Anthem Blue Cross Blue Shield announced their departure from the individual health insurance marketplace in most major county areas in Virginia at the start of 2018. Concern is growing about the state of the health insurance marketplace, and what the changes mean for affordable healthcare to consumers across the nation.
Increasing health insurance premiums and rising plan co-pays are just part of the issue. More and more people will find local and regional insurance agents reluctant to provide needed guidance and service to families looking for individual health insurance.
Anthem has maintained their plan to stay in the small group employer marketplace. However, Anthem and other regional insurance providers face competitive pressures from a new type of buying consortium, some of which provide small employers access to carriers and benefits historically restricted to larger employers (500 employees and above).
These consortium’s, called Professional Employer Organizations (PEOs) are often payroll service companies who have developed ways to provide additional services to the small employer clients. Through the PEO platform, small employers (down to just a few employees) can also access HR consulting and business consulting, providing non regulated services and in core areas of need for small business owners.
The insurance products offered through a PEO range from workers compensation to more complex commercial needs, health insurance, 401(k), and other core employee benefits. These products, however, require additional licensing by the provider instances of companies selling health insurance to clients without the proper licensing have already been reported. This has resulted in failure to meet compliance standards as part of their service offering.
However, there are PEO firms in the marketplace like BBSI, who partner with licensed local health insurance brokers as a way to leverage not only their relationships, but also their understanding of the local healthcare marketplace. Thus they can provide a more tailored, compliant, and effective solution to better meet the specific needs of individual small businesses.
Here are 4 reasons I believe that some PEOs are not helpful for the survival of the health insurance industry.
- Larger employers are more similar to one another than small employers – when buying insurance on a group basis, one of the first items the insurance company will request is the SIC code or Standard Industrial Classification. This is requested because the insurance companies can predict with reasonable certainty how different industries will perform from a risk and experience standpoint. That predictability is lost with the blended group, and thus businesses in certain industries with better claims experience are going to be financially supporting other industries with higher claims rates.
- Smaller employers need dedicated attention – looking at the federal health insurance exchange, there is a reason that experienced insurance agents are still needed to assist participants with enrolling in the plans. A licensed agent who knows the local networks and trends in the marketplace, along with legal requirements, can properly match the types of plans available to the specific needs of the employer. In a competitive staffing marketplace, health insurance and employee benefits need to be tailored to the employer’s goal for offering the benefit. The right benefits package can enhance the culture they want to nurture within their organization.
- Owners/Employers value local relationships – when is the last time the health representative from your PEO sent you a client referral, or found innovative ways to remind you that your business is a priority? Employers often depend on a local network to help build their business. Once established, the business has the opportunity to invest in the relationships knowing there is a long-term value in the trust and knowledge built over time. Health insurance brokers offer the same value to clients, providing an opportunity for business owners to build a long-term relationship with someone who keeps tabs on what is going on in their business. Better yet, the best insurance brokers look for ways to help grow their business on a local level, and offer a single point of contact if issues arise reducing the overall cost of business.
- The PEO model is a poor business match for long term success – business owners want to build a practice that is stable and predictable with little employee turnover thereby reducing costs over time. Many of the national payroll/PEO firms offering health insurance hire talent just out of college with little industry experience, and no track record of problem resolution – a key need for small employers who will encounter turbulence in their business. Further, the structure does not lend itself to long-term relationships if the sales representative on whom the employer decided to make the initial purchase (of services) moves on to the next opportunity.
As a business owner, you want your business to be recognized as the gold standard. If you don’t feel like you’re number one with your health insurance broker, or PEO, perhaps it is time to evaluate other options that can provide better, more tailored services to you and your employees.
David Hillelsohn is an insurance broker who prioritizes building long term relationships with clients that is built upon trust, knowledge, and compassion. David is the president of DHill Financial, LLC which specializes in health insurance and life insurance and he can be reached at 703/435-6028 or firstname.lastname@example.org. Contact David with questions.