How to Get into Groups...

[ABC]

So what kind of risk is a 30 life group taking on with your self funded platform?

You posted up to $127K in savings? How are you delivering that?

I would like to know specifics of the plan. What spec rate are you running? What is the aggregate? What is the run out?
Are there caps on benefits?

Can you answer these basic questions?

I thought I did. We use a variety of funding vehicles, including; Captive Insurance Companies with risk sharing, High Deductible with self-funding underneath the deductible, Spec and Agg, and Spaggraget. They key is not so much the product, but with the initial risk analysis. You need to find the groups that fit, meaning, risk that is below the average and employers who understand and are comfortable.

Rating of the risk is done in a similar manner to the fully-insured carriers model. Since there is usually no claim experience to rate these size groups, the risk is done based off of other factors, such as area, group census demographics, medical questionaires, etc. By the way, the medical questionaires (employer and employee level) is far more reliable than claim reports that may reflect months old information.

 

[TwiLight]

Can you answer these basic questions?

Leevena, what we want to see are specifics. You are dealing with seasoned vets that have been there and done that and I am having a hard time understanding your example.

Just delete the name to protect the innocent. It's not the third degree, this is a forum that shares ideas to help each other succeed.

 

[leevena]

So what kind of risk is a 30 life group taking on with your self funded platform?

You posted up to $127K in savings? How are you delivering that?

I would like to know specifics of the plan. What spec rate are you running? What is the aggregate? What is the run out?
Are there caps on benefits?

Can you answer these basic questions?

This one in particular is a high deductible plan purchased from a fully-insured carrier, with a self-funded plan under the deductible. For the self-funded portion you can use an HRA or not, it does not matter. This group is using an Agg only, but that is not required, it is what I call "sleep insurance" for the frequency risk.

Another option is the Captive Insurance Company. Usually in a Captive you will start with a $25k spec, and then have a risk-sharing corridor between $25 to $250, with each participating group sharing in that liability. Reinsurance is then purchased and the carrier will then cede a portion of the premium and risk to the captive. Each group is underwritten on their own and receive their own stop-loss agreements.

There are many level-premium self-funded plans out there also, too many to count and each work slightly different. But as a general rule of thumb, they rate the risk, give the employer a "fully-insured" rate, and then retrospectively refund money if the claims come in lower than expected. So for example, the proposal would say something like this; Pay us $400,000 for the year, and you are eligible for a refund of $125,000, depending on your claims level.

Again, the key is making sure you find the right groups, which primarily means a better than average risk (a group who is paying into the community pool) and who understands what they are getting and willing to do things to control their costs.

 

[ABC]

The first example, I have used which can bring in savings. For the group to have the kind of savings you are posting that would have to be very low risk. Also the current plan design has to be something that is very rich. So this really only works for on a select groups.

The 2nd example, I have explored a great deal and have not found any savings on groups under 50. You are asking the small group to take on 25K spec which is not worth the risk.

The 3rd example I have also researched a great deal. The level funded premium plans I have looked at have all been at least 10% higher than the fully insured premium. That was pre underwriting. The stipulations that I have seen for the premium refund have not really been in the clients favor. For the level funded premium to really look attractive you have to come below the fully insured cost. I have yet to see that.

Thanks for explaining.

This one in particular is a high deductible plan purchased from a fully-insured carrier, with a self-funded plan under the deductible. For the self-funded portion you can use an HRA or not, it does not matter. This group is using an Agg only, but that is not required, it is what I call "sleep insurance" for the frequency risk.

Another option is the Captive Insurance Company. Usually in a Captive you will start with a $25k spec, and then have a risk-sharing corridor between $25 to $250, with each participating group sharing in that liability. Reinsurance is then purchased and the carrier will then cede a portion of the premium and risk to the captive. Each group is underwritten on their own and receive their own stop-loss agreements.

There are many level-premium self-funded plans out there also, too many to count and each work slightly different. But as a general rule of thumb, they rate the risk, give the employer a "fully-insured" rate, and then retrospectively refund money if the claims come in lower than expected. So for example, the proposal would say something like this; Pay us $400,000 for the year, and you are eligible for a refund of $125,000, depending on your claims level.

Again, the key is making sure you find the right groups, which primarily means a better than average risk (a group who is paying into the community pool) and who understands what they are getting and willing to do things to control their costs.

 

[leevena]

The first example, I have used which can bring in savings. For the group to have the kind of savings you are posting that would have to be very low risk. Also the current plan design has to be something that is very rich. So this really only works for on a select groups.

The 2nd example, I have explored a great deal and have not found any savings on groups under 50. You are asking the small group to take on 25K spec which is not worth the risk.

The 3rd example I have also researched a great deal. The level funded premium plans I have looked at have all been at least 10% higher than the fully insured premium. That was pre underwriting. The stipulations that I have seen for the premium refund have not really been in the clients favor. For the level funded premium to really look attractive you have to come below the fully insured cost. I have yet to see that.

Thanks for explaining.

What Capative insurance company are you using?

 

[ABC]

What Capative insurance company are you using?

I am not using any Capative. I would be very nervous to use some offshore lending institution to insure any of my groups.

 

[Bruce]

This one in particular is a high deductible plan purchased from a fully-insured carrier, with a self-funded plan under the deductible. For the self-funded portion you can use an HRA or not, it does not matter. This group is using an Agg only, but that is not required, it is what I call "sleep insurance" for the frequency risk.

Another option is the Captive Insurance Company. Usually in a Captive you will start with a $25k spec, and then have a risk-sharing corridor between $25 to $250, with each participating group sharing in that liability. Reinsurance is then purchased and the carrier will then cede a portion of the premium and risk to the captive. Each group is underwritten on their own and receive their own stop-loss agreements.

There are many level-premium self-funded plans out there also, too many to count and each work slightly different. But as a general rule of thumb, they rate the risk, give the employer a "fully-insured" rate, and then retrospectively refund money if the claims come in lower than expected. So for example, the proposal would say something like this; Pay us $400,000 for the year, and you are eligible for a refund of $125,000, depending on your claims level.

Again, the key is making sure you find the right groups, which primarily means a better than average risk (a group who is paying into the community pool) and who understands what they are getting and willing to do things to control their costs.

I appreciate your detailed examples but I must admit I am not getting it. A couple questions:

1. First, assuming a fully insured high-deductible (call it $10k) on a 30 EE group, I have a hard time seeing huge savings on the insured piece. Don't Small Group Reform rate bands (generally, +/- 20%) significantly temper fixed cost savings, even assuming your prospect gets in at the 80% level? I really can't follow the savings on the fixed piece especially when assuming your ideal profile prospect is healthy and, therefore, not likely to be at the top of the rate band prior to going into your product.

2. Again, assuming a FI HD product, what are you using with respect to illustrating the Employer liability underneath as a percentage of expected manual? In other words, it strikes me that 30 lives is not especially credible and I'm curious as to what % of manual you're using on illustrations.

3. On the same product, what kind of entity are you using to pay the underlying claims? On 30 lives, are you able to get a percentage of claims based fee or is it a set per head charge/month?

Obviously, if you are doing it, it can be done. I'm just not able to grasp how.

Thanks.

 

[leevena]

I appreciate your detailed examples but I must admit I am not getting it. A couple questions:

1. First, assuming a fully insured high-deductible (call it $10k) on a 30 EE group, I have a hard time seeing huge savings on the insured piece. Don't Small Group Reform rate bands (generally, +/- 20%) significantly temper fixed cost savings, even assuming your prospect gets in at the 80% level? I really can't follow the savings on the fixed piece especially when assuming your ideal profile prospect is healthy and, therefore, not likely to be at the top of the rate band prior to going into your product.

The important thing to remember here is that this does not work for every group. Using the 30 life group as an example, it is rated within the Small Group market. So right away, for these options to work the group needs to be one that is a better than average risk. Or to say it another way, the risk needs to be below the average, so what are we looking at...maybe 40% or less of the small group market. Then figure on a few of these good risks seeing a significant savings, but the owner is hesitant to venture into a self-funded plan. Depending on how good you field underwrite, you may quote 10 groups and see only 3 or 4 good quotes.

The small group rating bands only apply to fully insured.

2. Again, assuming a FI HD product, what are you using with respect to illustrating the Employer liability underneath as a percentage of expected manual? In other words, it strikes me that 30 lives is not especially credible and I'm curious as to what % of manual you're using on illustrations.


You are correct that credibility is very low, to none. However, since claim/utilization is useless carriers use a debit/credit formula similar to how an individual medical policy is rated. Employers should be given a fully-insured look alike rate which will cap their risk. Then if the group performs well (lower claims) they get a refund. Years ago we called these "Retrospective Rating" plans.

3. On the same product, what kind of entity are you using to pay the underlying claims? On 30 lives, are you able to get a percentage of claims based fee or is it a set per head charge/month?

Claims are paid by a TPA for some products, and by a combination of carrier/tpa for the HDHP options. We recommend that a broker not place the commission in the product (it causes the costs to raise higher than the commission amount) and line-item the cost to the employer. The tpa will bill and collect.

Obviously, if you are doing it, it can be done. I'm just not able to grasp how.

Thanks.

Did I answer everything?

 

[Bruce]

I'm mainly wanting to work with groups under 30 employees. In our area, the businesses that "fit" this criteria are under serviced and a good deal of them do not have broker.

I've read your statistic about 90% of employers being happy with current broker, and I find this hard to believe when it comes to smaller groups. I would agree that 90% of employers aren't open to finding or looking into some better options.

All I'm looking for is advice on what's needed to get their attention...either through a call or a walk-in.

I think the paragraph I bolded is important. The two sentences/statements seem to run against each other.

I think a decent approach with a 30 EE business owner is to first understand that there are only 4 things that matter to him/her when making business decisions (like hiring you) and to make certain your conversation/pitch is always framed by them:

1. How do I improve service to my customers?
2. How can I increase my sales?
3. How do I lower my expenses?
4. How can I increase my profitability?

Nearly every agent who calls Mr X Company on the phone (or sees him in person) will lead with:

"Mr, X, I have saved some firms in your area a lot of money and I'd like to do the same for you..."

One different, attention-getting pitch might be:

"Mr X, as a small business owner myself, I understand delivering outstanding service to a growing client base on a cost-effective, profitable basis is your objective.I'd like to ask you just one question..... What is your biggest problem with your health plan?"

Whatever the response, your reply is, "I understand. Help is on the way."

Make the appointment.
- - - - - - - - - - - - - - - - - -

Group is a tough competitive market, you will find that most busines owners employee benefit packages rank right up there with getting a root canal, it's a necassary evil. Even if you have a carrier that offers a great rate, in certain geo tarket areas around your State.

9 times out of 10 your prospect can take your quote to their current agent and have then underwrite for them.

What I found that works best with group, and thats all I sell. Is going in with Workers Compensation, more than half business owners don't understand it, and don't know the liability that comes without having it. Business owners understand risk and liability and how we live in a ver legalistic society. One accident can bankrupt a small business.

There are riches in the niches in insurance, rather than be a me too agent, you have to position yourself as being different, and informative. It's great that employees dislike thier benefit package, but the one that signs the checks makes all the decisions.

I would rather dominate a vertical market CPA, Realtors, Manufacturers and so on, than struggle to gain a large market. Recently I started targeting schools, too soon to tell if I can be successful, but through a large Professional Employer Org. we established a consortium, with a leveraged buying pool, that can reduce a schools cost by 25 to 45% with a like benefit package. There is a lot of hurdles to jump with the establishment of the consortium, but there is only two organizations currently that are dominating schools, we saw smaller school districts leaving union contract organizations to self fund, and try drastic measures, was an opportunity for us to move in.

The consortium allows us to circumvent bid process, and gives us access to schools, and avoid being listed as an insurance vendor, or other vendor services, because consortiums are not designated as vendors.

So my advice, is try some different measures, and be out of the box, look at trends that are happening, that no one is capitalizing on. I beleive you will make some great head way. May not be an over-nighter, but with some strategic planning, and sticktuiveness it's possible.

In your third to last paragraph, you state you're able to save Districts "25%-45%" on a like benefit package. Assuming you're including Group Health, a few questions...

1. Can you provide any detail on how you can do this?

2. I know Gallagher runs School Pools in Michigan and their standard stated expected cost savings (vs a District Stand-Alone) is 7-8%. Are you picking off any Gallagher clients?

3. What kind of PPO vendor are you using?

Thanks and Congratulations!!

 

[PepDaddy]

I think the paragraph I bolded is important. The two sentences/statements seem to run against each other.

I think a decent approach with a 30 EE business owner is to first understand that there are only 4 things that matter to him/her when making business decisions (like hiring you) and to make certain your conversation/pitch is always framed by them:

1. How do I improve service to my customers?
2. How can I increase my sales?
3. How do I lower my expenses?
4. How can I increase my profitability?

Nearly every agent who calls Mr X Company on the phone (or sees him in person) will lead with:

"Mr, X, I have saved some firms in your area a lot of money and I'd like to do the same for you..."

One different, attention-getting pitch might be:

"Mr X, as a small business owner myself, I understand delivering outstanding service to a growing client base on a cost-effective, profitable basis is your objective.I'd like to ask you just one question..... What is your biggest problem with your health plan?"

Whatever the response, your reply is, "I understand. Help is on the way."

Make the appointment.
- - - - - - - - - - - - - - - - - -


In your third to last paragraph, you state you're able to save Districts "25%-45%" on a like benefit package. Assuming you're including Group Health, a few questions...

1. Can you provide any detail on how you can do this?

2. I know Gallagher runs School Pools in Michigan and their standard stated expected cost savings (vs a District Stand-Alone) is 7-8%. Are you picking off any Gallagher clients?

3. What kind of PPO vendor are you using?

Thanks and Congratulations!!

I perferably go through PEOs that offer a PEO rate or leveraged buying model. You can normally achieve a better rate, most carriers that offer PEO rates, will geo target areas around the state where they want to obtain a greater market share, of course you target your efforts in those markets where you beat the pants off competition using standard rates, of course the incumbent.

In Michigan is Blue Cross Blue Shield, teachers union contracts state that benefits must be identical to BCBS plans, well every seasoned and not so seasoned agent knows that BCBS does not own the physician network, and any benefit plan can be design and configured based on the client need.

So of course we're using PPO plans, with leveraged buying power through the PEO, If you're not familiar with PEOs, it may take some getting used to. I believe personally that it will be the next wave of income growth for independent L/H agents if you know how to measure up PEO's they are not created equal, but the right partnership, can catapult an agents income in the stratosphere.

At it's basics PEO's combine all of their employer groups volume of business throug select carriers to achieve a better premium rate, the more volume of business can actually leverage more discounts based on the number of business pushed through that carrier. If you have a PEO that understands the theory and strategy of claims and risk management you got a winner. Some agents fear PEOs because they do own the book of business, in a sense your partnerships, make it where you almost work for the PEO.

Truth of the matter there is strength in numbers and will make a small agency, gain the strength and power of a large scale organization, that can now go after large employer groups, including government entities, and schools, as long as your clients remain active, your are still the agent of record for the account, even though it goes through a PEO.

Last but not least, I have not had any dealing with Gallagher schools, but there are about 15 districts endorsing the consortium today. We're off to a pretty good start.

Let me know if you have any other questions.

Eric