As we entered 2006, you couldn't help but notice the myriad forces steering the benefits industry. Not since the rise of managed care has change been so irrepressible.
Technology is certainly one of the big catalysts. For benefits brokers selling group and voluntary products, there are five key trends driving the use of technology for both agency management and client service.
1. CDHP adoption. Adoption rates of consumer-driven health plans vary by region. Our survey of 283 companies from 41 states reveals 32% of businesses of all sizes plan to offer a CDHP option–that is, a health savings account or health reimbursement arrangement. Most of these employers are located in the Midwest and Southeast.
Brokers in regions that have been slow to adopt must be prepared to act quickly. In the Northeast, the number of employers currently offering HSAs (13%) is very low. However, that number doubles (26%) when asked if they are planning to offer HSAs this year. Once interest is demonstrated, adoption will move rapidly, and Web-enabled access to information and plan options will become a critical requirement for success.
2. Commission compression. Being a benefits broker is not as profitable as it used to be. Broker commissions will continue to shrink as carriers look to capitate commissions on a per-head basis and consumer-driven health plans, which pay lower commissions, gain market share. Shrinking commissions will require brokers to become more efficient to maintain profitability. Sure, client relationships will still require nurturing, but to compete, agencies must run as tightly as possible.
Technology will play a major role in achieving peak effectiveness. Brokers will demand quality solutions and expect extensive support and training. New technological developments in the areas of agency management and employee self-service are improving benefits practices across the nation. The best agencies will possess a broker-centric agency management system and set up portals for benefits management and employee self-service.
3. Mergers and acquisitions. Banks and large brokerage outfits continue to gobble up smaller broker firms to acquire instant market share. To combat the giants, some agencies have banded together to strengthen their collective resources. Firms that want to maintain profitable independence are better able to do so if they provide more effective client service and are more cost efficient. Agencies with a strong command of the latest technology will be more successful in a highly competitive environment.
