Health insurance at a crossroads – the rise of value sellingBy: Marc Metzner Health Insurance
Health Insurance carriers are currently under regulatory and competitive pressure that some analysts predict will result in a 3-5 year wave of share loss and consolidation. As a result, some leaders want to dramatically reduce sales costs and lower prices to preserve share. By contrast, other leaders believe enabling their personnel to conduct higher-value selling is the key to survival.
The Alexander Group works with carriers to optimize sales strategies and just completed a study of 18 carriers on this topic. We conducted executive interviews and reviewed data on sales productivity, cost, quota and sales comp. Based on this research and on our experience with similar transformations in other industries, we believe adopting a value-selling approach is critical. Carriers have a broad mix of customers. While some low-wage customers want to cut their health costs immediately, most customers want help with innovative solutions that create the right employee environment. How should carriers adopt a value-selling approach to reach these target customers?
First, let’s summarize the impact these changes are creating for current sales roles. One national sales vice president described the magnitude of the impact: “I wake up some nights in a cold sweat wondering if we carriers just got ‘Kodaked’ – are we being made obsolete or turned into wholesalers?” The changes include:
- Relentless increasing pressure to cut both premiums and health care costs coming from employees, businesses, and government entities.
- The entry of new competitors into formerly static state markets, potentially leading to the type of severe consolidation the telecom services and other industries have endured.
- The launch of semi-private, on-line defined-contribution “Exchanges” by AON, Mercer and other “benefits consultancies,” where employees select carriers based on price/features.
- The launch of ACA Public Exchanges (run by states or fed gov) to increase price competition for individual buyers and give small employers the option of blowing up their plans.
- The on-going consolidation of large group brokers, leading to a narrower window for carriers to access customers and potentially to greater price competition as well.
The first step in developing a value-selling strategy is answering this key question: What do health insurance customers really want from their carriers today? Our industry research points to five key elements:
Cost Management – The C-suite is very aware of rising health insurance costs and wants assistance in managing costs down, but without unduly raising risks. They want creative pricing including new types of tiered networks and, particularly if self-insured, they want to understand how to use Wellness Programs, Disease Management and Case Management to reduce costs further.
Risk Management – Companies want their carrier rep to act like a risk consultant and help them understand the complex trade-offs between short-term costs and medium-term risks. Poorly-covered illness or injury can hurt employee productivity and company efficiency. Moreover, chronic conditions that are poorly managed can also degrade morale as well. As self-insurance migrates down-market, companies also need to understand their options and how to use claims data to manage risks. In fact, choosing the wrong stop-loss provider can lead to small business bankruptcy.
Employee Productivity – For many higher wage professional companies, a health-focused culture is an advantage in recruiting, retention, internal collaboration and productivity. Carrier reps need to demonstrate to senior executives how the right solution creates value for company culture and productivity. The solution cannot just be about medical, but must also include ancillary offerings like Dental, Vision, Life, Disability and Counseling. And it cannot just address insurance, but must also include Wellness Programs to keep employees healthy, Disease Management to manage chronic conditions, and Case Management to help employees make smart choices.
Channel Navigation – The emergence of private and public exchanges creates a greater need to help customers navigate their options. Beyond the choices of more or less coverage, self or full insurance, or the right ancillaries, companies now need to evaluate moving to an exchange. Carrier reps and brokers need to have compelling reasons why employers should stay off the exchanges, as well as high-value arguments for winning share in an exchange environment.
Employee Empowerment/Customer Experience – In this era of Consumerization, it’s a given that employees will make more of their health insurance decisions. However, companies need help determining the right elements of that choice, as well as if the carrier’s exchange can provide as rich a web-based customer experience as those of the benefits consultancies. Companies also need help evaluating potential employee choice options around tiered networks and variable coverage plans.
Conclusion – With all the industry changes and new choices they face, companies increasingly need help thinking through the options. This creates a major opportunity for the carrier sales rep and broker to become a valuable resource, especially since the benefits consultancies will now look more like vendors than trusted advisors. Taking a value-selling approach, carriers can position themselves in 2014 as a valued partner, providing innovative solutions that will help customers solve their increasingly complex health program needs. Carriers that get this right have the opportunity to maintain margins and grow share. Missing on this could lead to further margin and share erosion.
The game is definitely changing, and business as usual simply won’t suffice. To quote a sales vice president from AGI’s 2013 Health Insurance Sales Strategy Study: “In today’s increasingly competitive health insurance market, companies cannot expect to thrive by just selling traditional products to their regular customers any more…they must become trusted advisors consistently providing new products and new value to customers, or face death by commoditization.”
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