As the cost of medical care continues to rise faster than the GDP, many producers are struggling to help commercial clients continue to offer healthcare benefits while remaining solvent. Shifting the financial burden onto employees seems to be the most palatable solution—at least, if you listen to the business owners themselves.
According to a new study from PricewaterhouseCoopers LLP’s Health Research Institute, 44% of employers are only considering high-deductible health plans as an option following 2014.
With such narrow parameters for action, PwC suggests producers and their clients find other ways to make up for high0deductible plans, as offering health insurance is still “a valuable tool for recruitment and retention.”
“Explore high-performance networks, even if they are not local,” advised PwC Principal Mike Thompson. “Employers should find health plans that offer a high-performance network for medical care or contract directly with these health systems.”
Thompson also stressed that employers must understand and educate their employees as to their new responsibilities under high-deductible plans. Of course, clients can expect a certain amount of blowback regarding their new, increased financial responsibilities and one way to temper this is through offering additional, low-cost voluntary plans.
According to the Towers Watson 2013 Voluntary Benefits and Services Survey, the importance of voluntary products in a company’s total rewards strategy is expected to increase 27% this year, with critical illness, hospital indemnity and accident coverage the most coveted.
“Businesses want to invest in their employees, but they want to do it practically,” said Ty Elliot, vice president of core broker sales for Aflac. “If [brokers] can ask the right questions and identify the right pain points, that’s your best avenue to secure that relationship.”
Of course, smaller businesses with fewer than 50 employees are also considering dropping health coverage altogether. According to the PwC report, the median premium for a public exchange plan for a single person is $5,844 as compared with the average $6,119 for a comparable plan offered through an employer.
This 4% cost difference “may make public exchanges an attractive alternative for employees in the future,” PwC said.
That’s a strategy Mark Brown of M. Brown & Associates embraced in his Illinois practice.
“I had a group who had already seen three or four agents and were considering going out of business. Well, when you broke it down, we were really talking about 10 people you needed coverage, which meant there would be no penalties for the company to send them to the exchange and get subsidies,” Brown said. “I was the only one advising them this way. They could have let people go or lowered the hours, but this helped them stay in business.”
Of course, this strategy only maintains a revenue stream for producers who serve individuals as well as small groups, and even then, commissions are generally low for policies sold through the exchanges.
The reality for holding onto commercial clients then, Brown said, is to recommend high-deductible plans.
“I’m seeing huge increases passed to employees, so where the employer might have paid most of the premium before, now they’ll pay 30% to 40% less,” he said.
