All shook up: Transitioning your clients to next-generation strategies
This article is the fourth in a five-part series that takes you step-by-step through the process of becoming a next-generation advisor.
The advisor of tomorrow wants a better way to contain health care costs for clients. That means adopting a fee-for-service payment model and building independent, high-performing health plans.
Not all of your clients are ready for a transition like this and that’s OK. The first step in this part of the process is figuring out which clients are a good fit for the direction you want to go. We classify companies into two distinct buying styles: the price buyer and the strategic buyer.
Price buyers are not a good fit for something like this because all they want is the plan they had before at the cheapest possible price. Every single year, they want you to run an auction, demanding that you get as many carriers to quote the business as possible. On the off chance a competing advisor presents a cheaper option, they will likely leave your firm. The relationship is completely transactional and the strategic horizon of the buyer doesn’t extend beyond the current price of the renewal.
Strategic buyers, on the other hand, are already looking three to five years into the future and understand how to successfully manage change. These are the clients that you want to target in your first wave of transition, because they are willing to work through any challenges knowing there will be a payoff in the long run. They are collaborative partners, and they want to know how they can improve the plan with you. These client relationships will last longer, be easier for you to work with, and it’s a warm audience of people who already trust you.
Here is something that nobody wants to talk about: By transitioning your business model to deliver high performing health plans, you will lose some clients that are price buyers (or traditional auction buyers) because all they value is the price. That is worth repeating: A transactional buyer only values the price of the renewal and will never understand the strategies you need to implement in order to really help them. Rather than worrying about that, focus on growing your client base by gaining new clients that are strategic buyers (and refusing to work with any more price buyers) to replace the not-so-solid relationships of the clients that won’t ever come on board.
This transition can be unnerving, but over several years, you will end up with a much stronger client base as you lose some price buyers and bring on new strategic buyers. It’s a natural, healthy turnover in your book of business. And keep in mind, the process you are suggesting to your clients may not be what they originally “bought into” when they hired you several years ago.
Offering an independent, high-performing health plan is the right thing to do for your clients. In order for it to be successful, you need to engage them and explain to them what that the execution looks like while assuring them that it’s not going to be more challenges, just different challenges.
Timing matters
In our earlier article, “Suspicious minds: Prepping your team for high-performing health plans” we discussed the importance of preparing and educating your internal staff before you bring these solutions to your clients. Beginning with your staff is the most logical place to start and a great place to pressure-test the partners, messaging and strategies. The execution will fail if you try it when your team isn’t ready.
After your staff is ready, they should bring this new model to your existing clients first and convert your relationship to a fee for service arrangement before you talk to prospects about it, as we mentioned in the article, “It’s now or never: Converting to fees and performance-based compensation.”
This is a step that most brokers are doing in reverse, selling prospects on these processes first, then rolling through their clients if it works. But why would you start a new prospect relationship with a concept that’s new to your firm and your team? The last thing you want to do is try to gain someone’s trust by using something you have never delivered or don’t intend to ever deliver. People are already skeptical, because they have been burned in the past by others who promised them solutions that didn’t work.
That doesn’t mean you should keep doing business as usual. As an industry, benefit brokers can’t afford to do business the way that it’s always been done (the traditional producer model and auction-based solutions). Although it may have been fine in the past, it’s not effective anymore because the major carriers have no incentive to lower your client’s costs and there are an increasing number of firms delivering better benefits at a lower cost to their clients.
Educating clients
Much like you had to do with your staff, you need to educate your clients so that they understand what’s not working and where the process that they are in is broken. We’ve found that the strategic buyer respects when you admit that something is not working. It builds credibility and you’ll be hard pressed to find an employer who is happy with the traditional markets. Once you’ve clearly articulated the problem, you can explain how an independent, high-performing health plan will work better to control their health care costs over time.
After talking theory, show them available benchmarks to build a solid numbers case, starting with the plan’s current per employee per year cost. Teach them about the measurements that they should be using, the level you are trying to reach, and show them long-term measurements of those who have taken a similar journey.
If you are just getting started, you can ask colleagues in the industry for examples, but only if you plan on executing the strategies that will produce those results. Leverage the presentations that others will share with you until you are able to build your own.
Education is the way to lessen resistance. If possible, offer workshops or seminars to educate your clients in a group setting. These seminars foster a collaborative culture and will help your clients see they’re not the only one in the room making this type of transition. It also builds your credibility as an expert.
You’ll need a few external champions within the client’s staff to promote the transition. Build cases for why the journey they are about to embark on will help both the C-Suite and HR staff by delivering better benefits and lower costs. Try to identify who will be supportive and who will be resistant up front and address challenges proactively.
Right now, nontraditional competitors such as Amazon, Walmart, Apple and Google, are reshaping the business landscape. The last thing you want is to give them a chance to convince employers that the broker distribution channel is unnecessary or obsolete, like the taxi industry or public phone booths. If they put some of the large traditional health insurers out of business, you don’t want your business model relying on a few insurers to supply 80 percent of your revenue stream.
The next two articles in this series will guide you through the final steps of the process and examine the challenges involved, so you will be ready to tackle them head-on. The articles will focus on:
- Now that you and your clients are ready: Managing your carrier relationships
- Conclusions and looking ahead
Mick Rodgers is the managing partner at Axial Benefits Group, which is based in Boston. Mick has been called a pioneer, a disrupter and has always had a focus on disintermediation.
Bob Gearhart Jr. is the third generation to lead DCW Group and is responsible for helping clients manage the healthcare supply chain to improve benefits and increase their earnings.