Filed Under:Health Insurance, Individual Health

Selling In The Age Of Health Care Reform: How Top Producers Are Addressing The Challenges

Jules O. Gaudreau Jr., ChFC, CIC, LIA, is the president of the Gaudreau Group, a multi-line insurance and financial services firm headquartered in Wilbraham, Mass. He works primarily in the corporate market with a focus on employee benefits, estate and business applications of life insurance, and commercial property/casualty lines. Jules is an eight-year member of the MDRT with one Top of the Table and four Court of the Table qualifications. As a NAIFA trustee, he has served as the board liaison to the Young Advisors Team, APIC, and Government Relations Committee and is past president of NAIFA-Massachusetts.

Mark Gaunya, GBA, has more than 22 years of experience in the employee benefit industry and is an equity partner and principal for Borislow Insurance. He is a former sales leader for several regional and national health insurance companies, covering all market segments and employing multiple funding models. Mark is the co-author, with partner Jennifer Borislow, of "Bend the Healthcare Trend." Mark is a five-year member of the MDRT with five Court of the Table and four Top of the Table qualifications. He also serves as the president of the Massachusetts Association of Health Underwriters and is a board member of various insurance company advisory councils.

Thomas E. Heinecke, CLU, RHU, is an independent agent who specializes in life, health, disability and retirement insurance services in Hopkins, Minn. He has been active in insurance and financial services since 1980, and he has a wealth of experience in health insurance sales, both group and individual. He is a member of the Minnesota Association of Health Underwriters.

There are a number of adages in the English language that highlight the relationship between challenge and opportunity. I'm sure you've heard many of them. There's the one about how, in the Chinese written language, the character for danger and the character for opportunity are one and the same. (By the way, I'm not really sure whether that is actually true, but motivational speakers throughout the United States repeat it like it is.) There's also the one about how whenever a door closes, a window opens. And I'm sure you can think of a number of others.

The reason we have so many adages to describe this relationship is that, by and large, what these oft-repeated phrases tell us is actually true -- there is often an opportunity that accompanies a challenge.
With PPACA and other, unrelated market changes impacting health insurance, even people from outside our business understand how difficult these challenges must be. But what many people don't understand is how the top producers are viewing the changes and how they are still operating even in the most challenging of business environments.

To help us better understand that, we asked the following top producers to discuss the effects of health care reform on their respective businesses: Jules O. Gaudreau Jr., ChFC, CIC, LIA; Mark Gaunya, GBA; and Thomas E. Heinecke, CLU, RHU.

QUESTION 1
Charles K. Hirsch, CLU:
Can you talk a little bit about why you decided to make health insurance part of your business, and what the sales environment was like at that time?

Jules O. Gaudreau Jr., ChFC, CIC, LIA: In 1992, I had been in the life and property/casualty business for nine years and was hitting my stride writing mid-sized commercial accounts. My business clients appreciated the services we were providing on their property/casualty lines and frequently asked if we could do the same in the group insurance arena: creating plan specifications; drafting requests for proposals and marketing their plans to various carriers; collating data into comparative rating and decision-making models; and providing employee education and claims mediation services.

Managed care plans were starting to become mainstream in Massachusetts, with low deductibles and co-pays. Interestingly, we also wrote hundreds of non-group policies, which were all lost in the late 1990s, when carriers left the marketplace following the passage of our guaranteed issue law. Group insurance is now approximately two-thirds of our practice's revenue.

Mark S. Gaunya, GBA: Health insurance has always been a part of our business, from an accidental group insurance sales call made by my partner, Jennifer Borislow, to the present day, where we operate a thriving employee benefits practice serving more than 350 corporate clients and 25,000 families in 40 states across the country. From what Jen tells me, back in 1982, it was a whole lot easier to find and write new group clients. Today, the world of health insurance is complex and growing increasingly challenging with the advent of ObamaCare. While frustrating at times, it's that complexity that makes us even more valuable to the clients we serve.

Thomas E. Heinecke, CLU, RHU: In the fall of 1980, I entered the insurance business as a district representative for Aid Association for Lutherans -- AAL. At that time, AAL's portfolio of insurance products included traditional life insurance, fixed annuities, disability income insurance, major medical insurance and a hospital confinement plan. AAL had a closed territory for its representatives, so it was up to me to meet the health insurance needs of the Lutherans within my assigned territory.

When I was studying for my insurance license exam, health insurance seemed to be much more complex and difficult than the life insurance segment. This, of course, meant that, after passing my licensing exam and getting trained, my first appointments were with people interested in health insurance. On-the-job training was in full swing! "I don't know, but I'll get back to you with an answer" or "Let me check and call you back" were useful answers.

There are still times when that sort of phrase is the most appropriate response.
By the mid 1990s, I had become an independent agent. Another older agent I knew invited me to help him with his health insurance agency. We grew our relationship, and at the same time, I developed relationships with other agents, many of whom were property and casualty agents who needed help with health insurance for their clients.

Now, most of my business is health insurance. I supplement the referrals with Internet leads.

QUESTION 2
Hirsch:
It seems like many producers will look at the changes that health care reform is bringing to the way they do business and think their business will only be changed in a negative way. However, one thing most people who have been in this business a while learn is that change -- even what looks like massive negative change -- can actually open up exciting new opportunities for the smart producer. What are you finding with regard to the changes that are being driven by health care reform? What are the major negatives? And if there are significant opportunities, what are they?

Gaunya: Our clients expect us to understand, filter and communicate the impact of any new federal, state and local laws and regulations. They count on us to keep them in compliance. As the president of the Massachusetts Association of Health Underwriters -- MassAHU -- and the National Association of Health Underwriters -- NAHU -- I participated in the ObamaCare debate. The end result was a combination of disappointment and a sense of optimism.

By understanding the details of the law, that experience helped us identify opportunities where our business would be well-positioned to assist our clients and prospects through uncertainty. Fortunately, we were ready for ObamaCare because of our practical experience implementing Massachusetts health care reform in 2006. That knowledge enabled us to prepare for the changes the new policies would bring about -- the good, the bad, and the ugly.

The biggest negative is what ObamaCare represents -- the takeover of health care by the federal government and the uncertainty that goes with it. It was sold to the American people on the premise it would reduce costs, but the reality is that costs are rising faster as a result of its flawed design. I'm not quite sure how you insure 32 million more Americans, require additional mandated coverage, and yet reduce the cost of health care. The principles of government control rather than consumer empowerment -- private market solutions -- are what make this law so troubling.

The next biggest disappointment is the amount of time and energy we invest. Compliance used to occupy one-third of our time -- now it accounts for more than 50%. In addition to the resource challenges, ObamaCare has also enabled the health insurance companies to reduce our compensation in a time when workloads are increasing -- through new regulation. One little-known but important provision in ObamaCare is the requirement of insurers to spend a certain percentage of the premium dollars they collect on health care expenses versus administrative costs.

Broker compensation is built into the premiums, which are paid by our clients and charged by health insurance companies as a pass-through expense. The MLR -- minimum-loss ratio -- provision enables the health insurance companies to reduce their compensation to comply with the law, and most of them are taking full advantage.

As I stated earlier, we believe where there is complexity there's opportunity -- but where is it? In our agency, we created a compliance practice to serve our clients and broaden our overall value proposition. To the extent that a prospective client isn't in compliance, we ask questions that point out the material weakness and position our knowledge, expertise and resource commitment to help us earn the business -- outright or through a limited consulting engagement. Revenue opportunities do exist if you are creative.

Ironically, the cost pressures exerted by ObamaCare are actually pushing the market in our direction. You might ask, how? In 2009, my partner and I authored the book, "Bend the Healthcare Trend -- How Consumer-Driven Health and Wellness Plans Lower Insurance Costs." It's the best business card we could have ever designed.

By embracing the principles of transparency, responsibility, and opportunity, we help our clients and prospects lower their insurance costs and improve the overall health and well being of their employees. In a world of increasing complexity and cost uncertainty, this book provides our clients and prospects with vision and clear direction.

Heinecke: Change is an integral part of life. How many different tax reform or simplification bills have we seen during the 30 years that I have been in the insurance business? Many times, I have told clients that all we can do is play by the rules as we have them today. If the rules change, we will have to adapt accordingly. And if we don't like the way the rules are being changed, then we need to consider where we mark our "X" on the ballot in November.

Health reform has been signed into law. Many of the provisions are not yet in place. And the rules and regulations that will affect the implementation of ACA are in the process of being written. If nothing else, this process has awakened and enlightened many, both within the insurance business as well as in the insurance-buying public, on how our government works and how we as citizens can try to influence or move our elected leaders.

Clients trust us to provide workable solutions. They trust us with a great deal of personal information. Now clients are looking to those who they have trusted to continue to provide them with information on what the changes will mean for them. It seems to me that the knowledgeable and informed advisor can solidify his relationship and his reputation with his clients by providing accurate, reliable and up-to-date information to his clients.

The biggest potential downside for agents is the potential for lost commission revenue. However, if one has established himself as a trusted and reliable advisor, many people will still need someone to guide them through the maze of health insurance choices and options.

The Internet can already be looked at as one of our biggest competitors. The Internet can be a competitor if we allow ourselves to be selling a commodity that is purchased based solely on the lowest price. We need to show not only our prospects and clients the value that we as agents bring to the table, but we must also take this opportunity, as potential health insurance exchanges are designed and perhaps implemented, to show the public and our governmental officials what value and service we bring to the table.

However, if we are just peddling a product, we could easily find the government taking our product away from us.

Personally, I am trying to expand my business. I am looking at clients where all that I have done is sell a health insurance plan. These clients also have disability insurance needs; they will have different life insurance needs; and perhaps they have funds that could be put into an annuity. I need to be aware of these additional opportunities. I also need to make sure that my clients know that I do more than sell health insurance.

If I don't talk about some of these other needs, someday a better agent may come along who does talk about these other needs and who will provide innovative solutions to these needs. Because that other agent has solved these other needs, the client may ultimately turn to him regarding his or her health insurance needs as well. Thus, by at least looking at these other areas and making my clients aware of the fact that I can help in these other areas, I will be better positioned to protect my existing book of business.

Gaudreau: I am a big advocate for the concept of embracing change but also creating change where possible. One thing is certain: the complexity of health care will only increase -- expanding the need for our services. Those organizations that can assist buyers and consumers of health care to transition throughout the process will succeed. Practices are consolidating, and with few new entrants into the marketplace, new opportunities will emerge for leaders who evolve.

QUESTION 3
Hirsch:
The health care reform plan is an unfolding process, with certain aspects scheduled to kick in at specific dates down the road. While it is unfolding, opponents of reform continue to carry the fight into the courts, leaving health care reform with a significant cloud of uncertainty surrounding it. How does that affect your own business and strategic planning efforts? What would you advise other producers who are being scared away from the health insurance market precisely because of the uncertainty?

Heinecke: Life and health insurance products are all about guarantees. They guarantee that our clients will be more financially secure when they face the uncertainty of a major illness, a disability or the death of a loved one.

While we face an uncertain future and the uncertainty of a changing health insurance landscape in the era of health care reform, who but an informed and competent health insurance professional will be able to guide and advise their clients regarding health insurance needs and concerns?

I don't think we want the government to take over the role of health insurance advisor. There is a saying that goes, "When someone says to you, 'I'm from the government and I'm here to help,' you better hang on to your wallet and run!" Not many people would look to a government bureaucrat for expertise in any area.

How much can we depend on the media to provide information and especially expertise on health care reform and health insurance? First off, health care reform is no longer exciting news. Newspapers would be the one media source equipped to provide in-depth and detailed reports on what is happening with health care reform. But newspaper readership is down. Radio or television news might give a story two minutes. The Internet can provide more detailed information to those people who are actively searching for the information.

That leaves the professional health insurance agent as arguably the best resource, with the widest audience. That means, as agents, we have to keep ourselves informed on the developments surrounding health care reform.

We would do well to be a part of our professional associations such as the National Association of Health Underwriters, NAHU. NAHU and other professional associations put us in touch with our peers, provide a good source of information and education, and can help give us a voice in the political arena.
My business efforts are focused on keeping in touch with my existing clients. I want to review their changing needs and goals in light of the changes brought on by health care reform.

And I want to try to help the client meet other needs, such as the need for an income if they do get sick or hurt and are unable to work. Illinois Mutual, for example, has some promotional pieces that ask the question, "Do you have half a health insurance plan?" They then go on to state that health insurance makes sure that the doctors get paid, the hospitals get paid and the pharmacists get paid. The question, then, is who pays you if you are sick or hurt? This approach has at least opened some doors to a discussion about disability insurance.

Gaudreau: Uncertainty about the future of health care and the producer's role is causing many firms to simply abandon that segment of the insurance business. Many senior producers are selling or merging their practices. Our clients are similarly uncertain and are often reluctant to take a long-term approach to their benefits plans. The creation of "outcome-based" health insurance plan designs, which require innovation and commitment of time and resources, may often be delayed by such uncertainty. In my own firm, we have recruited two additional commercial property/casualty producers and will continue to boost our efforts in the life, long-term care, disability and pension areas.

Gaunya: ObamaCare's impact on our agency strategy is significant -- and multi-layered. We are committed to serving the employer market -- group -- because we believe it will continue to exist. One study by McKinsey & Co. suggests 35% of the employer market will cede to the state-based exchanges required to be established by 2014. However, most studies conclude the opposite, with a stronger employer market.

We are concentrating our growth efforts in the middle- to large-market segments -- 100-plus employees. The exchanges will disrupt the small-group market segment -- less than 100 employees -- by competing directly with brokers, or at the very least, reducing their compensation. If what's happened in Massachusetts is any indication, they will create legislative advantages to grow their presence, becoming a referee and a player at the same time -- a difficult competitive challenge.

As I noted earlier, health care costs continue to rise and absorb more of the employee-benefit dollars. Employers will seek to manage costs by reducing or eliminating other products and services. As they cut back on core benefits, opportunities arise to place worksite voluntary products so employees and their families can protect themselves. The insurance needs still exist; it's the purchaser that will change. Said another way, we see employers shifting their budgetary strategies to defined contribution for employee benefits, not unlike the shift we witnessed in retirement planning with 401(k)s. With this shift, we believe the burden of choice and responsibility will rest with the employees, and they will need to be engaged and educated to become empowered.

As for advice to other producers, ObamaCare brings significant change. Embrace those changes and seize the opportunity to create clarity for your clients in a time of uncertainty. Our role has never been more important.

QUESTION 4
Hirsch:
Because you are deeply involved in this market on a regular basis, where do you see the market ultimately heading? Will we eventually see a complete government-run single-payer system, or in your view, will the private insurers still continue to compete? And as the market evolves, how do you see the role of the producer continuing to evolve? Further, how are you positioning your business to make sure that you continue to evolve with the market?

Gaudreau: Worst-case scenario: government takes over core medical benefits, preventive care, etc., in a clinic-based system. Private insurance would fill in the gaps, perhaps paying for private-pay-only providers. It will be difficult for private insurers to compete without gaining control of underlying medical costs. That control seems unlikely, as large medical providers have often become monopolistic sellers of health care in the regions they serve. It is difficult for private enterprise to compete with a government that can simply create fee schedules and force providers to accept them. Ultimately, a large percentage of medical costs not paid by the government are passed on to the private market.\

Health insurance professionals will take an increasingly consultative role in the future. It will be necessary to become an expert in regulation, taxation, wellness initiatives and human resource compliance issues. Commissions will go away. Brokers will be paid a capitated rate for small groups and will negotiate fees for services with mid-size and large groups. Most brokers will place an increased focus on lines of business other than medical -- for instance, group disability, group life, long-term care, pensions, and worksite marketing of portable life, disability and health care products to individuals.

Gaunya: The big question is where is this all going? That question will be more easily answered after the Supreme Court rules on the constitutionality of the law and the 2012 elections. If there is a change in the White House and the Senate, ObamaCare will be repealed or, at the very least, fundamentally changed. If not, the architecture of the law suggests more government control of the health insurance market through aggregation of the uninsured and small employers who will most likely abandon their role in providing health insurance to their employees.

I don't believe ObamaCare will lead us to a complete government-run single-payer system, but I do feel it is the desire of some to see that happen. Instead, I see ObamaCare increasing the rate of inflation for health insurance and forcing us to raise taxes to pay for yet another entitlement program.

As for the impact on insurers, I believe they will continue to face regulatory scrutiny for the premium rates they charge. Ironically, those rates will rise faster because of all the new additional mandates inherent in the law. I'm still not sure how we insure 32 million more Americans, provide richer benefits to those already insured and reduce our national health care spending -- that math just doesn't work for me. If the law remains in effect, I can envision a public utility-type existence for carriers. If the law were repealed, I imagine carriers would continue to develop innovative products and services to engage employers as well as their employees and dependents in being health care consumers and living healthier lifestyles.

In the producer community, there will be winners and losers based on the ability to embrace change, adapt to changing market dynamics, and create loyal relationships with clients that go down to the real customer: the employees and their families. For those producers who can see through the complexity, there is an abundance of opportunity.

Heinecke: For years, Ken Happ, who has perhaps had the greatest influence on my health insurance career, has said that he sees the federal government adopting a Medicare-like base health insurance plan for all Americans. Ken sees agents as selling a supplement to fill the gaps in the government plan and providing additional benefits above and beyond the government plan. Although I had no special insight, or perhaps, in light of health care reform, it was just wishful thinking, I did not see the government taking over health care.

The political winds seem to be changing and moving toward a more conservative position. I'm not sure that this means all of the health care reform bill will be overturned or negated. I do think that, regardless of the outcome of the 2012 election, there will be a continuing struggle between conservatives and liberals on health care reform and Medicare reform as well as on a host of other issues for years to come.

In my view, the health care reforms that have been passed as well as a single-payer system do not address the fundamental problems in financing our health care. It could be argued that any sort of single-payer system creates a monopoly in which there is no incentive to control or reduce the cost of care. Ultimately, it is the cost of care that is the primary reason for escalating health insurance costs.

All of us, as consumers of health care, need to take ownership and responsibility for our health and health care costs. We have to have some skin in the game. We need to adopt more healthy lifestyles; we need to make wise and informed health care decisions with our health care providers. No one else, whether that is a health care provider, insurance company or government agency, is going to be as interested or concerned about what is best for us as individuals than we ourselves.

As health insurance agents and advisors, that means we need to keep ourselves informed on the issues, and we need to keep our clients and prospects informed on health care and health care financing issues. We need to work so that the public, the government and, especially, our clients see us as the experts on ways to finance health care.

As individual agents as well as through our professional associations, if we are seen as the go-to experts with creative and innovative solutions, I think that we can keep health insurance as a viable private enterprise. Health insurance as a private enterprise must show that it is willing to adapt to changing health care needs and markets.

We must show why and how we bring value to the market. Rather than just showing a spreadsheet of quotes, we must take a consultative approach and be willing and able to ask probing questions to uncover the needs, goals and objectives. We have to let our clients and prospects see that there is more of a reason for our professional existence than our personal need for a commission check.

QUESTION 5
Hirsch:
Any further thoughts?

Gaunya: ObamaCare is not the right answer to rising health care costs, but it is the law until further notice. The magnitude of change is hard to measure, but one thing is for sure -- there is a lot more work and plenty of opportunity for producers who think strategically. The days of collecting an easy commission from group clients are over. Everyone will have to do more with less. Only those who think creatively and consistently demonstrate value will be around when the dust settles.

Invest in learning the law and pay close attention to regulations emerging from the Department of Health and Human Services. Those regulations are the blueprint for your agency business plan -- it's all in how you look at it.

If you haven't already, get involved with your state and local NAHU chapter. Leverage that membership and its horsepower with your legislators and help shape the laws and regulations in your state, especially as they relate to the exchange.

Invest in creating innovative tools you and your clients can use to make staying in compliance easier. Help them design a three- to five-year strategy that paves a clear path to compliance and effective risk management.

And visit www.joinMDRT.org and other association websites to learn more about how these organizations can provide access to more resources, as well as opportunities to discuss regulatory changes with others in the industry.

The world after ObamaCare isn't a place without a role for the savvy producer. Our role has never been more valuable because we create clarity and certainty for our clients, so they can then serve their customers and grow their businesses.

You too can turn lemons into lemonade; it's all in how you look at it.

Heinecke: A couple of sayings come to mind: "Talk is cheap; it takes money to buy whiskey," and "Practice what you preach." Perhaps I, as much as anyone, need to review these ideas regularly and make sure that I am putting them into practice.

Change is inevitable. There is and, perhaps, will always be a need to change and reform our health care system and our health care financing system. If we as professional health insurance agents and advisors show that we are willing and able to take the lead in making the required changes, we will not only keep our place at the table, but also help our industry grow and flourish.

Gaudreau: Make no mistake, the state and federal governments can ruin the health insurance profession if Americans let them. We need to stay organized, so join and support the National Association of Insurance and Financial Advisors (NAIFA). NAIFA is providing tremendous industry leadership and advocacy for the tens of millions of Americans who want the choice of private insurance and the brokers who serve them. Brokers must get involved in the political process if we are to save this honorable profession.

Charles K. Hirsch, CLU, is a contributing editor to Life Insurance Selling. He is the president of Hirsch Communications Consulting LLC, in Florissant, Mo.

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