Wednesday, July 11, 2007

Tips From an Independent Benefits Consultant

  • You have the right to hire and fire your benefits consultant or broker.
One of my customers owns a construction business with several hundred employees. During my initial visit with the owner I discovered they had been told one owner would need to lose weight in order to obtain disability coverage. I pointed out a group LTD plan could be implemented on all 20 salaried personnel for less than the cost of individual disability on the two owners and it come Guaranteed Issue. After being hired I was successful in placing LTD coverage and further reducing a 45% health plan rate increase to 20% with the incumbent carrier. Your customers do not tolerate bad advice from your firm so why not hire someone who focuses on your issues and offers sound counsel?

  • Eliminate inefficient insurance costs
Insurance should be secured for catastrophic risks. Many employers continue to fund dental coverage when the annual maximums are limited to $1,000 or $1,500. This is not catastrophic protection and the cost can easily fund a risk that is catastrophic like disability for instance.

  • Try Fixing service problems with vendors before Firing Them by dealing with the right vendor personnel.
Too many consultants and brokers begin a new relationship by replacing incumbents without any effort to resolve the underlying cause of a service related issue with the incumbent. In a vendor relationship as in a marriage communication is always less painful than a divorce. A competent consultant can often resolve issues with an incumbent thus eliminating a costly and time consuming vendor search and implementation. Several years ago a very large hospital system was facing a mid rate guarantee increase from their group life and disability insurer. After meeting with the employer and their carriers underwriters we were able to eliminate the rate increase altogether for Life and mitigate the needed increase for LTD plan. If we had not sat down face to face with the client and their vendors underwriters an agreement would never have been reached. If you have not met your underwriter face to face how can you have a relationship?

  • Align funding, plan design and objectives
Several years ago I met with a customer with several thousand employees had a participating group life insurance plan and a self-funded Long Term Disability plan with an extremely limited benefit offering. The customer hated the cash flow fluctuations inherent with the minimum premium funding arrangement for Life and the FAS 112 exposure associated with the LTD plan.I recommended they needed to take advantage of the fixed cost of a fully insured life insurance plan and shift to a fully insured LTD plan. By changing the funding arrangement the employer was able to save over $100,000 annually while enhancing Life and Long Term Disability Benefits and generating a predictable monthly cost while eliminating future FAS 112 exposure.

  • Boost your pharmacy generic utilization rate
Statistics show that only 33% of physicians discuss generic drug options with their patients and patients only bring the subject up 2% of the time to their doctors. It is possible for an employer to secure a PBM which will utilize a simple process and plan design to assure insureds are encouraged systematically to utilize the low cost in therapeutic class generic alternatives. This change alone can take many employers from an 8-10% pharmacy trend to flat or even negative territory.

  • Demand relationships not transactions from consultants and brokers
The service models of many intermediaries at many broker and consulting firms is oriented towards their interests versus their clients. This is particularly true at many publicly traded firms where revenue growth and the pressure for billable hours focuses intermediaries on securing new business primarily while seeing that the service staff maintains just enough dialogue with existing clients to retain their revenue. Our clients deal exclusively with a principal who understands their objectives and translates them into plan design and actionable expectations for vendors so that a relationship rooted in performance over time. Our goal is a relationship not a transaction.


Anonymous said...

Thanks for a very interesting post.

Please explain the difference between a consultant and a commissioned salesman.

It has never been clear to me how a small business goes about finding a "consultant."

Is it as simple as calling an insurance agent listed in the phone book? But isn't that a commissioned salesman? What would his incentive be, to make the kinds of recommendations you've described in your post?

The Group Guy said...


Aside from the form of compensation--either commission or a fee basis I would submit that the difference between a consultant and a a broker is largely defined by their behavior. Is the focus of their behavior on pushing a product or solving a problem? There are a number of very high dollar consulting firms in this country pushing products or concepts and not solving specific problems which have been identified and targeted.

In short there are high quality brokers and consultants whose behavior is identical who utilize a consultative client focused style and then there are revenue driven brokers and consultants who are all about transactions. The key IMHO for employers is to keeep looking until you find someone whose behavior and performance meets your expectations.

Employers can also do an RFP for consulting or broker services and interview and select the firm whose services and style matches their needs.