Health Care Costs Play Major Role in Company’s Fortunes

By Carl E. Dickerson | August 18, 2003

The cost of health care is the most popular issue that politicians, employers and Americans of all walks of life are talking about.

Health care in America represents approximately 15.6 percent of the Gross National Product and the trend is continuing to rise each year at a double-digit inflation rate. Coupled with the continuing rise in costs of workers’ compensation in the State of California creates a major financial dilemma for any employer, and in particular the small employer employing less than 100 employees.

By most calculations, health insurance costs represent close to 11 percent of payroll equivalent alone. Therefore, this means that the proper purchasing and design of an employer’s benefits package can directly affect his or her bottom line.

Can today’s small employer successfully grow his company when an increasingly larger bite of his revenue must be allocated for the rising cost of health care? It is the opinion of many experts that this cost, if not brought under control, will result in a depression of new business startups, a increased number of business failures coupled with an ever increasing number of uninsured Americans, which now total close to 42 million.

What then is the solution, and what role can the insurance broker play in helping their client keep this cost under control?

The broker that is able to give their client reasonable solutions to this dilemma will close the back door and secure his business and improve the retention of his total book of business. The overall impact for the broker is that by adding health insurance to the services that they provide will substantially increase their aggregate revenue.

Many successful P/C brokers are adding employee benefits departments as an invaluable service to not only provide much needed increase in stability in agency income. It is not uncommon for some P/C agencies to have health insurance represent 25 percent or more of their total revenue.

The role of the general agent
The Property/Casualty broker needs to have a convenient, effective and timely way to present health insurance alternatives to their client. This can be accomplished through a group health insurance general agency.

The services that the General Agent should be prepared to provide are as follows:
– Insurance Carrier Selection
– Marketing and Premium Negotiation
– Premium and Rate Analysis
– Benefit Plan Review and Plan Design
– Claims Review and Resolution
– Coverage and Cost Benefit Analysis
– Self-Insurance Assessment
– Staff Training and Education Programs
– Employee Benefit Seminars Employee
Enrollment Assistance
– Employee Handbook Review
– Summary Plan Description Booklets

These above services should be comprehensive in nature, so that the P/C agent can spend their time in the area of their expertise.

By using the General Agent the broker receives the same commission that they would otherwise receive if they went to the carrier directly
and assumed all those responsibilities themselves. Therefore, it is more cost effective, faster, more professional and provides the P/C broker with the assurance of knowing that their client is well served with plans that are more suited for there cost profile.

An example of what a full service General Agent will have in a proposal is a list of all carriers and all plans that are offered, in sequential order from the most costly to the least costly, and what the benefit trade-offs are. In addition to health insurance, the General Agent can provide the same quotes for a variety of other benefits such as Dental, Vision, Accidental Death and Dismemberment, Long Term Disability, Short Term Disability, Worldwide Travel Accident Programs, Workers’ Compensation, COBRA Administration, Employee Satisfaction Surveys, Employee Wellness/Assistance plans, Self-Insurance Assessments, Prescription Drug Plans, Group Legal and Roadside Assistance plans.

The General Agent should also assist with training in-house personnel for the P/C agent so that the expansion of their book of business can be done in a more cost-effective way.

Carl E. Dickerson, president and founder of Dickerson Employee Benefits (www.dickersongroup.com), has over 30 years of insurance experience and is licensed in all areas of insurance, including employee benefits, commercial lines and bonding.

Topics Agencies Training Development Property Casualty

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Insurance Journal Magazine August 18, 2003
August 18, 2003
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