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 on 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 sometimes 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 even conducted employee benefit meetings despite the Ebinghaus study. (The Ebinghaus study concludes that within 24 hours we forget 75%, after 30 days we forget 90% and the 10% remaining only remember 5%). Most importantly they socialized with the powers to be with frequent lunches and a round of golf or two. That “service” continues to this day as a time honored tradition.

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 spreadsheeting. Ah, the power of the spreadsheet to reign in health care costs! Works every time doesn’t it Uncle Hermann!

Fortunately all of this is changing. Employers are smarter these days along with 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. And their ranks are growing. (

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.

Employers are beginning to understand health care costs cannot be tamed through spreadsheeting. 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 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 – traditional 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 never practiced to the degree we see today, employers are treating their second largest corporate expense seriously through intense vetting of select health care advisors prior to engagement (a necessary step towards a lasting and happy marriage).

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 the experience risk manager.