Managing Risk vs Servicing Risk – The End of Status Quo Brokers?

With little formal training, a majority of health insurance brokers back in the day were simply spreadsheet artists………………………….

By Bill Rusteberg

Employer sponsored health plans have traditionally relied upon independent insurance brokers when seeking health care benefits for their employees. With little formal training, a majority of health insurance brokers back in the day were simply spreadsheet artists. They would “shop the market” on behalf of their client or prospective client, spreadsheet the results and make recommendations.

Once the sale was made and the group enrolled, most brokers hung up their renewal suits and donned traditional golfing attire for the remainder of the plan year.

Of course brokers “serviced” their clients by taking care of minor problems as they occurred. They would contact the insurance company, explain the problem and parrot back the answer/solution to the client.

They even conducted feel good employee benefit meetings, ignoring the Ebinghaus study. (The Ebinghaus study concluded that within 24 hours we forget 75%, after 30 days we forget 90% and of the 10% of what we remember, only 5% is accurate).

Most importantly they socialized with the powers to be with frequent lunches and a round of golf or two, a traditional model basis for servicing the risk.

In essence traditional brokers service risk while implying they manage risk too, although they don’t.

In the past few brokers managed risk in the truest sense. Employers didn’t care or understand enough to care because to them “managing risk” was accomplished through an annual “competitive” bidding war pitting agents against fellow agents ending with a spread sheet risk management decision.

Ah, the power of the spreadsheet to reign in health care costs!

Fortunately all of this is changing. Employers are smarter these days aided by a committed band of health care innovators and revolutionaries bent on solving and taming the health care beast in this country. They jointly understand the true meaning of managing risk and place diminishing importance to servicing risk. After all that’s the job of vendors such as the carriers or third party administrators who are expected to provide excellent service as a condition of continued employment.

The Health Rosetta is a prime example of the new era insurance broker/consultant. With a torch in one hand and the Health Rosetta in the other these daring rebels led by Dave Chase are revolutionizing the way health care is delivered and financed in this country. Their ranks are growing and employers are taking notice. (www.healthrosetta.org)

Managing risk takes a broader knowledge base most insurance brokers lack. It takes a committed and constant continuing education in today’s fast changing, dynamic health care delivery system towards providing the best in class in risk management services. It takes a collaborative effort of sharing ideas and resources among like minded insurance brokers and consultants.

Employers are beginning to understand health care costs cannot be tamed through spread sheeting. They are learning they can control the health care supply chain on their own terms, not those of others with vested interests. They have gained a level of strength through knowledge they never had before. They are empowered, for the first time, to negotiate better terms from a position of strength rather than through weakness powered by ignorance. They’ve fired their parrot and hired an eagle.

They pay their insurance advisers directly for services rendered and refuse to work with brokers whose income is derived from commissions and undisclosed fees earned from vendors they recommend. They understand duty of loyalty is necessarily based on this model avoiding the inherent conflicts of interest of status quo insurance brokers.

The insurance community is close knit. We all know each other either through personal knowledge or reputation. We know the good ones and we know the bad ones. We know who to trust and who not to trust. And so do more and more employers.

Heretofore almost never practiced to the degree we see today, employers are scrutinizing their second largest corporate expense including intense vetting of select health care advisors prior to engagement. Criteria? Eagles not parrots.

Plan sponsors now have expectations that must be met but that most brokers can’t meet. Therein lies the demise of the traditional status quo health insurance broker in this country and signals the rise of the role of experienced risk managers.

RiskManagers.us is a specialty company in the benefits market that, while not an insurance company, works directly with health entities, medical providers, and businesses to identify and develop cost effective benefits packages, emphasizing transparency and fairness in direct reimbursement compensation methods.
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