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Brokers guide clients through health insurance maze

Brokers guide clients through health insurance maze

While individuals buying health insurance coverage in public exchanges are facing big premium increases next year — expected to be well over 20% in many states — and a dwindling number of insurers offering coverage in the exchanges, the health insurance marketplace for midsize employers is in far better shape, brokers and others say.

“Premiums are soaring in the public exchanges,” said Tim Cunningham, a partner with Optis Partners L.L.C., a Chicago-based investment banking and financial consulting firm that serves the insurance distribution network.

“Since the public exchanges were created, there has been a huge influx of uninsured individuals into public exchanges, resulting in adverse selection,” said Pattysue Rauh, executive vice president and national benefits leader with Daytona Beach, Florida-based Brown & Brown Inc.

By contrast, premium increases in the commercial market are running in the 6% to 8% range for midsize employers, which many define as organizations with between 200 and 2,000 employees.

Another sharp difference between the midsize employer and the public exchange markets: While several big health insurers have disclosed they will be exiting public exchanges next year amid big financial loses, midsize employers typically will continue to have several insurers from which to choose coverage.

“There still is a lot of competition for midsize employers,” said Maria Harshbarger, U.S. midmarket leader with Aon P.L.C.’s health and benefits practice in Chicago.

With midsize employers continuing to provide coverage to employees, their brokers offer a wide range of services, some directly related to the Affordable Care Act.

For example, broker Arthur J. Gallagher & Co. has set up a team of experts to help clients keep track of legislative and regulatory issues.

“We have about 40 people who are focused on regulatory and legislative compliance,” said Jim Murray, an executive vice president with Rolling Meadows, Illinois-based Gallagher.

And, there are plenty of other services brokers have been providing to their middle-market employer clients in an effort to hold down health plan costs.

Brokers, along with insurers, are helping employers set up wellness programs that give employees financial incentives, such as lower premiums or other cost-sharing requirements, if they enroll in company wellness programs.

Under some wellness programs, for example, employees can earn credits to offset premium charges if they have annual biometric screenings and participate in physical activities, such as walking certain distances.

“It is well-known that 20% of employees account for 80% of health plan costs,” noted Robert Reiff, president of Lockton Benefit Group in Kansas City, Missouri.

Given the link of wellness programs to improving employees’ health, it is not surprising that more than 80% of employers now offer wellness programs, Mr. Reiff added.

“It is a great way to get employee engagement,” said Brown & Brown’s Ms. Rauh.

“We are seeing the whole area of wellness programs expand dramatically,” said Sandy Ageloff, West region health and benefits leader with Willis Towers Watson P.L.C. in Los Angeles.

Brokers also are helping midmarket employers set up telemedicine programs. Under such programs, employees pay only a small fee to call a doctor or other medical professional about a health problem or condition. Telemedicine programs are considered a cost-saving alternative at times, such as weekends or at night, when their primary physician offices often are closed, with hospital emergency rooms being the only other alternative to getting care.

“Telemedicine is a great example” of how costs can be better controlled, said Jay Brown, a partner with Mercer L.L.C. in Nashville, Tennessee.

Yet another health care area where brokers are helping clients involves critical illnesses, such as cancer. The cost of treatment can be very expensive for employees, especially for those enrolled in high-deductible health plans.

To protect employees from those costs, some middle-market employers, with the help of their brokers, are offering so-called critical illness policies, which provide coverage for medical expenses, such as for cancer treatments, that fall under health plan deductibles. Unlike regular group health plans, though, premiums for critical illness policies typically are fully paid by employees, not their employers.

Critical illness policies are a “way to mitigate” the greater financial risks employees are exposed to when their employers move to high-deductible plans, Mercer’s Mr. Brown said.

At the same time, more midmarket employers, like their larger counterparts, are moving to self-insure their health benefit plans.

“It is a way to reduce costs,” said John Connell, regional president of Employee Benefits West for EPIC Insurance Brokers & Consultants in Concord, California.

Costs saved by employers that self-fund include exemption from state-mandated benefit requirements under a provision in the Employee Retirement Income Security Act of 1974, as well as the portion of premiums charged by insurers to earn a profit.

Meanwhile, the growing complexity of health care plans, as well as higher administrative costs, are leading more smaller brokers — those with less than $5 million in revenue — to merge with or be acquired by larger brokers.

“We have seen a lot more mergers and acquisitions in the last 12 to 18 months. The ACA made the business a lot more complex. You need more resources and the investment in resources can be cost-prohibitive for smaller brokers,” Lockton’s Mr. Reiff said.

“Consolidation will continue,” added Phil Trem, a senior vice president with Marsh, Berry & Co. Inc., a Willoughby, Ohio-based merger and acquisition advisory and consulting firm to the insurance sector.





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