This article originally appeared in employeebenefitadviser.com
A few months before adviser Mick Rodgers of Boston’s Axial Benefits Group was named EBA’s 2017 Employee Benefit Adviser of the Year, he and 29 other forward-thinking benefits advisers from across the country signed their name to the “Declaration by NextGeneration Benefits Advisers” that declares nothing less than a revolution in employee benefits.
In the declaration, these advisers boldly break with the benefits industry status quo that year after year continues to deliver rising costs for employers and reductions in benefits for the employees that depend on them. Brokers who accept that status quo and continue to do the same thing year after year deliver, not surprisingly, the same “less bad” renewal year after year. And most benefit brokers remain status quo brokers. This is not an indictment — they just don’t know any better yet.
Rejecting that status quo, NextGen advisers have declared for a new model for delivering employee benefits. In this revolutionary new model, advisers engage the client differently, get compensated differently and commit to delivering not just activity but also bottom-line results for their employer client.
NextGen advisers are elevating their practice into the C-suite, in order to have a strategic benefits conversation with the CFO, CEO, president or owner of the company. While HR remains a valued partner in the implementation and operation of the benefits program, the adviser is developing the benefits strategy with the executive who is responsible for the company’s profits, the owner of the profit & loss statement.
C-level executives are highly strategic and highly incentivized to increase profits by reducing healthcare costs. C-suite executives view these NextGen advisers as business consultants, not insurance brokers, and are therefore much more likely than HR to follow their recommendations.
Moving the chair
The most essential innovation in benefits doesn’t involve a product, plan design or technology, but just a chair. Once they are working with a C-level executive, NextGen advisers symbolically are moving their chair around the table to sit next to the client. They’re doing this by, first, moving to fee compensation instead of commission on the medical insurance. But while moving to fees is necessary, it’s not enough. NextGen advisers are then putting part of their fee compensation at risk based on the performance of the health plan. In other words, performance-based fees align the adviser’s incentives with the employer’s so that now they both are sitting on the same side of the table.
In essence, these advisers are guaranteeing results for the client. If the client does well, the adviser does well. If not, the client keeps the fees. Never before has any broker or adviser sat next to the client and shared the risk. Until now. And it makes all the difference in the world to the broker/client relationship. The client implicitly trusts the adviser to act in the client’s best interest because the adviser now shares the employer’s goal: reducing the cost of healthcare to reduce the company’s benefits budget without reducing benefits.
Of course, these advisers are able to guarantee results only because they can deliver results. Despite the prevailing industry wisdom, NextGen advisers are reducing the cost of the health plan by reducing the cost of healthcare, delivering real bottom-line results for the employer.
This past October, Rodgers delivered $3.2 Million in unused premium back to 43 of his clients. Who does that?! What broker ever returned premium dollars back to the client? And it’s not just Rodgers. John Sbrocco of Questige in New Jersey, for example, recently delivered his client an oversized check for almost $86,000 in unused premium.
These premium refunds are possible because these advisers are putting groups into self-funded health plans with a per-employee-per-year cost 20-25% less than the average health plan in their markets. The self-funding environment gives the adviser the control needed to reduce the cost of healthcare. But just how does the adviser reduce healthcare costs?
Managing the healthcare supply chain
Rodgers and these other NextGen advisers are able to reduce the costs of employees’ healthcare because they’ve taken on the role of managing the client’s healthcare supply chain. As Chief Financial Officer Gary Bender wrote in his Foreword to Breaking Through the Status Quo, “[T]he real problem with employee benefits is that we in the C-Suite simply have not treated our benefits like we do every other key part of our business. … Supply chain management? Of course, for every single business unit in the company … except benefits.”
NextGen advisers manage the healthcare supply chain — the quality and cost of medical treatments — through strategies and tools such as medical management, fiduciary PBMs, specialty med cost-mitigation programs, bundled-price surgery centers, surgical bidding, direct contracting and reference-based pricing/reimbursement. These and other strategies address the misaligned incentives in the healthcare system that drive up the cost of medical treatment.
These innovative and forward-thinking advisers have rejected the status quo and the industry best practices that maintain it. They are setting the standard for the industry with their “next practices” that are improving employees’ benefits, engaging and educating employees on those benefits, and reducing healthcare costs to ensure that these benefits are affordable and sustainable for their employer clients.
In the words of Rodgers, “This is a revolution. The movement is real.” Are you ready to join the movement?