Retailers may look to wholesalers for
help dealing with healthcare reform.
Retail brokers may find that wholesale benefits brokers can
help them navigate a changing landscape as the historic
healthcare reform law takes effect.
While healthcare reform presents serious challenges for
brokers, there also may be opportunities for those who can
offer clients greater value.
One wholesaler predicts: “Federal legislation will
give benefits brokers and wholesalers a ‘financial
haircut.’ We expect commissions from carriers to be cut.
Quite simply, there will be less money and smaller
Restrictions on carriers and employers will translate into
pressure on retail brokers. Among the challenges are medical
loss ratio requirements, the inception of so-called community
rating—a set of universal underwriting guidelines that
threaten to handcuff underwriters—and tax consequences
for employers that don’t comply with the law’s
“This is a ‘who moved my cheese’ moment
for retail brokers,” says Sam Fleet, president of AmWINS
Group Benefits Division, referring to the best-selling business
book on organizational change by Dr. Spencer Johnson.
Fleet says he’s not sure if changes will spur or
stifle growth for benefits wholesalers. “Big players
don’t seem to be showing any interest in wholesaling
employee benefits,” he says. “Competition at the
wholesale level is usually confined to regional general agents
and general agents who sell some specialty products.
That’s about it.”
Fleet says that success in benefits wholesaling at the
national level requires an extension of the traditional
wholesale model beyond that of a purely transactional broker.
AmWINS Group Benefits operates in three verticals: the
distribution of wholesale products, outsourcing administration,
and underwriting products. “We develop, distribute and
administrate. We don’t take the risk. That’s all we
In March, the company introduced the AmWINS Specialty
Pharmacy Protection to the marketplace. “The cost of
drugs keeps going up. They range from hundreds to hundreds of
thousands of dollars monthly, depending on the severity of the
condition. Employers don’t want to self-fund these
costs,” Fleet says. “This product fully insures for
the cost of specialty drugs; it provides the employer with
predictable cash. This allows them to continue to self-fund
other benefits costs.”
Targeting drugs made sense for two reasons: the rising cost
of specialty pharmaceuticals and the influx of more complex
products. Both place tremendous strain on self-insured clients.
“Today there are more than 200 specialty pharmaceuticals
available. A decade from now, more than 400 are expected to be
handled by specialty pharmacies,” Fleet says.
Rodger Bayne is the vice president of marketing and
development at Group Benefit Services, a benefits wholesaler
and administrator based in Hunt Valley, Md. The company’s
more than 200 employees work across three offices in Maryland
and Pennsylvania, offering wholesale products and services
nationwide. Many of its clients are large p-c brokerages that
have their own benefits division.
“Our broker clients often send their in-house benefits
folks to us to utilize our system to generate quotes from
multiple carriers simultaneously, as they might in a future
health insurance exchange,” Bayne says. He expects the
exchanges, required under federal law by 2014, to duplicate or
engage much of the technology his firm already uses.
The wholesaler’s payroll services protect brokers from
competitors with an ulterior motive. “Brokers use us
because they are concerned that larger payroll services will
come directly to the customer and attempt to take over the
benefits administration and workers compensation,” he
says. “We’re seeing this becoming