By Kent B. Utsey
CEO of American Health Resources
Health insurance agents face numerous challenges. The Affordable Care Act (ACA) and an evolving legislative landscape have added complexities to the industry.
At the same time, insurers are reducing or completely eliminating commissions, while digital health care companies are attempting to lure small-business owners and individuals away from using agents.
But new opportunities exist, and the insurance agents who capitalize on them stand to benefit significantly. Perhaps the biggest untapped market is small businesses — specifically those with fewer than 50 employees.
Although the ACA does not require them to provide benefits, these companies are struggling to attract and retain talent. According to the career resource website Glassdoor, when it comes to recruiting talent, nearly three in five workers (57 percent) report benefits and perks among their top considerations in an employer.
Some small-business owners may think they can “go it alone” and circumvent using an agent, but there are risks to this approach.
Insurance agents offer small businesses many advantages, including knowledge of different health plan choices, the ability to navigate the enrollment process, insight into compliance and regulatory issues, and assistance with claims and plan changes.
But even these advantages may not be enough to convince small-business owners with tight budgets to use an insurance agent. However, agents who go beyond offering traditional PPOs and HMOs to bring clients the latest and most innovative strategies stand a better chance of convincing small-business owners to turn to them.
STRATEGIC INNOVATION BRINGS NEW SALES OPPORTUNITIES
Some agents may be familiar with the health reimbursement arrangement (HRA) strategy, which allows the employer to offer a less expensive high-deductible health plan (HDHP). These plans have a lower fixed cost than low-deductible group health policies, and when coupled with an HRA, they minimize the financial burden on employees.
However, there are risks involved with HRAs. One way insurance agents can showcase their expertise is to make sure small-business owners are aware of those risks, and provide solutions for them.
For example, if the HRA is designed poorly or paying too much for first-dollar coverage, or if the group is particularly unhealthy, excess medical claims may exceed any savings won by switching from a low-deductible policy to an HDHP. Contingent liability also may be a problem. If the employer is on the hook for $2,000 to $10,000 of medical expenses for each and every employee, that is a significant financial risk.
Finally, even a well-designed, well-managed HRA with no excess usage will have some increase in medical expenses due to medical inflation.
There is a way for employers to put a cap on their contingent liability and structure their HRA to reduce claims costs year over year. Agents can help their clients design and manage intelligent HRAs that stabilize the cost of benefits and avoid the financial risk that could potentially destroy a company’s bottom line. One approach is a health matching reimbursement arrangement (HMRA). It can be used as a funding mechanism to improve a standard HRA.
Insurance agents can sell this option to their clients by focusing on the cost savings and reduced risk. Employers can set aside money to protect themselves against medical inflation and claims risk. Deposits are “matched” by the HMRA provider, using actuarial principles, so financial protection grows very quickly. Once sufficient reserves are built, the money can be used to reduce claims expenses each year in the future.
For small-business clients, an HRA-HMRA approach is like putting money in the bank and being able to live off the earnings. The result is significant cost savings for the company, a reduction in claims risk and the ability to go to even higher deductibles with even lower premiums or to consider a partially self-funded plan.
How to Implement This Strategy
Insurance agents with a thorough understanding of how to implement an HRA-HMRA strategy will demonstrate their added value to their small-business clients. The following steps lay out the best approach.
 Determine the HRA plan design. A good way to do this is to decide how much the employee maximum out of pocket will be, given the HDHP deductible, because that determines how much of that deductible the HRA plan will pay. Limit it to expenses allowed by the HDHP only, and make sure employees are paying some percentage of the charges every time they go to the doctor, or that they have some other incentive to use the money wisely.
 Next, decide what deposit level they want to make to the HMRA accounts to build the assets. This is based on employer budget and how low or high the employer wants their claims cap to be in subsequent years. It is a per-employee, per-month (PEPM) deposit.
The goal is to build up assets in years one and two. This money can be used during this time if needed, but the objective is to build assets for the long term. Once those asset levels are achieved, there are no further monthly deposits. Only minor maintenance fees (and agent commissions) need to be covered.
 The employer then decides the amount of their claims cap each year, based on their financial goals, HMRA assets available and benefits budget. This amount can be changed at any time. Once that cap is reached, the HMRA takes over paying the claims.
 Setup can be done electronically or online.
 Deposits are bundled with regular HRA payments, so it is a single-check solution. HMRA balances are viewable online, and the HRA administrator is responsible for paying claims out of employer money, or HMRA money once that cap is reached. The employer has no additional administrative burden, and the process is invisible to employees. Claims are submitted and paid the same way, regardless of whether they are paid with employer funds or HMRA money.
The intricacies of today’s health insurance choices leave many small-business owners scratching their heads. Add to it the cost and administrative time commitment, and it is not surprising many either stick with their old policies that are wasting money or decide to opt out altogether. By making employers aware of new, more cost-effective and risk-adverse choices, agents stand to build their customer base and bottom line.
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