Buckle up!
The benefits industry is scrambling to adapt to a
rapidly shifting regulatory and economic
environment while also looking
ahead to an uncertain future.
2023 Health care survey
The benefits industry is scrambling to adapt to a
rapidly shifting regulatory and economic
environment while also looking
ahead to an uncertain future.
he benefits industry is not what Bob Dylan had in mind when he wrote “The
Times They Are a-Changin’” nearly six decades ago. However, it might be a
fitting theme song these days, given the economic and regulatory environment in which brokers and other benefits professionals find themselves in 2023.
Already this year, the federal government has issued a barrage of regulatory changes, from enacting sweeping SECURE 2.0 legislation to ending the COVID-19 public health emergency. Perhaps the biggest current challenge for benefits advisors is sorting out how these changes will affect both their clients and their own businesses.
Benefits professionals from across the industry shared their insights into the state of the industry and where it may be headed in the BenefitsPRO Health Care Survey for 2023.
T
By Alan Goforth
The Biden administration has its work cut out if it hopes to garner industry support in the 2024 election. Only 15% said the administration has had a positive impact on their business, while 60% said the impact has been somewhat or extremely negative.
Survey respondents also provided insights into both the challenges and opportunities they face today and what the future may have in store.
Regulatory upheavals
Very effective
Somewhat effective
Not effective
10%
43%
47%
What is your opinion of the hospital price transparency rule so far?
Extremely positively
Somewhat positively
No impact
Somewhat negatively
Extremely negatively
3%
20%
70%
7%
1%
How has the rule impacted your business and clients so far?
Extremely positively
Somewhat positively
No impact
Somewhat negatively
Extremely negatively
5%
16%
66%
12%
2%
How has the rule impacted your business and clients so far?
Very effective
Somewhat effective
Not effective
9%
43%
48%
What is your opinion of the broker compensation disclosure rule so far?
So far at least, the jury is out on the impact of recent regulations. For example, opinion is evenly divided on the effectiveness of the hospital transparency rule. Fifty-three percent of respondents said it is somewhat or very effective, while 47% consider it ineffective. But it may not matter, considering nearly 7 in 10 said it has had no impact on them or their clients.
Respondents similarly were divided about the broker compensation disclosure rule. Fifty-two percent called it somewhat or very effective, 48% said it is not effective, while two-thirds said it has had no impact on their business or that of their clients so far. Less than one-third said ongoing conversations regarding health care reform, such as the Affordable Care Act and Medicare for All, have had a positive impact on their business. Slightly fewer (28%) said the effect has been negative.
Overall, the majority of respondents said recent regulatory changes have had little or no effect on their business. Individual-coverage health reimbursement accounts have had the biggest impact, with 27% saying they have helped significantly or a little. The Consolidated Appropriations Act has been the least effective, with 21% saying it hurt their business significantly or a little.
Regardless of their perceived effectiveness, the flurry of new regulations have presented brokers with an opportunity to strengthen their advisory role with clients. More than 8 in 10 agreed that clients have become more reliant on them for information about regulations, compliance and similar topics in recent years.
Lower prices
Better servicing and processes
Superior, flexible benefit bundles
Consumer-friendly and technologically advanced enrollment tools
Excellent employee-facing education materials and methods
More seamless integration of the carrier’s administration with employer HR and payroll systems
Strong recommendation from other advisors
35%
30%
21%
19%
18%
13%
10%
Clients are scrutinizing benefits to focus on those that are most impactful
13%
30%
33%
47%
2%
How has the current labor market impacted the benefits discussions you have with clients?
Two topics are consistently top of mind for brokers: providing superior service that enables them to retain current clients while attracting new ones, and integrating fair compensation models so they can grow their own business.
When groups drop coverage, it’s always a cause for concern. Small-group accounts (fewer than 100 lives) were more likely than larger groups to have dropped coverage in 2022. Half of respondents said that between 1% and 24% of their small-group accounts had done so, compared with 26% saying the same about mid-market, large-group (11%) and national (9%) accounts. Nearly 9 in 10 expect the percentage of groups dropping coverage to stay the same or increase this year.
Brokers are also tracking employer
trends that could affect the products
and services they offer. More than
half said their clients are scrutinizing
benefits to see which have the most
impact in a tight labor market.
One-third of clients are interested
in expanding or offering new
benefits and are focusing on the
competitiveness of benefits
instead of the cost.
Meanwhile, small employer groups are more likely to move to a defined contribution approach by the end of this year. Four in 10 brokers expect up to one-quarter of their small-group accounts to adopt a DC plan. Fifty-three percent expect the percentage of accounts using DC funding to stay the same, while more than 42% look for an increase.
Despite recent surges in self-funding across the nation, only 10% of respondents said that at least three-fourths of their book of business is self-funded, while 60% said that less than half of their business falls into that category. However, nearly two-thirds expect a moderate or drastic increase in their self-funded business in the coming year.
When it comes to enrollment, brokers and employers increasingly rely on online tools. Respondents rated the impact of the pandemic on their clients’ enrollment selections and methods at 45 on a scale of 0 (not at all) to 100 (completely). The industry adapted its enrollment strategies out of necessity during the pandemic, and apparently, many of those adaptations are here to stay. Three-fourths of respondents agree or strongly agree that they expect these changes to remain in place moving forward.
Fifty-three percent of respondents said that at least half of their accounts use an online enrollment tool. More than 8 in 10 agree or strongly agree that “offering enrollment or benefits administration technology and/or an online solution to my clients is a critical component of my value proposition.” Independently using an online electronic enrollment tool is the primary way that client employees select and enroll in benefits. This option was most commonly cited by 63% of respondents, followed by meeting with a worksite enroller or broker in a group setting (42%) or meeting one-on-one with a worksite enroller or broker (39%).
Slightly less than half of respondents work with a preferred enrollment and benefits administration. This group is divided almost equally between having two or more partners (25%) and a single partner (23%). Only 14% have invested in developing proprietary private exchange technology.
Evolving client needs have brokers taking a closer look at which carriers deliver the best products and services. But what factors do brokers consider when recommending a health insurance carrier? Thirty-six percent strongly consider network breadth and strength, followed by:
State of the industry
Other
Clients are interested in expanding/offering new benefits
It’s shifted from a focus on the cost of benefits to the competitiveness
Not at all/no change
Respondents
at a glance
Number of employees
General or managing agent —
Brokerage owner —
Brokerage employee —
Consultant —
Carrier executive or representative —
Other —
16%
16%
23%
14%
23%
7%
17%
1 to 5 —
6 to 25 —
26 to 50 —
51 to 100 —
101 to 1,000 —
1000+ —
39%
20%
7%
7%
12%
15%
Respondents to the BenefitsPRO Health Care Survey represent a broad cross-section of industry roles and company sizes.
Roles
Click to show respondent breakdown
Click to hide respondent breakdown
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75% to 100%
5%
What percentage of your compensation currently comes from fees?
Although fees are important, they remain a relatively small portion of the overall compensation picture. Only 10% of brokers receive more than half of their compensation from fees, and 40% earn nothing from them. Thirty-five percent expect the amount of compensation from fees to increase moderately in the coming year, while nearly 6 in 10 expect it to remain the same. One-third look for their average compensation from fees and commissions from writing health insurance to remain the same in 2023, while 44% expect it to increase.
Show me the money
50% to 74%
5%
25% to 49%
13%
10% to 24%
14%
Less than 20%
23%
None
40%
Increase
significantly
In the coming year, do you expect the percentage
of your compensation coming from fees to...
4%
35%
57%
2%
3%
Increase
moderately
Stay the
same
Decrease
significantly
Decrease
moderately
75% to 100%
5%
50% to 74%
5%
25% to 49%
13%
10% to 24%
14%
Less than 20%
23%
None
40%
What percentage of your compensation currently comes from fees?
Brokers are also keeping an eye on several factors that are largely out of their control but could have a significant impact on their businesses in coming years. Most significant are the 86% who are worried to some degree about the ongoing consolidation of health care systems and health insurers.
Although 43% view the new wave of “disruptive” companies entering the industry as concerning or a grave threat, 30% consider it a much-needed wakeup call. One-quarter said the growing role of outside disruptors such as Amazon and Walmart will have no effect on U.S. health care, while the rest are evenly divided about whether they will improve or harm health care.
Finally, brokers are considering what might happen to their own businesses over the near or short term. Twenty-six percent of respondents said it is likely that their organization will acquire or merge with another broker or agent organization over the next five years. The same percentage said it is likely that they will buy out the book of business of a retiring broker or agent. Nineteen percent anticipate being acquired by another broker or agency, while 7% expect their organization to leave the health insurance or benefits business altogether.
Take a look ahead
Life insurance (whole or term)
Disability insurance (short- and long-term)
Critical illness/hospital indemnity/gap medical
Long-term care insurance
Pet insurance
Retirement products
ID theft protection
Legal products
Fertility and family planning
Student debt repayment
78%
73%
72%
57%
41%
38%
34%
34%
33%
28%
As if adjusting to the changing regulatory and economic environment in 2023 were not enough, brokers must also anticipate and plan for future changes. Mental health is the area that will see the most focus and growth over the next five years, according to 68% of respondents. Other areas they expect to grow include digital health (53%), chronic condition management (48%), caregiver benefits (34%), gig economy (19%) and FMLA revisions (15%).
More than 8 in 10 brokers either plan to start offering or expect to increase their focus on ancillary insurance coverage such as life, disability or supplemental medical in the future. Other services they plan to begin offering or emphasizing include promoting health plan consumer engagement and health and wellness programs (72%), promoting mental and behavioral health resources and benefits (70%) and promoting third-party non-carrier consumer engagement and health and wellness programs (63%).
Forty-four percent of brokers said they and their employer clients would offer more voluntary products if prices were lower. Meanwhile, 72% expect total compensation from ancillary and bundled products to increase slightly or significantly this year. Dental and vision insurance are the most popular voluntary products that brokers expect to sell more of in 2023, with more than 9 in 10 saying they expect to write a moderate or high amount of each. They also expect to sell moderate or high volumes of:
Three-fourths of respondents expect telehealth to have a somewhat or very positive impact on their business performance over the next three years, while only 5% anticipate a somewhat or very negative impact. Other innovations expected to have a positive influence include:
Direct primary care
Concierge services
Data/transparency tools
Direct contracting
Reference-based pricing
AI and machine learning
Medical tourism
Government regulations
65%
61%
61%
52%
47%
45%
25%
15%
Extremely worried
30%
Somewhat worried
43%
Slightly worried
14%
Not worried at all
14%
How worried are you about the ongoing consolidation of health care systems and health insurers?
Not at all/no change
It’s shifted from a focus on the cost of benefits to the competitiveness
Clients are interested in expanding/offering new benefits
Clients are scrutinizing benefits to focus on
those that are most impactful
Other
13%
30%
19%
56%
2%
How has inflation and the current economy impacted the benefits discussions you have with clients?
My organization will
acquire or merge with
another broker/agent
organization
26%
Which of the following would you say is likely to happen over the next five years?
My organization will
buy out the book of
business of a retiring
broker or agent
My organization will be
acquired by another
broker/agent
My organization
will exit the health
insurance brokerage
business
None of the above
26%
19%
6%
43%
Respondents
at a glance
This year’s Health Care Survey covered a wide range of topics that will affect the industry throughout 2023 and beyond. If one takeaway message emerged, it may be that brokers who are nimble enough to comply with a host of new regulations, adapt to new technologies and products, and respond to the changing needs of their clients and staff will be well-positioned for future success.
Number of employees
General or managing agent —
Brokerage owner —
Brokerage employee —
Consultant —
Carrier executive or representative —
Other —
16%
16%
23%
14%
23%
7%
17%
1 to 5 —
6 to 25 —
26 to 50 —
51 to 100 —
101 to 1,000 —
1000+ —
16%
23%
14%
23%
7%
17%
Respondents to the BenefitsPRO Health Care Survey represent a broad cross-section of industry roles and company sizes.
Roles
Click to hide respondent breakdown
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2023 Health care survey