“One way or another.”
Is that the best way to describe a sound investment strategy nowadays?
Yes. If you’re talking about the growing number of agencies investing in group health benefits offerings.
It’s the attitude being echoed by more and more agencies when asked why they are increasingly investing in group benefits despite a looming decision from the U.S. Supreme Court that could overturn parts of the Obama Administration’s healthcare reform. Those spoken with said that despite the decision, which had yet to be made at the time this story went to print, they were moving ahead by beefing up employees and investments in resources to prepare for growth in this sector.
The consensus: One way or another, as times change and the world becomes ever more complex, the healthcare landscape is changing, and businesses small to large are going to need help navigating whatever system happens to be in place in coming years.
“Frankly we want to take advantage of whatever changes take place,” said Shawn P. Pynes, a principal with Barney & Barney LLC in San Diego.
Barney & Barney, which has numerous divisions, including a growing property/casualty division, sees group benefits as one of its biggest growth opportunities, and the agency is ponying up both fiscal and human resources to be prepared for that growth.
Regardless of what the Supreme Court does with the Obama Administration’s healthcare plan, or whether the Republican challenger Mitt Romney gets in office and halts the sweeping reforms, the elections themselves going to shape the implementation of healthcare.
That’s Pynes’ thoughts on the matter.
He adds a thought: States like California that have embraced healthcare, or Obamacare is many call it, are likely going to go through with health care exchanges that will shape the health insurance landscape regardless – thus driving employer need for services and products, or at least assistance in figuring things out.
“Regardless of what the federal government does, California is moving forward with the heath health insurance exchange,” he said.
Starting in 2014, Californians will have the California Health Benefit Exchange, touted as a way to make it easier for individuals and small businesses to compare plans and buy health insurance on the private market.
“The Exchange will enhance competition and provide the same advantages available to large employer groups by organizing the private insurance market, including a more stable risk pool, greater purchasing power, more competition among insurers and detailed information regarding about the price, quality and service of health coverage,” according to a statement from the state government.
Currently the Exchange is soliciting comments via public forums and online, and it plans to use the input to develop its policies, which it plans to release for comment in July to be finalized in August. Enrollment may begin starting in October, 2013 for coverage as of Jan. 1, 2014, according to the Exchange.
In fact, more than half of insurance executives believe that most health insurance will be sold through exchanges within five years, and nearly a third believe they will be government-run exchanges, according to a survey by Connecture Inc., a sales automation technology company focused on the health insurance industry. The firm conducted its survey during the America’s Health Insurance Plans Institute’s 2012 conference in late June.
While surveys on what firms will do in the face of healthcare reform vary broadly, the Connecture survey shows that nearly two-thirds, 61 percent, believe that five years from now the majority of small businesses will not offer health insurance to their employees, according to the survey.
Despite what surveys show, or what the pending election or Supreme Court ruling brings, Paul Saich, CEO of San Jose, Calif.-based Thoits Insurance Service Inc., is firmly in the “one way or another” set.
“No matter what direction it goes there’s always going to be a need for consultants on employee benefits,” Saich said. “We are at full throttle ahead with the benefits department.”
The last three big hires Thoits has made have been on the benefits side, and those hires have been to prepare the agency for expected growth in that segment, he said.
Roughly one fifth of Thoits’ business is headed toward group benefits, Saich said, adding, “and I would suspect with within the next 18 months it will be 25 percent.”
For hint of Thoits’ strategy think “captives.”
“Benefits is really going that direction,” Saich said.
Thoits is setting up captives to bring together companies together with similar synergies. Such captives can be comprised of a combination different of firms, or very like companies, as long as they have similar buying needs, he said.
Additionally, Thoits is negotiating with carriers to take bundled group benefits products and “unbundling the entire thing,” he added. “The idea is that we’re going to take the best of everything.”
The resulting products, and Thoits’ strategy, is geared toward the midsized market.
“It’s really a solution geared for the middle market,” Saich said.
In other words it’s for companies that are not big enough to do it themselves, but big enough to understand the process.
It takes a minimum of 100 to 150 employees to start talking about group captive, but ideally Thoits likes companies with employees numbering in the 200 to 250 range, and putting those companies with five, 10 or more others, he said.
“Usually we like to see about 1,000 lives to make a group successful,” Saich added.
Pynes of Barney & Barney said his agency is exploring numerous options to answer the building demand for group health offerings, including developing their own private exchange, and the agency is taking a strategic approach by focusing on a particular segment of the market as well.
“We really believe that the jobs are going to be created at the lower end of the market,” Pynes said.
Their focus is on assisting their existing clients – and obtaining new clients in – the small group space.
“We think a lot of brokers are running away from small group because of uncertainty that exists,” he said.
Pynes believes that while some employers will dump their employees from their benefit plans, move them into exchanges and take the penalty and get out, he doesn’t think that will be the case with the majority of companies.
And that’s why Barney & Barney is sold on employee benefits and healthcare. About half of the agency’s revenue comes from employee benefits, and 70 percent of that is tied to healthcare specifically, Pynes said.
Some of the investments Barney & Barney is making is in retirement services, compensation consulting, and two years ago the agency invested in enrollment and customer support by acquiring a small firm, Virtual Cosourcing Solutions in Orange County. VCS specializes in enrollment and retention services primarily for the insurance carrier industry.
The purchase provided Barney & Barney a platform to deliver consumer insurance offerings. Expanded services will include extended customer service hours, online enrollment services and an online purchasing portal.
“What we’re trying to do is be prepared to deal with individuals instead of just companies,” Pynes said. “We recognize we’re going to have to get more connected to the end users.”
Barney & Barney also sunk some research and development cash and resources – Pynes wouldn’t say how much – in their actuarial department to develop what he described as “a robust healthcare reform remodeling tool” to help walk employers through the financial implications of their healthcare decisions through 2018 when reform is supposed to be fully implemented.
The tool is a computer software program that allows Barney & Barney to plug in variables – financial data, Census data, employee salaries – to help calculate what a customer’s benefits cost will look like over next five years based on how reform is worded now.
The software tool will tell an employer what it will look like if he cancels all his insurance and pays a $2,000 penalty and sends all employees to an exchange. Want to know what happens if you gross up salary so employees can buy their own coverage? How about if you continue to offer the coverage you offer today and just things let play out?
“What we’re finding is it’s not that simple of an equation,” Pynes said. “If you really walk through what the implications are, it’s not that easy of a decision.”
There’s also the moral decision some are struggling with to do “the right thing, whatever that is,” he added.
“That model, what it really shows, is it’s not a cut-and-dried decision,” Pynes said.
It’s far from cut-and-dried, said Karen Albanese, senior vice president Heffernan Insurance Brokers in San Rafael, Calif.
Albanese is seeing a great deal of interest in voluntary benefits, which employees are choosing to purchase through their companies at rates lower than they could get on their own.
“There is definitely a ground swell toward voluntary benefits,” said Albanese, who has worked in the group health arena for Aon, Marsh, Deloitte & Touche and Blue Shield of California.
The mounting number of options has led Heffernan to gear up to provide employers overwhelmed by the options – or that in need of more help for their employees – services like enrollment support.
“A lot of employers, they just can’t be present enough with the employees,” Albanese said.
Albanese’s Bottom-line: It’s all about alternatives.
“With healthcare reform there’s definitely a trend toward people looking for innovative alternatives in the medical arena,” she said.
Employee wellness is one alternative Heffernan is pushing. In fact, the agency itself has a dedicated wellness expert in its office.
“We have a huge emphasis on wellness,” Albanese said.
Another alternative Heffernan is working is alternatives to the state exchange.
Providing, or advising on, such alternatives are the baseline of where Heffernan sees its growth in the next five years, she said.
“I would expect we can grow our business by 10 to 20 times what it is,” added Albanese, who said she is going after the upper mid-market –businesses with fewer than 5,000 employees.
“I go after the underserved mid-market,” Albanese said, referring to that segment as a market with “a unique need.”
“They’re big fish in a small pond,” she added.
Albanese too takes the “one way or another” attitude about the future of group health.
“I’ve talked of lots of CFOs who said if there’s an option I’m out,” she said, adding that she’s talked to about as many who have said they plan to continue giving their employees benefits.
The question that remains, she said, is how to spend your money.
Like other agencies, Heffernan has invested heavily in tools like financial predictive modeling to help clients make those decisions.
“There’s a lot involved and it’s a very important discussion and it takes a lot of knowledge to help guide somebody thought that discussion,” she said.
“And we’re always retooling ourselves,” she added. “The focus on what the evolution is. Wellness, improving administration efficiencies, assisting clients in communicating, helping with strategies over the long term.”
Speaking of the long-term, Albanese was asked her thoughts on how the industry will shape up out to 2018, when and if healthcare reform is supposed to be in full affect.
“I think we’re just going to see further consolidation,” she said. “Mostly we’re going to see fewer and fewer brokers.”
See another video with Pynes and hear the full podcast at www.insurancejournal.tv.