Health Insurance at a Crossroads

Redesigning Sales Roles for a Moving Target

To say there are changes in health insurance is not exactly news. The game is clearly changing. But how are these changes impacting the sales roles of health insurance companies? Players from inside and outside the industry are betting heavily on new sales strategies to capitalize on the regulatory and market-related changes. Will these bets work? Maybe. Maybe not. But not changing (not taking calculated bets) is also a big bet which could lead to market share losses. However, they can also see how changing too much, or in the wrong direction, might significantly disrupt existing customer and broker relationships and revenue.

Instead of getting stuck in this indecision zone, leaders need to consider the winning strategies from similar industry transformations. (Further insights on this topic are also available on our website). We start by sharing why refocusing sales roles is critical now, then discuss what needs to change, and finally review how carriers should approach this path of sales transformation.

The Why

There are powerful forces reshaping the industry. The players are shifting, investing in new sales channels and service combinations. There is a lot of hype and confusion, but there is also plenty of significant action. Consider the following trends:

Trends Shifting the Industry

• Rollout of the Affordable Care Act (health care reform), including public and private exchanges, recruitment of the uninsured, community rating, risk pool shifts, increasing self-insurance, and the consumerization of health care decision-making
• Rising levels of competition and accelerated consolidation in both the health insurance and medical care sectors
• Increasing pressure to reduce healthcare costs, impacting all parties in the system, and increasingly driving purchasing decisions
• Powerful lobbying influencing how cost reductions will be distributed across care providers, insurance carriers, business customers and individuals
• New business models and entrants in the health insurance arena, including vertical and horizontal integration across insurance and delivery players
• Technological advances, such as mobile computing, introducing new patient management approaches and efficiencies

The What

In short, health insurance salespeople (both broker managers and direct sellers) will require more strategic sales skills to succeed going forward. They will need to increase focus on solutions that deliver value and rely less on product and price. Skills to develop and help execute business plans that provide greater short- and long-term value to the buying company (and to the broker) are essential now. These sales personnel need to focus on:

• Managing Fewer Brokers. The broker channel in the mid- and large group segments, including agents, brokers and consultants, is undergoing significant evolution and consolidation. These intermediaries are fighting to maintain a role in the buying process, while facing reduced commissions and margins. As a result, health insurance sales personnel must learn to focus on fewer brokers, particularly those that are aligned with their companies’ sales strategies. They must add more value in creative ways to help these brokers succeed and to win their loyalty.
• Creative cost saving solutions. Employers are increasingly exploring creative ways to reduce their rising health care costs, including employee wellness programs, employee cost sharing, and other insurance utilization reduction strategies. In particular, they are seeking to manage high-risk groups (e.g., diabetes, asthma) and seeking alternative financial arrangements, including self-insurance. Reps who are able to really help customers manage costs and risks and achieve desired outcomes will gain market share. Meanwhile reps and companies that remain stuck in their comfort zones around traditional sales activities will lose share and ultimately their jobs.
• Ancillary Product Sales. The ACA law limits the proportion of insurance premium dollars that can be spent on non-medical reimbursement costs. As a result, health insurance reps and companies are increasing their focus on selling more ancillary products such as dental, life insurance and wellness programs. The margins on these programs are currently uncapped. To succeed at this, reps have to learn new skills and tools in order to sell to new influencers.

The How

To manage this transformation, sales leaders can adapt key lessons from the sales transformation in high tech over the last ten years. They must avoid the “race to the bottom” that results from focusing on selling similar products for less. Tech industry winners trained their sellers to adopt new skills and processes and focused their sellers on higher-level economic buyers. To win in this new environment, health insurance players must do the same. Here are four important levers to drive this change:

• Account segmentation: Identifying which brokers to invest in and cover strategically is pivotal. Most health insurers provide dedicated coverage to top national accounts. But below national accounts, they typically rely on the “wisdom of the rep” to make account prioritization and investment decisions. The use of more sophisticated, data- and criteria-driven models to prioritize sales focus is needed to improve effectiveness. The role of the broker-manager will need to evolve to have a greater ability to capitalize on these different models and to prioritize sales efforts to the highest opportunity targets.
• Differentiated routes to market: “One size fits all” sales coverage models will no longer suffice. Health insurers historically differentiated coverage between individual, small group and large group customers. Now they must consider a broader continuum of coverage solutions ranging from web/self-service and inside sales for low potential accounts all the way up to complex dedicated account teams for the highest potential customers. Managing more diverse routes to market and sales roles will require carefully aligning sales costs to customer value, particularly during the new channel rollout and customer transition process.
• Performance-based Compensation: Health insurers must align their compensation plans with their new strategic selling objectives. Traditional commission plans that reward primarily for volume attainment will no longer be sufficient. Based on the lessons of high-tech and other sales transformations, health insurance leaders should be evaluating:

 – New performance measures that help focus reps on key products, cross-selling, strategic milestones or profitability – in addition to the traditional volume focus. The right application of these measures depends on the sales role, its targets and strategic objectives. However, the skills to design and implement such plans will be a key advantage for some carriers.

– Goal-based plans that help leaders align sales behaviors to both sales strategies and territory/account potential. Meanwhile, linked crediting rules can encourage the rep collaboration needed for more complex sales models and the agility to change as the market continues to shift.

– Aligned Pay at Risk to focus reps on the longer more sophisticated sales processes required to create partnerships that will benefit brokers and carriers over the medium-term. Success will require reps to have a longer-term perspective than today but still be hungry to produce sales results. For some long-cycle roles, this may even argue for less pay at risk, combined with smarter alignment of that pay at risk to more strategic sales objectives. While high rewards are still important to top performers, this role must act in the interest of the company in the long term rather than solely focusing on the current month’s sales volume.

• Sales enablement and operations: Guiding and supporting this shift in sales behaviors will require effective and richer sales planning, enablement and operations. Having the skills to design, implement and optimize new roles, territories, quotas and compensation plans will be a key advantage for carriers. The carriers that migrate the fastest will grow market share and profits.

When sales leaders face major industry changes like those occurring in the health insurance industry, they can learn from the experience of other industries and apply those lessons to pioneer change in their organization. At the Alexander Group we’ve seen similar patterns occur across many different industries over the years. Helping organizations make decisions with confidence as they navigate new pathways to growth is what we do.

For more insights on aligning sales strategy, roles and compensation for successful health insurance sales transformation, please visit our Health Insurance practice pages.