4 Ways Brokers are Overcoming Commission Cuts with Ancillary Benefits

Brokers do a lot more than just sell. They explain critical differences, explore benefit plans and insurance options, and find solutions for employees and employers.

Brokers also help fill the communications gap between employees and H.R. executives, which is crucial when it comes to those potential healthcare costs people might forget about: like dental, vision, short-term disability and life insurance.

According to a 2011 Aflac study of employers and employees, 40 percent of H.R. executives said they believed they were "extremely/very" effective in communicating benefits. At the same time, 40 percent of employees rated their H.R. departments as “somewhat” effective in communicating about benefits. Another 27 percent said “not very/not at all” effective.

But, unfortunately, while brokers help companies and employees navigate their healthcare choices and select the least expensive, most effective plans, it’s been an extremely unhealthy time for the industry and their commissions. 

Cuts for agents who make a living providing employee benefits and group plans in medical commissions began in January 2011. In the months that followed the federal healthcare law’s medical loss ratio (MLR) provision, insurance brokers were quick to feel the pinch.

Last November, a member survey by the National Association of Insurance and Financial Advisors (NAIFA) revealed the following:

• 80 percent of brokers who sell health insurance have seen decreased commissions since MLR went into effect.
• Six out of 10 respondents reported that commissions dropped 25 percent or more in the following months
• 17 percent stated that commissions decreased 50 percent or more.
• One out of five survey respondents shared that they have had to lay off employees or drop the hours of customer support staff.

In addition to MLR, our questionable economy is making things just as tough for brokers. Many employers are reducing the benefits they offer employees or decreasing benefits to reduce costs.

The troubling report on commission cuts as a result of MLR is not new. What is new is how some brokers are responding to MLR by adding ancillary benefits to their sales strategy. In particular, those preventative and unplanned medical costs that many people forget to factor into their health care costs, including dental, vision, short-term disability and life insurance.

The good news is that many agents are finding success by turning to ancillary benefits such as dental and vision, according to an Employee Benefits Survey by Agent Media.

For employers, ancillary benefits can add significant value with limited impact on the cost of a comprehensive plan design. Ancillary products can enhance benefit packages and demonstrate goodwill towards employees, which can be the difference between losing and retaining top-talent when the job market shifts back to an employee-driven environment. 

Here are four solutions brokers are using to adjust to MLR and the economic climate, while diversifying their product offerings through ancillary benefits to help increase their revenue:

1.    DENTAL— Despite dental being the third most requested benefit, nearly 50 percent of America’s workforce is not covered by employer-sponsored dental insurance, according to the National Association of Dental Plans (NADP).

Lost time, lack of productivity, employee health, and reduced revenues are all critical reasons for employers to encourage workers to maintain good oral health and get to the dentist. Studies have shown that employees are more likely to keep up with their dental care with some type of dental plan in place, whether it’s employer-paid, voluntary or a combination of both.

2.    VISION— Vision plans are another preventive benefit that is often overlooked, but can provide essential savings for employees.

According to the Vision Council of America, vision problems affect 120 million Americans and cost businesses an estimated $8 billion annually because of reduced productivity. In addition, vision plans are one of the top five most-desired benefits by employees, according to a study by industry group LIMRA International.

A vision plan can be set up on a voluntary or employer-paid basis.

3.    SHORT-TERM DISABILITY— According to the Council for Disability Awareness, 30 percent of employees across America will experience a disability of some kind before they retire.

For employers, short-term disability benefits can help employees get back to work following an illness, injury or medical leave of absence. Many of the conditions that trigger payment of short-term disability benefits, such as pregnancies, resolve quickly, and the employee is often able to return to work before benefits are exhausted.

The setup for a short-term disability plan can be voluntary and provided for only certain classes of employees.

4.    LIFE INSURANCE— According to the Trends in Life Insurance Ownership study conducted by LIMRA, 35 million American households do not have life insurance. Eleven million of those include children under age 18.

In addition, the survey found that 40 percent of households would have trouble paying for living expenses immediately if the primary breadwinner died.

Group life insurance is an inexpensive benefit for H.R. executives to offer employees— one that can round out a benefits package by providing a financial security net during worst-case scenarios.

Ancillary benefits such as these can help brokers and employers adjust to the changing employee benefits environment. For H.R. executives, it can save the company money while offering a more comprehensive benefits package. For brokers, ancillary products can get them back on track in 2012.

About The Author

Nicole Ropiza is the Broker/Group Manager at DentalPlans.com, a leading online resource that offers more than 30 voluntary discount dental plans available for businesses and groups. For more information about a turnkey sales solution for insurance brokers, visit www.DentalPlans.com/Brokers or email DPBrokers@DentalPlans.com.