Executive Summary

Health insurance brokers traditionally have played the role of linking business customers with insurers, leveraging their resources to find the most cost-effective solutions for those businesses and their employees. The centerpiece of that strategy has been healthcare cost control, either by steering employers toward less expensive plans, cutting benefits, or by increasing employee contributions. However, as steam picks up behind the concept of Healthcare Performance Management (HPM), the competitive imperatives in the broker industry will change dramatically.

HPM is a technology-enabled, data-driven business strategy that tackles the challenge of controlling healthcare costs and improving quality in much the same way that enterprises have optimized customer relations, supply chain management and enterprise resource management.

As the healthcare landscape changes, brokers who embrace and master the principles of HPM can benefit greatly from the changes that this discipline introduces into the enterprise management of health plans and policies. It is becoming increasingly evident that it is no longer good enough to simply adjust plan costs and establish stand-alone wellness initiatives within an enterprise.

Changes in insurer and carrier business practices caused by health reform legislation also underscore the need for a new broker business model. The Patient Protection and Affordable Care Act, which requires carriers to satisfy minimum medical loss ratio (MLR) requirements, places significant new pressure on broker commissions. Insurers are already reducing broker commissions in the small-group market to help ensure compliance with MLR rules. While these efforts are expected to reduce premiums, they will also reduce broker commissions, now counted as administrative expenses. It raises a compelling question: What future do brokers have unless they find alternative ways to create new revenue streams?

“All stakeholders in healthcare, including insurance brokers, will have to adapt their business model and develop new areas of expertise and capabilities to be successful in the reform era,” says Michael Weinstein, a spokesman for Highmark, Pennsylvania’s largest health plan, to Insurance & Financial Advisor, one of the nation’s leading sources for insurance industry news.

An HPM-driven new business model can help brokers and their customers use data about key workforce population risk factors and trends to make rational investments in preventive programs within a specific employee population. The data can then be leveraged to effect desired changes in health outcomes.

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Document: 

The Changing Role of Healthcare Brokers_A New Business Model Provides Brokers a Competitive Edge.pdf