Skip to main content Skip to Footer

SMALL BUSINESS
HEALTH PLANS: GO
BROKER, OR GO BROKE

SHAKING UP SMALL GROUP MODELS

Small businesses with 2-50 employees are a growth engine for the American economy, continuing to grow year over year. However, fewer of these employers are offering health insurance. The percentage of firms offering health benefits dropped from 59 percent in 2012 to 53 percent in 2016.1 At the same time, medical loss ratios have increased in light of the introduction of an 80 percent minimum threshold and the rising cost of care. Carriers face a dual threat of decreasing enrollment and rising medical costs, forcing them to re-evaluate the way they do business.

Impacting the medical cost trend requires participation of a wide variety of stakeholders, many of whom the carriers cannot directly impact. Therefore, carriers are more likely to try to reduce administrative spend categories, where there is more that they can directly influence. The broker channel, given the high cost of commissions, is a frequent target. In theory, if carriers adopt a direct-to-employer sales model, they can cut out the middleman, thus improving service and eliminating commissions.

DOWNLOAD ARTICLE [PDF]

1 http://kff.org/health-costs/report/2016-employer-health-benefits-survey/

DISPLACING BROKERS IS DIFFICULT

Accenture surveyed 1,503 small employers to understand the role that brokers play and test the hypothesis of disintermediation. The research indicates that brokers are a cost-effective channel for carriers to grow their business and improve employer satisfaction.

The broker channel offers three structural advantages over the direct channel:

  • Brokers have a stronger relationship with employers than carriers. Although carriers continue to see rising Net Promoter Scores (NPS)®1 with members, their NPS with employers remains low. On these “first sale” contacts, Accenture research found that brokers achieved an NPS of 28 compared to -2 for carriers. Brokers also have longstanding relationships with their customers.

  • Employers see brokers as offering sales and service. While it is true that brokers continue to play a role supporting the “quote to card” process for employers, their activities extend beyond the point of enrollment, with some even supporting activities such as billing and claims inquiries.

  • Even those employers willing to switch to a direct channel believe that there are high switching costs to leave their broker. In fact, research shows that 42 percent of employers are willing to go direct under the right conditions.

DOWNLOAD ARTICLE [PDF]

1 Net Promoter, Net Promoter System, Net Promoter Score, NPS and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.

SWITCHING IS EXPENSIVE

If carriers want to avoid competing with brokers on a relationship basis and service basis, they can attempt to price the brokers out. However, this comes at a high cost—one that significantly outweighs the commissions currently paid to brokers with employers reporting a median required premium discount of 20 percent.

The pass-through pricing of commissions creates further complications for carriers, as employers are, in some cases, not aware that commissions exist. Of those respondents with a broker, 43 percent were not aware their broker received a commission and 9 percent thought their broker did not. This means that from the employer lens, disintermediation of the broker is a loss of free services.

DOWNLOAD ARTICLE [PDF]

OPTIMIZING THE BROKER CHANNEL

By investing to improve the broker channel, carriers can help grow market share and drive efficiencies, without the costly startup and ongoing costs required to go direct.


1. ANALYZE NEW DATA TO BETTER UNDERSTAND BROKER PERFORMANCE

Broker data models typically focus solely on revenue and commissions data. However, carriers can and should be asking more questions about the brokers. By creating a more complete picture of brokers, employers can achieve better results by identifying the brokers that are evolving to meet the new world of lower commissions and greater responsibilities from the carriers.


2. ADOPT A STRATEGY OF DIGITAL ENABLEMENT VS. DIGITAL REPLACEMENT

If broker service requires calling the carrier, then the services they offer still represent a cost to the carriers. Deploying self-service options for brokers is a valuable way to help them maintain their relationships with customers and reduce call volume.


3. USE THE BROKER CHANNEL TO ENGAGE WITH EMPLOYERS AND EMPLOYEES IN NEW WAYS

Sometimes the messenger is just as important as the message. If carriers are willing to invest in the broker channel, they have the potential to overcome trust barriers in the channel and tap into the brokers’ relationships with employers.


DOWNLOAD ARTICLE [PDF]

VIDEO INSIGHTS

What Can Health Organizations Learn From Our Small Business Employer Survey?

DOWNLOAD VIDEO TRANSCRIPT [PDF]

Accenture's survey asked key small business decision makers about their perspectives on health insurance and brokers.

Small Business Health Plans Search Ways to Reduce Broker Dependency

DOWNLOAD VIDEO TRANSCRIPT [PDF]

Accenture’s Scott Brown discusses how health plans can optimize existing broker channels to achieve continued success.

Stay In The Know

Receive e-mails from Accenture featuring new content that matches your interests.

Visit the subscription center to make your selections and subscribe to New from Accenture.