As a manufacturer in the Small Group Market (25-99 employees) you have less influence in the insurance markets than your larger competitors. Further complicating matters is that most Small Group brokers only represent one to three insurance companies and have little interest in doing more than renewing your coverage where it benefits their carrier bonus. Continue reading for an overview of common mistakes, an overview of your options, and how DCW Group can help your manufacturing firm.
It’s 90 days before your upcoming health insurance renewal and every broker you’ve ever crossed paths with is calling to ask for an updated census, summary of benefits, and the other information they need to “work their magic” for your company. You may have the information or may have to ask your current broker which could tip them off that you’re looking at other brokers.
Over the next 60-75 days your current broker will be slow to deliver relevant information to hinder the other brokers and the other brokers will be angling to figure out how to unseat the incumbent.
As the clock ticks down and your renewal approaches all of these brokers return to your office with the exact same proposals. What follows is a glorified beauty pageant that sounds something like this “we have an amazing team that provides incredible service, our carrier relationships are better than anyone else, and we’ve been doing this since 1804.” If that doesn’t entice you to make a change you are inundated by offers of “Value Added Services,” also known as who will give away the most support for free.
If you provide 10 brokers with the same data and send them to obtain health insurance quotes, all 10 will return with the exact same proposals. There’s no difference between the multinational, publicly traded brokerage and your neighbor's cousin who works out of his house.
As a small manufacturer you’re much more likely to run into Cousin Eddie than Corporate Carl but in both cases don’t simply accept an annual auction as the only way to control costs. Remember, the barrier of entry to become a health insurance broker is a one week course that you can take online and 24-hours of continuing education every two years. The person who cuts your hair requires more training and certification than someone managing a top three business expense for your company! If the price of your haircut doubled every four years you certainly wouldn’t put up with it, don’t do the same with your broker.
When an insurance carrier receives a request for proposal on behalf of your company from multiple brokers they know that they possess the leverage in the negotiation. You can’t possibly have a serious strategy for your upcoming renewal if you haven’t even chosen a strategist.
This is assuming that your current broker is even conducting a proper market evaluation. If your broker comes in with a spreadsheet and says “we looked and ABC Current Carrier is still the best option” you can be confident you’re renewing with the insurance carrier that has the largest market share (and bonus payment) for their firm. Brokers follow up these statements with circular conversations about how fortunate you are that they negotiated a few points off the renewal.
Ask to see the physical proposals from each carrier that was considered and watch the terror wash over their face. You can take solace that before you change brokers that they will have felt a small fraction of what you felt each time they delivered your renewal with yet another increase.
Insurance is a commodity. The plans and pricing are the same regardless of who represents your organization. Sending multiple brokers to quote your benefits each year creates an environment where brokers spend the majority of their time focused on how to beat their competition and not on what is best for you and your organization.
Brokers and consultants should be interviewed outside of your annual renewal and you should ask them the following questions:
Once you’ve conducted these interviews that have centered solely on strategy, select one firm to represent your organization. Any broker who offers to quote your benefits without having you as a client should be dismissed from the process immediately. If you choose them this year, next year they’ll be out there offering to work for free for even more non-clients which takes away from time spent working on behalf of your company.
It is not uncommon for employers to offer one set of benefits through a broker, and another set of benefits through a different broker or carrier rep. The most common occurrence is having one broker to manage your “Core Employee Benefits” like Medical, Dental, Vision, Employer Paid Life, STD, LTD, etc. and a separate broker/carrier rep to manage your “Enhanced Benefits” like Accident, Critical Illness, Hospital Indemnity, etc.
In this scenario the representatives from each brokerage or carrier likely don’t have a comprehensive understanding of the entire benefit portfolio. Employees miss an opportunity to understand how all of their benefits, both employer and employee paid, work in concert to build a program that fits their needs.
The lack of coordinated benefits can result in unintentional over-insuring, unnecessary over-spending, and create disruption and stress both in the workplace and home-life. Fortunately this is easily corrected by choosing a single brokerage to represent all of your benefits.
Many insurance brokers would prefer that Employers see health insurance and their employee benefits as an enigma only manageable with their expert guidance. If that were the case the barrier to become an insurance broker would be far higher than a one-week course that you can take online.
As an employer you should demand a baseline understanding of the pro’s and con’s of the various markets available to your organization for purchasing health insurance. Since all of the markets are the same regardless of the broker, you should be focusing on finding a firm who can take you from the market you are currently in to the market that you want to access.
You would be shocked how many new clients are able to generate significant savings simply by looking at a market they’ve been able to access for years that their previous broker overlooked or refused to evaluate.
For most small employers, the HR department and broker are typically tasked with the distribution of information, implementation of open enrollment, and execution of employee elections.
Far too often the distribution channel consists of voluntary all-staff meetings; or worse, emails or memos that go unread. Making matters worse are the staggering numbers of employers who are still executing this process manually using paper. In a post-COVID world there is no excuse for not transitioning your benefits administration online even if it still requires a personal touch in the first year.
By adapting the Counselor Assisted Enrollment process used by most voluntary benefits carriers it is possible to conduct 1 on 1 enrollments with your workforce, allowing you to use that opportunity to move your benefits administration online, and deliver a first-class benefit buying experience for your employees.
Healthcare and health insurance are notoriously opaque in their pricing. You deserve to know who is being paid, how much they are being paid, and what services are being rendered. We apply transparency to everything that we do and you will know exactly what our firm is being compensated. You may think you know today but there are numerous bonuses, overrides, and contingency programs that are not reportable on the Form 5500. Click here to download a sample of our fee disclosure agreement.
As a business leader you rarely make a change for more of the same or slightly better. Health insurance is fundamentally broken and the only way to bring predictability and stability to this top three business expense is to work with a partner who understands the business models of all parties to your health insurance.
By developing a risk profile for your organization we can leverage existing and emerging markets to build a benefit program that eliminates the profit margin and waste currently being retained by insurance carriers, pharmacy benefit managers, third party administrators, and other parties to your current health insurance program. Click here to watch a quick video that explains the business models leading to your increased premiums and some common sense solutions.
You have a business to run which means you likely don’t have the time or resources to develop world class business processes around benefits delivery and administration. One of the major reasons DCW Group is hired by manufacturers is that we have built those processes by leveraging our years of experience and best practices across the industry. Here’s what it looks like:
You wouldn’t be reading this if you weren’t frustrated with part of all of your employee benefits program. We wouldn’t be here if we weren’t equally frustrated with an industry that grossly overcompensates mediocrity while shifting cost to small businesses and their employees. Our recommendation is that we take 30 minutes for a compatibility call to see if a working relationship makes sense.
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