Transcript HRLF Meeting - Prince William SHRM Inc.

Beneficial Relationships
You and Your Benefits Broker
What You Should Expect
Prince William County SHRM Meeting
Chris Bartnik, CLU, RHU, REBC, CLF, CHHC
May 6, 2015
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Agenda

Changing Landscape of Employee Benefits

What You Should Expect From Your Broker?
Basic Services
 Building Out the Toolbox


How Much Do Specific Factors Impact the Employer’s Expectations

Odds and Ends
How Do You Know You Are Getting a Good Deal?
 How Can You Feel Confident In Your Compliance With Today’s Laws?
 Compensation Arrangements


Brokers a Product Vendors

Zywave Broker Services Survey

Questions
1
Questions
 What
Do You Want to Learn Today?
 What
Questions Do You Have That You Have Never Asked a
Broker?
 Are
you just here for the CE credits?
2
Brokerage Landscape
Do We Need Brokers?
2015 Metro DC Survey of Benefit Strategies & Trends
100%
80%
1%
1%
0%
2%
17%
17%
0%
1%
4%
1%
1%
1%
1%
1%
1%
1%
1%
13%
27%
33%
49%
54%
40%
0%
1%
0%
41%
60%
20%
0%
65%
68%
74%
38%
67%
NA
41%
25%
25%
20%
12%
4%
18%
2%
10%
6%
51%
30%
14%
13%
Decreased Significantly
Decreased Somewhat
Neutral
Increased Somewhat
Increased Significantly
Increased Significantly
or Somewhat
 Reliance on External Business Partners (84%)
 Administrative Burden (79%)
 Plan Cost (79%)
 Need for a Multi-Year Strategy (68%)
4
Different Types of Brokers

Broker
Represents the client in the marketplace
 Relationships with multiple carriers and specialty vendor partners
 Provides specific expertise related to insurance companies, products, strategies, etc.


Brokers are often differentiated by:
Ownership (Public, Private, Private Equity)
 Market focus (small, middle market, large employer)
 Business model (producer centric, team centric, resource centric)
 Scope of services (core brokerage versus specialty services)
 Investment model (national decision making versus local decision making)
 Service footprint (local market, national market, international market)
 Compensation model (commission, fee for service, hourly billing)


Pros and cons to each model based on client need or position in organizational
life cycle

Key differentiator is people!
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What Should You Expect?
What Should You Expect From Your Broker?
Historical
Service Delivery Model
 Basic
Annual Strategy (?)
 Insurance Placement and Renewal Negotiation
 Claims Resolution
 Carrier Relationship Management
 Basic Underwriting Knowledge
 Open Enrollment Meetings
 Benchmarking
 Basic Compliance Questions and Answers (Q&A)
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Changing Landscape In Employee Benefits

Employee Engagement
Consumerism
 Wellness


Increased Compliance (more to come?)


Healthcare Costs Continue to Escalate


Health Care Reform, ERISA, and Other Compliance Requirements
Specialty Drugs
Changing Delivery System
Telemedicine
 Minute Clinics
 Accountable Care Organizations (ACOs)
 Narrow Networks


Health and Wealth Planning
Health Savings Accounts
 Retirement Planning and Savings (the next big problem?)


Brokers becoming vendors instead of advisors
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Changing Landscape In Employee Benefits
What Can Employers
Offer – Plan Design
• Metal Plans/Limited Plan Choices (insured, market size)
• Actuarial Value Requirements
• Essential Health Benefits
Who Employers Must
Cover - Eligibility
• Full-Time versus Part-Time
• Spouse/Dependent Children Requirements
What Employers Can
Charge –
Contributions
• Percentage of Salary/Household Income thresholds
• Unbundling of Coverages
What Carriers Can
Charge – Premiums
and Taxes
• Medical Loss Ratio
• PPACA Fees and Taxes
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What You Should Expect From Your Broker?
Financial
Compliance
Communications
Risk Mgmt
Administration
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What Should You Expect From Your Broker?

Wellness or Population Health Management

Benefits Administration Outsourcing Solutions and/or Consulting Advice


Be Careful with proprietary solutions – extricating yourself can be painful!
Compliance Services and Resources
ERISA (most large firms employee ERISA attorneys)
 Health Care Reform (moved from financial impact analysis to maintenance)
 Document and Notice Support (SPDs, SBCs, etc.)


Communications
Open Enrollment (multi-channel options like presentations, guides, videos, etc.)
 Change Management (focused communications on consumerism, wellness, health care
reform, etc.)


Health Care Data Informatics (Data Mining)

Private Exchanges
Proprietary
 Strategic Partnerships

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Factors That Impact Employer Needs and Expecations

Health Care Reform – stratifies companies from a broker perspective (under 50,
Under 100, Over 100)

Employer Size
Under 50 (2014) and Under 100 (2016) – healthcare products and underwriting are
mandated by Health Care Reform (metal plans and standard underwriting rules)
 Over 100 – Service offering varies by broker and by funding methodology


Other Factors that Impact Expectations
Domestic footprint (local only or across the country)
 International footprint (requires special knowledge and resources)
 Industry – Government Contractor with SCA employees (for example)
 Size of internal Human Resources Department


Pricing
No real benchmarks
 Should have an annual discussion with your broker to determine value versus cost
 Commission/Annual Retainer most prevalent in the small and middle market

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How Do You Know You Are Getting
a Good Deal?
How Do You Know You Are Getting a Good Deal
from Your Insurance Carriers/Vendors?

Hard to quantify if you are getting a good deal – not purchasing a
commodity, although some ancillary coverage purchasing is strictly
price driven (life, disability)

Several market factors impact pricing (MLR, PPACA fees/taxes,
mandates, underwriting methodology, etc.)

Employer specific issues (claims, size, location, etc.) impact pricing

Key is the value your broker partner brings to the process

Remember any deal that is too good to be true = large increase the
next year
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How Do You Know You Are Getting a Good Deal
from Your Insurance Carriers/Vendors?

Providing Value in Carrier/Vendor Negotiation

Relationships, relationships, relationships




Carrier book of business




Do we have a lot of business together?
Are you a partner that is a source of potential future growth for us?
Do you send us lots of quote requests but never place any business with us?
Underwriting expertise


Advisory Committees
Have we worked together?
Strategic pricing arrangements
Negotiate from a position of strength – data, facts, information (don’t just bang your fist on the
table)
Benchmarks of current and historical client data


Agency Management System
Large enough sample size for comparison (administrative fees, reinsurance rates, other fixed
costs, etc.)
Carrier’s need/desire to keep the business – level of realism required
 Are you a preferred business partner/broker?


Carriers evaluating and reducing their distribution channels (Innovation Health)
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Staying Compliant with All of
These Laws
How Can You Feel Confident In Your Compliance With
Today’s Laws?

Broker is a strategic partner to help you understand your responsibilities as the
plan sponsor

Remember, laws are changing rapidly and regulations are often late or delayed
(short period of time to read, interpret, and react)

Broker can provide specific compliance services
Form 5500 Filing
 Discrimination Testing (may use FSA vendor)
 Document drafting and updating
 Annual Notice Drafting and Support
 Legislative Updates
 Calculation of PPACA Fees and Filing Assistance


Plan Sponsor is Ultimately Responsible for Being Compliant
Select a partner with in-house ERISA attorneys (are they accessible? an extra charge?)
 Include specific compliance service requirements in your RFP
 Include specific service in your annual service calendar

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Compensation
Compensation Arrangements

Commission on insurance placements
Medical: 3.5% to 5%
 Dental: 5% to 10%
 Life/Disability: 10% to 15% (some products may be a sliding scale)
 Voluntary benefits: Varies, often have a higher first year commission and a small trail


Fee for service (hourly billing) – varies by firm and level of resource

Annual Retainer Fee – often pegged to historical commission figures

All options may include or exclude specific hard dollars costs
Claims advocacy services
 Printing
 Data mining


Contingent/Persistency Compensation
Disclosed on Schedule A
 Reinvestment opportunity for brokerage firm
 Key focus has to be what is best for the client regardless of impact to annual bonus

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Brokers Become Vendors
Concerns with Broker Carrier Exchanges
2015 Metro DC Survey of Benefit Strategies & Trends
50%
42%
42%
40%
30%
37% 37%
28%
40%
35%
30%
20%
10%
0%
Plan Design and
Objectivity of
Vendor Choices Recommendations
Very Concerned
Fee/Cost
Transparency
Multi-Year
Contract
Requirement
Somewhat Concerned
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ZyWave Broker Services Survey
2014, ZyWave Inc.
ZyWave 2014 Broker Services Survey Data

ZyWave – software as a service vendor for the insurance industry (compliance,
administration, surveys, etc.)

Annual survey of 3,000 employers representing various industries and group
sizes across the country

Key findings
Employers are expecting more than just placement of insurance from their broker
 Employers looking for more than just a relationship, they are looking for a Trusted
Advisor
 Employers want to hear from their broker monthly about Human Resources and
Compliance issues
 Biggest factor leading to a broker change is not providing prompt and effective service
or answering questions in a timely manner
 Over 1/3 of respondents said lack of communication, not providing trusted advice, and
not offering compliance resources would cause them to change brokers

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ZyWave 2014 Broker Services Survey Data
Benefits Expected Services
Service
Important
Unsatisfied
Answers our compliance-related questions
(PPACA, COBRA, FMLA, etc.)
97%
28%
Provides updates/guidance on PPACA and
other legislative changes
97%
22%
Offers employee communications to help
employees make better decisions and
understand the benefits we provide
95%
40%
Important
Unsatisfied
Offers benefit statements to help our
employees understand the value of their
benefits
90%
63%
Provides online access to policies and
compliance and HR tools
89%
56%
Provides health and prescription drug
claims analysis
88%
56%
Benefits Areas of Opportunity
Area of Opportunity
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ZyWave 2014 Broker Services Survey Data
Top Five Criteria Ranked in Selecting an Employee Benefits Broker
Client Need
% of Respondents
Answers our compliance-related questions (PPACA,
COBRA, FMLA, HIPAA, etc.)
97%
Provides updates and guidance on health care reform and
other legislative changes
97%
Offers employee communications to help our employees
make benefit decisions and understand the benefits we
offer
95%
Offers employee communications to help our employees
understand how health care reform affects them
94%
Offers employee communications to help our employees
improve their health and become wise consumers of
health care
93%
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ZyWave 2014 Broker Services Survey Data
What Keeps Employers Up At Night?
Top Employee Benefit Challenges
% of Respondents
Managing health care costs
73%
Keeping in compliance and up to date on the changing
legislation, including health care reform
50%
Benefits administration and employee benefits education
34%
Attracting and retaining employees
29%
Helping employees become better consumers of health care
27%
Human resources issues
21%
Educating employees on health and wellness
18%
Worksite wellness programs
14%
Managing prescription drug costs
12%
Helping employees prepare for retirement
9%
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Our Mission
To be the worldwide value and service leader in
insurance brokerage, employee benefits, and risk management
Our Goal
To be the best place to do business and to work
www.lockton.com
© 2014 Lockton, Inc. All rights reserved.
Images © 2014 Thinkstock. All rights reserved.
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