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.

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.

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.

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.

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.

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.

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.

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.\

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.

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