Sunny Days Ahead for Benefits Brokers?

As healthcare-reform settles in, advisors settle down with a new voluntary reality

by Dan Lebish

Remember Eeyore, the old, gray donkey who was a sidekick to the eternally optimistic Winnie the Pooh? For a few years there, brokers were a bit like Eeyore. They were certain that changes brought about by health care reform were storm clouds hovering over their industry.
Well, it looks like Pooh’s sunny attitude has won over the naysayers, because the results of the 2015 Aflac WorkForces Report revealed that brokers today have a much brighter outlook.1

Now that health care reform is in place and not just a series of changes on the horizon, the clouds have parted: More than half of brokers who took part in the 2015 survey agree they are confident about the future of their firms and their industry. Of course, a more positive attitude is to be expected when client bases and sales revenue are on the upswing:

• Nearly 4 in 10 brokers surveyed (39 percent) reported increases in their client bases over the past 12 months.
• Likewise, 36 percent said their companies’ sales/revenue grew in the past year.
• And more than half (54 percent) said their companies maintained their sales/revenue over the past 12 months.

The upside of health care reform

Thanks to health care reform, nearly all Americans now have access to major medical insurance, either through workplace plans or the health care marketplace. Brokers who once weren’t sure reform was such a good thing have discovered that major medical insurance is merely the tip of the benefits iceberg. It’s much more effective when it’s supplemented by employer-sponsored policies such as life and disability insurance and, going a step further, by voluntary insurance options that help pay bills major medical insurance was never intended to cover.

Brokers are eager to offer voluntary insurance to improve their revenue streams, and their efforts have been fruitful: Thirty-nine percent of companies offered voluntary options in 2014, up from 26 percent in 2012. What’s more, 64 percent of employees see a growing need for voluntary insurance today when compared to years past. Their reasons?

• 68 percent named rising medical costs.
• 64 percent named rising medical insurance costs.
• 56 percent cited increasing deductibles and copayments.
• 29 percent put the blame on employers’ reduced benefits and/or coverage.
• 49 percent named changes resulting from health care reform.

Capitalizing on voluntary insurance

No matter what the cause, brokers are ready to take advantage of the voluntary opportunity. To capitalize on consumer interest in voluntary products, nearly 6 in 10, or 58 percent, plan to increase the amount of revenue from voluntary benefits at their firms over the next 12 months. That’s a sizeable 9 percent increase over 2014 and a 14 percent uptick compared to 2013.

The outlook was just as bright when brokers were asked to project the success of voluntary benefit sales. Nearly half, 45 percent, believe the proportion will increase over the next year. The drivers of all this optimism? Brokers cited satisfying the needs of their clients’ employees as the No. 1 reason to include voluntary benefits options in their portfolios, followed by the need to remain competitive with other firms and the desire to offer broader benefits options.

Increased consumerism

Of course, health care reform – and workers’ increasing responsibility for their health care costs – is leading to increased consumerism when it comes to benefits options. One example: U.S. workers today have higher expectations of the benefits-enrollment experience. The majority of workers want enrollment to take place online, perhaps due to increased comfort with technology and the Internet. In fact, 63 percent prefer electronic enrollment, followed by 20 percent who prefer to enroll face to face and 11 percent who prefer paper enrollment.

Employers are of the same mind, because 62 percent used online enrollment in 2014. This is one area in which brokers are out of step. Not surprisingly, they think the personal touch remains the best way to go. According to the Aflac survey, brokers make these recommendations when it comes to benefits enrollment:

• 52 percent suggest it take place face to face.
• 31 percent favor online enrollment.
• 8 percent suggest it be handled by call centers.
• 7 percent encourage old-fashioned paper enrollment.
• 2 percent suggest it take place at kiosks.

Agitated, cash-strapped workers

No matter where and how enrollment takes place, brokers should keep in mind that workers are increasingly agitated by the economy’s slow recovery and the effect it’s had on raises, promotions and bonuses. One reason for discontent is that many are actually bringing home less than they were a decade ago – and the high price they’re paying for health care is to blame. Employees’ share of premiums increased 81 percent between 2004 and 2014,2 and health insurance deductibles have risen six times faster than workers’ earnings since 2010.3

For that reason, it’s more important than ever for brokers to act as trusted advisors. As companies seek to increase worker satisfaction with their jobs and benefits, here are some possible strategies:

• Encourage companies to find creative ways to give workers more bang for their buck. For example, some companies are giving workers more time off to ease the sting of stagnant wages and make their benefits offerings more competitive. Birthday holidays and “floating” holidays – one or two days off that employees can use whenever they see fit – are easy ways for companies to show appreciation for a job well done and that they’re giving real consideration to the concept of work-life balance.
• Encourage clients to take the sting out of health care costs by making medical care easier and more convenient to access. One growing trend is the presence of doctors and clinics at work sites. Surveys show that providing employees with on-site access to medical care increases productivity, enhances a company’s reputation as being a desirable place to work and reduces health care costs.4 What’s more, according to the 2015 Aflac WorkForces Report,1 employers are finding that in-house physicians are cost effective. Seventeen percent of participating companies said their wellness efforts include an on-site doctor or nurse. Of those, 65 percent agreed their wellness programs enabled them to offer lower health insurance premiums to their workers.5
• Suggest that companies change their voluntary insurance strategies. Given the fragile nature of employees’ financial circumstances, companies that currently offer or are considering adding voluntary products to their benefits offerings should carefully consider which products to make available to employees.

For years, dental and vision insurance have been the foundations of most companies’ voluntary insurance pyramids. But perhaps it’s time to rebuild those pyramids from the ground up. After all, benefits from some dental and vision plans are limited, and most workers can afford to pay relatively small bills stemming from new glasses prescriptions or the occasional cavity. It’s much more difficult for them to absorb bills stemming from serious accidents or illnesses. Given that many families have less than $1,000 set aside for emergencies,1 encourage clients to consider the benefits of critical illness, hospital and accident insurance policies.

The bottom line is that while brokers are embracing the new health insurance landscape, many U.S. workers aren’t as enthusiastic. One of the top challenges for insurance professionals in 2016 and beyond is coming up with meaningful, low-cost ways to improve their clients’ benefits packages and, in turn, help cash-strapped workers see the brighter side of benefits. ◊