America's Health Trends
Selling Self-Funding Plans
What Makes You Different?

by Stacy Morris

“Let your current broker show you everything else in the market, I just want to show you one thing.”How would you like to walk into a prospective client’s office and make that statement? It speaks confidence and builds instant credibility that you are a person who knows something the current broker may not know. It will get your foot in the door.
Ask yourself a couple of questions:

• What type of salesperson am I -- an order taker or consultant?
• Would I stand out in a room full of my competitors?

You need something to set you apart from your competition. A portfolio full of yesterday’s solutions won’t cut it when you are working with small employers that are facing today’s realities. Allow me to ask this another way: Are you in business to do exactly what your clients want and nothing more or will you be the person who helps your client figure out what’s in the client’s best interest and make it happen?

Small employers have faced more than 10 years of double-digit rate increases. Each year, employers have to make the decision to lower the benefits, pass the extra cost on to the employees, or eliminate the health plan altogether. Employers need you now, more than ever, to be an expert and lead them in the direction that will provide relief

Step one is to break down the situation. In any size group, 50% to 70% of the members do not use the health plan in any given year or they use it so little that it doesn’t make sense to pay high premiums for co-pay or traditional plans. You can show the employer how to take advantage of that fact.

The next step is to address the benefits. If the employer strips out benefits, it hurts the 4% to 7% of the members who have a chronic illness and use the plan regularly. Once you show the employer how to lower the premium as I mentioned above, you can address how to improve the benefits.

What’s the solution? Health reimbursement arrangements (HRA) and medical expense reimbursement plans (MERP) can be packaged in different ways to fit your client’s needs. When you become familiar with the mechanics of a HRA/MERP plan, it will be an easy concept for you to deliver. As a consultant, you will show the employer a new way to take on some of the risk and responsibility of providing benefits. The end result will give your client a group health plan that saves the employer 30% to 50%, gives the employees benefits they have grown accustomed to, makes you an expert in your industry, and sets you apart from your competition.

How does it work?

By using the HRA/MERP solution, you will show your clients how to put in place a high deductible health plan and partially self-fund benefits accordingly. Typically, the self-funded benefits are customized to mirror what the client already has in place. With your guidance and the right administrator, the client can create its health plan in any way it desires

By moving the small employer client to the high deductible health plan, you cut the health plan premium by as much as 60%. It is from the premium savings that an employer is able to pay for any claims that may be incurred by an employee. The employer can rest easy knowing that its maximum liability is capped by the high deductible health plan and it will not self-fund any more than the deductible minus the employee benefits for any one risk unit. Take a client who selects a $2,000 high deductible health plan. The client then wants the employees to have a $250 deductible and the client will self-fund 80% of the remaining $1,750. This leaves the client with a meager $1,400 in liability. If one of the employees ended up in the emergency room with a severe medical problem, the client would not pay more than $1,400. The insurance carrier would then cover all charges incurred for the remainder of the calendar year.

The Research Continues

All of this can be administered using a TPA that specializes in HRA and MERP plans. When qualifying a TPA for your clients, there are things you should look for and questions you should ask.

How long Has the TPA been in Business?

There are many obstacles to overcome in order to provide a properly administered plan. A good TPA has met those obstacles

Does the TPA Offer Options Or Is it Just a Simple Reimbursement Plan?

The easiest path for a TPA is to offer reimbursement plans. When a member goes to the doctor or pharmacist, the member pays the provider in full for the services then waits for a check to come back from the administrator for reimbursement. This would be a good option if the members could afford to pay 100% of the cost up front. But how many members could afford that? Assuming the member could not afford to pay in full each and every time they visit a doctor or pharmacist, a co-pay option is typically preferred.

How Are Claims Paid?

It takes a seasoned TPA to work this method out so that it is seamless for the client. Some reimbursement TPAs will process the claim and send the reimbursement to the member as I stated above. This method could work out fine if the member paid in full. But how likely is a member, who still owes for services, to use the reimbursement to pay the provider? In many instances the provider ends up sending the member to collections for lack of payment. Other TPAs may process the claim and send payment to the employer, which works, but the employer then needs to forward that check to the member or the provider. Some TPAs will offer to process the claim and send payment to the provider. An experienced full-service TPA will have the capability to offer all of the methods shown.

How Are Fees for Administration Determined?

The saying, “You get what you pay for” is true in most scenarios. Some TPAs will offer to administer the plan for $5 less than the guy next door. You may find that a TPA advertises the lowest administration fee only to find out it applies to every member and dependent. If you really dig in, you will discover that the advertised fee is lower because the TPA’s services or capabilities are less and the claims cost to the employer is higher than it would be with a full-service administrator.
These are a few key points to consider when doing your research. The small employer client depends on you to know the answers in order to guide them in a direction that will keep them in business and allow the client to offer a competitive benefits package.

The Result

It takes years of persistence and continuous effort to become known as a consultant or resource, but it will be clear to everyone, once you have reached that point, including your competition. Small employers will begin to approach you and ask for your help with their benefits -- not the other way around. Remember, it’s not just about being different; it’s about being different in ways that provide greater value to your client. Offering these plans will give you the confidence to walk into your prospect’s office and say, “Let your current broker show you everything else in the market, I just want to show you one thing.”
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Stacy Morris, CEDS, is the Director of Marketing for BEN-E-LECT. Under Stacy’s direction, BEN-E-LECT created the concept of Employer Driven Benefit Plans TM, implementing strategies which put small employers in control of their group health plans, lowering cost without reducing benefits.