify their world and help the end employee create better work-life balance. Today the term being used is employee “well-being”. While many employers were buying technology with good intentions, many of them did not have the capacity to leverage the technology in a meaningful way. They may have improved HR operations to a degree but the outcomes had fallen way short of their goals. The technology was supposed to be a means to the end but it became the end. We advised employers on technology but our business did not follow it through to the very, very end. Did the employer ever reach their objective? Most don’t.

The other day I met with my staff to discuss our vision, our Why. I asked some people why they think we as a business, exist. One of my employees said, “to make brokers lives easier”. Another said, “to give brokers a competitive advantage”. It was enlightening and said a lot about where the business has drifted. I told them I do not wake up every day hoping to make brokers lives easier or to give them a competitive advantage. We think we what we do can provide a competitive advantage but that is not our Why. It is not what drives me or my partner. We also did not start the business to simply advise clients on technology or sell software. We started because we wanted to help employers help their employees.

Working with brokers is our How! Making it easier for them to help their employer clients and the employees is one of our tasks, our What’s. But it is not our why. The initial thought was that if we can pool resources and work collectively with local companies (Brokers and HR consultants) that shared the vision we could deliver a great solution to the market. We could centralize buying power and services. We could work with brokers to deliver the onsite local service. Sure we could leverage technology along the way but that was not the end. The technology is simply another tool, or resource, no different from my staff or the staff of our broker partners, to help employers create a better HR world for themselves and their employees.

For most workers they probably don’t go to work because it fits with their Why. If you are living paycheck to paycheck one’s Why is to do whatever it takes to pay the bills and support one’s family. A noble cause. I am pretty sure my father was not thinking of his Why. He just did what he had to do. In today’s environment employees are also more financially strapped with large college loans, increased health care costs, some still suffering from the housing crisis, and flat wages. For many, things are worse, not better.

   
The opportunity and need to help employers and their employees is greater than ever. The technology has advanced to become more user friendly and more engaging to employees. The number of vendors providing products and services in the HR area has expanded and range from new HR technology, to employee loan programs, online EAP programs, wellness, and more. And the daily use of mobile technology by individuals has exploded. However, the challenges for employers in the HR area are also greater as more laws, a more complex workforce, and emerging technologies have made HR even more chaotic with even less time available for change. They need help and not just someone who drops technology off at the front door. As many may have heard me say before, employers are needing landscapers not just lawn tractors.

So in 2015 we decided to re-focus our business and return to our initial vision, but this time we are doing it a little different. We are now laser focused on delivering better outcomes by providing services, not just technology, for employers and their employees. We don’t want to sell technology that nobody uses or deliver programs to employees that few ever use. The focus is on delivering the outcomes that will make a difference in their work-lives. We want the HR person to have less stress. We want employees who need help with some financial issue to have an outlet. We want the CEO to have actionable data. We want employees to understand their benefits. We want them to use their technology in an optimum way. We want to help.

To accomplish this, we felt we needed to combine centralized services with local services. We needed to add the staff with the skills but also needed the scale, and buying power. And we needed partners who share the vision and are as vested in delivering great outcomes as we are.

This new organization is called ProHCM. We view ProHCM as a franchise model of a national HR/Benefits/Payroll technology and services company with brokers as vested owners and service providers in their markets. ProHCM is a collection of Human Capital Management experts working together to deliver products and services that will guarantee better outcomes. It is a team effort.

So to those brokers out there that want to be a part of something unique, join us to create some better days for HR and their employees!

The Health Insurance Balloon is About to Pop


If you are reading the headlines about Obamacare lately you can’t miss the articles about how 2017 is going to bring significant increases in health care costs. Here are some of the headlines:

“The Pennsylvania Insurance Department says insurers have proposed premium increases averaging 23.6 percent for individual coverage for 2017.” (NY Times)

“Obamacare 2017: Health Insurance Costs are Ballooning – Texans’ Premiums Will Soar By Over 55%”

And according to the Wall Street Journal premium increase proposals for some states are as follows:

NY Times List

As I had mentioned in a previous blog these increases are not sustainable. That being said, I think the health care balloon is about to pop. And this is not just the exchange plans. It is the health care balloon which includes all plans. Let me explain.

Those in the health insurance business are familiar with the term “squeezing the balloon”. The implication is that when you try to control health care costs in one place it often pops up somewhere else. The cost of health care doesn’t go down it just moves from one place to another. The balloon gets squeezed but does not shrink. In fact, the health care cost balloon keeps on getting bigger and bigger.

For the past 20 or so years benefits brokers have been trying to help employers manage costs but have seen little success. For the most part there is very little a broker or an employer can do because there are simply too many things outside of one’s control to control costs over time. So the whole industry has mastered the art of helping employers find better risk pools. PEO’s try to attract employers by moving firms into a larger risk pool. Smaller and smaller employers have been moving to self-funded plans. Now we see “Captives” which is essentially a methodology of creating another risk pool. The idea for many of these employers is to get smaller employers out of small group community rates.

This idea of having all these different risk pools is quite interesting. Even the insurance companies create different risk pools. They have their individual insurance pools; their small group pools; and their large group experience rated pools. They put these employers in different buckets and mange those buckets. It almost seems like within a single insurer they have their own death spiral going on. By segregating their risks eventually, the smart companies or individuals will find a way to get into a better risk pool leaving the bad risks in another pool.

It is my belief that the government, and maybe society in general, will not let this persist. There are already complaints about the “game being rigged” resulting is income disparity. In some ways the health insurance game is heading in the same direction too, with different groups of people having much different experiences. I will not get into risk and underwriting here because it really doesn’t matter. If a large part of society can’t get affordable health insurance it is everyone’s problem.

The day may be coming where there may no longer be a place to hide. In a recent NY Times article Kurt J. Wrobel, Chief Actuary of Geisinger Health Plan stated:
“Our rates for Medicare, Medicaid and employer-sponsored insurance have been relatively stable, but those products have to bear the cost of our losses on exchange business,”

Geisinger requested a 40% increase for their exchange plans for 2017. If they don’t get it they have to make up for the losses somewhere else.

This health care cost problem is not going away. In fact, it is getting worse. I often tell my staff that when you see a problem staring you in the face, do something about it. The health insurance problem is staring us right in the face, right now, and if the industry doesn’t do something about it then someone else will. That someone in the U.S. is the government.

Many have said that the reason incomes are flat is because employers have been bearing the brunt of the health care cost increases over the past 5 years. Health care cost increases are consuming dollars that could be used to raise wages. Employees have been also getting hit with higher contributions for health insurance. Flat wages plus higher health care costs equals a negative income.

This problem is coming to a head. The balloon has no more capacity. Will 2017 be the “tipping point” that will force changes in unprecedented ways? I think so and there may be no place to hide.

Understanding the Benefits Broker Role in a new HR Ecosystem


This was written for Employee Benefit Adviser Magazine. The link to the article on their blog is here.

When the iPhone first came out in 2007 there were no apps other than what Apple provided; no third-party products like phone covers, car chargers, headsets, or wireless speakers. If you dropped the phone and broke the glass you couldn’t take it to the local mall to have it repaired.

Here we are nine years later and there are over 1.5 million apps. There are add-on products sold online, in pharmacies, convenient stores, airports, and all kinds of other retail stores, that make the phone more useful. If you wanted to write an app for the iPhone there are skilled programmers available around the world. And if you dropped your phone there is some person at the local mall who could fix it.

The majority of these products and services are not provided by Apple. They are provided by some person or company that one day made a decision to capitalize on the success of Apple and build something that users of Apple products would value.

According to the Financial Times, “technology ecosystems are product platforms defined by core components made by the platform owner and complemented by applications made by autonomous companies in the periphery…the core firm’s product has important but limited value when used alone but substantially increases in value when used with the complementary applications.”

In the HR/Benefits technology world the same rules apply. There is a core product and there are periphery products and services. A core product with an advanced ecosystem will have much more value. If you are an advisor in the benefits business it is important to know which products are core and which are periphery. If you are providing services it would be important to know how your service fits into the HR/Benefits tech ecosystem.

Many benefits brokers are not recognizing these HR technology ecosystems. Many think the benefits technology vendor they have chosen is its own ecosystem or the center of the clients HR world. At one time people thought the Earth was the center of our solar system too. This belief caused many problems with keeping the calendar, sailors navigating at sea, and keeping track of Holidays.

Thinking that benefits technology is the center of the HR Ecosystem also results in problems. Benefits aren’t easily administered or communicated. Systems delivered by brokers often aren’t easy to use or have issues with “integration”.

Working in a vacuum delivering siloed software creates the problem.

The HR technology market is in the midst of big changes. The market leading vendors are making efforts to grow their ecosystems to create more value for employers and employees while also creating space between themselves and those that want to take their business.

If you are a benefits broker it will be important to recognize this market change. You need to make decisions as to who you think the winners and losers are going to be. You would need to think about how what you do will fit into these HR ecosystems. This could impact everything from the products one sells, advice one gives, and the services one provides. Private Exchanges, benefits administration and communication are all impacted by how the HR ecosystem evolves and how these products/services fit in.

When it comes to benefits technology I always remind brokers that it is important to understand the tools of one’s profession. Understanding how technology impacts the benefits business does not make someone a technologist. It makes someone a better broker.

HR Technology is going through an evolution much like the cell phone business except we are 7 years behind. A few years from now there may be fewer vendors with much bigger ecosystems.

Providing some product or service that enhances the value of the right core HR technology solutions is an opportunity that can become very lucrative. At a minimum understanding the “tools of one’s trade” is a requirement to simply being a better benefits advisor. Either way, pay attention, because the HR/Benefits technology world is about to change.

My Bold Predictions About the Future of the Benefits Business – A Summary


In various articles in this blog, and in some of the webinars I have conducted, I have made some bold predictions about the future of the benefits technology business (as technology is my main area of expertise) and more broadly about the benefits business in general. I guess I am as qualified as anyone in this area having started in the business 30 years ago. As I have stated repeatedly, the reason I make these predictions is because for my business to survive and thrive I too need to predict, to some degree, the future so that I can make the right strategic decisions today in preparation for the years to come. The reason I am publishing these (again) is because I am looking for others in the benefits business to participate in my “think-tank” to talk about these issues and collectively formulate ideas that may be used to help our businesses thrive in the future. So this is somewhat my “call-to-arms” for anyone in the benefits business. Here is a summary of my predictions. I may be right and I may be wrong.

1. HRIS/Benefits Technologies without Payroll will become obsolete.

This is a prediction I made a few years ago and I am holding to it. As a technology consultant we help employers choose and implement HR / Benefits / Payroll technology solutions. The only demand I have for benefits only systems comes through benefits brokers. Outside of the benefits broker world I find few employers wanting stand alone Benefits or HR/Benefits systems. Yet those are the systems most brokers promote. Personally, I can think of few business reasons to have multiple systems. My company runs one system and all my employees have everything related to work through one app on their cell phone. And those that think integrating systems will work let me give you the names of a hundred employers who will debate you on that. The majority of technology issues that employers bring to me are caused by having multiple systems. Everything needs to be in one system with one database. Integration causes problems. I replace benefits enrollment systems that brokers put in for employers every day. The broker often causes the problem and now the employer wants to get rid of it. Here is my article on this prediction and the mistakes brokers are making.

2. The majority of employers with fewer than 100 employees will look for a single-source technology and services solution in the future.

Zenefits has exposed a pent-up demand in the market and that is to have some outside firm make an employer’s HR life easier. Small employers want to throw things over the wall and simply have someone else handle large parts of HR. The PEO’s, HR consulting firms, and many payroll firms already know this. Zenefits did not invent anything new here. I also believe Zenefits is really an outsourcing firm, not a technology vendor, but we can debate that somewhere else. My main point is that this demand will grow as more and more vendors enter the market. What does this mean for brokers? Brokers who do not provide such services will be replaced.

3. There will be dozens of Zenefits-like companies in the market within 6 months.

This HR/Benefits/Payroll technology and services market is no secret. The fact that employers will change brokers to move to a solution that combines HR/Benefits/Payroll technology with benefits services is also not a secret. There is a ton of money being invested into this space and vendors will be popping up everywhere. New technology vendors will arrive and get into the benefits business, but more competition will come from existing businesses offering some product or service in this market already. This will include payroll companies getting into the benefits business as brokers and HR Consultants expanding into the benefits and payroll business. I spoke to a payroll company owner this week that is getting into the benefits business. Why? Because that is where the money is. And everyone knows it. They also won’t partner with brokers. At least not the ones doing this right. Competitive pressures will require anyone in this space to leverage the benefits commission to compete. Even if the commissions is half of what it is today.

4. Small group health insurance commissions will be 50% of what they are today by 2017.

Do you know that small group commissions in Massachusetts are almost half of what they are in California? Yet, there is no shortage of brokers in MA. The carriers know this and they are getting squeezed by ObamaCare. Firms like Aetna are already cutting commissions and others will follow. One is because they can, but the other reason is because they will have to find every dime to compete. The small group market may even go to 100% fee for service. Here is an article about this here.

5. Employers will be out of the health risk business within 3-5 years.

This prediction, along with the next two, are somewhat related. I covered this in an article I wrote titled, “The Coming End to the Health Insurance Business as We Know It.”  The key term in this prediction is the “health risk” business. When I spoke at a conference on Private Exchanges I asked the employers in the audience why they would be interested in a Private Exchange. The answer was not what most brokers would think. One may think that employers want to give employees more options. Others will say they want to reduce health care costs. The answer I got was they thought that a Private Exchange would get them out of the health care business. Employers don’t want the hassle of worrying about high claimants, wellness programs, disease management, and that annual dreadful renewal meeting. They want out. That doesn’t mean they mind giving employees money to pay for part of their health care. They just want out of the risk business. And I think the market will comply. What does this mean for brokers? No more underwriting. No more claims analysis tools. No more catastrophic claims management tools. Employer based wellness to try and control health care costs will go away. For most brokers these are their core skill sets. These skills won’t be needed. Wow! This changes the world of most national benefits firms or any firm that focuses just on large group.

6. Most health insurance will be individually purchased within 3-5 years.

Think about this for a second. There is no law that would prohibit a traditional insurance company from offering all their small group pooled products to larger employers. Can an Aetna offer all the same products in the public exchanges to an  employer at the same rates as on the public exchanges? I don’t believe there is a law that says they couldn’t. It could still be a group plan but just be pool rated and with more options. Employees who leave an employer can move to a public exchange into the same plan. I think carriers may do this because the market wants it. This will get employers “out of the risk business” as I indicated in my previous prediction.

7. Provider systems will dominate the health insurance market in 5-10 years.

The largest hospital system in Massachusetts got into the health insurance business a few years ago. According to my neighbor, who was a consultant for them, said the reason they did this is because with ObamaCare the providers are getting less and less money from government programs that are adding more and more people. In order to survive the hospital system needs money from the healthy people not just less and less money from the sick people. As my neighbor said, there will be no Blue Cross version of them in 5 years. Keep these comments in mind when you read about the recent Obama/Boehner deal to lift the debt ceiling. In that deal Medicare reimbursements are getting cut 2.5%. So 5-10 years from now employees will be choosing between provider systems not health insurance companies. The providers and insurers will be one in the same.

Conclusion

Many who may read this blog or who have listened to my webinars may think I am nuts or at least way off base with some of these predictions. Many will hope I am wrong. What has really amazed me most is how slow people are to change. I wrote about the coming of a Zenefits in 2009 yet few acted. I have seen brokers lose well over a hundred thousand dollars in commission yet still not act. Or worse, they take action but it is the cheap and often wrong solution creating a false sense of security. Now I am predicting a much different future that requires further and even more profound action. I am not willing to risk my business on hope so I am taking action in my business. What am I doing? Well, stay tuned, but I am not going to tell all my secrets. Or give me a call to possibly join my think-tank. Either way, take action.

Market Disruption is Coming to the Benefits Business and at it will Come from the Outside Not In


According to a report released by the Department of Health and Human Services on October 26th health insurance premiums for 2016 will increase an average of 7.5%. This is in a market where inflation and interest rates are close to zero. It is no secret that the cost of health care is one of the biggest issues impacting the U.S. economy in the coming decade. With a $19 trillion deficit the cost of health care is a problem that is waiting for, and desperately needing, a solution. And if solutions don’t come then the solutions may be imposed on the industry as we have seen with Obamacare. Hillary Clinton, if elected, would certainly try to finish the job. Just last week she included health insurance companies and pharmaceutical companies on her short list of enemies along with the NRA and Republicans. Back in 1993 when Bill Clinton was pushing his health care plan Hillary, when asked what insurance brokers would do if the Government took over health care responded, “They can get another job”. The industry has a target on its back and the target is getting bigger. I think changes are coming. But it won’t be the government taking action this time. While some see the target on their backs others see the same target as an opportunity.

The opportunity to fix the health care cost problem in the U.S. is no secret. According to CB Insights “$14 billion of venture capital has gone to the insurance tech space since the beginning of 2014, with health insurance-related investments getting more than all other insurance sectors combined”. I have personally spoken to several Venture Capital firms who are studying the market looking to invest in companies that will disrupt the status quo of the current health care industry along with the employee benefits distribution business. Yes, there are many companies looking to put the current providers out of business. It is often easier for outsiders to disrupt the markets instead of the insiders. A taxi company did not create UBER, Blockbuster did not create Netflix, and Barnes and Nobles did not create Amazon. It may be because the current market leaders would have to step back before moving forward. It would be a very bold move to disrupt your own business model, often at a huge expense, based on the chance that your new idea would eventually pay greater dividends than the present model.

Those in the health insurance business know that it is the underlying costs of health care that drive health insurance costs. The outsiders do too. You can eliminate the insurance companies but not reduce health care costs to any significant degree. So these changes that I am referring to will attack the costs of health care. This will trickle down to benefits brokers because the majority of a benefits broker’s revenue is selling health insurance. These outsiders may or may not see the broker as a valuable resource in their future world.

While some benefits brokers are trying to be a part of this coming change, for the most part they are going to be spectators. Firms like Zenefits, Gusto, and Namely are disrupting benefits distribution by offering technology and other HR type services with benefits advisory services, and some brokers are pushing Private Exchanges like they are some new form of health insurance, but neither bend the health care cost curve. To paraphrase Peter Thiel from his book Zero to One, “Innovation must be something new not a slightly different version of something that already exists….and that innovation must be at least 10 times better than its closest substitute”. Private Exchanges, payroll/HR tech companies giving away free technology, and most of the other technology solutions in the benefits business that I have seen do not meet this definition of innovation. In fact, these companies too may be disrupted by those that bend the health care cost curve.

The true disruptors are going to impact the market in ways many of us may not yet even imagine. But they will come, because there are many people interested in bending the cost curve including the government, employers, employees, and any individual paying an insurance premium. And of course those investors who are spending billions of dollars. Those less interested are those protecting the status quo.

So who are these disruptors? Firms like Google and Apple are hoping to play a major role in the mobile health market. Apple’s HealthKit is designed to manage ones heart rate, blood pressure, cholesterol, take a temperature, and make that information immediately available to one’s physician. Google also happens to be an investor in the new health insurer called Oscar Health. Evolent is helping hospital systems enter the health insurance business. Theranos can do over 120 blood tests with the prick of a finger and substantially reduces the time and costs for such testing. There are hundreds of others on the horizon.

The health care marketplace is ripe for change. The political environment, expanding web and mobile technologies, and a cash rich, highly motivated investment community, are all aligned and ready disrupt the status quo. And the prize for success is very lucrative. That future has yet to be defined but change is coming. Benefits brokers will have a choice to fight the change or start looking for those outsiders that will need help bringing their new solutions to market. But there will be no choice. The winds of change are already blowing.