It’s become increasingly difficult to stand out in employee benefit sales. Most brokers are offering the same basic plan designs from the same carriers, and employers often aren’t impressed with the options. A blue ocean strategy offers a different approach. Instead of struggling to get noticed in a crowded market, you focus on an underserved market.
In employee benefits, the direct partnership plan market has created a blue ocean opportunity.
What Is a Blue Ocean Strategy?
The term “blue ocean strategy” was coined by business strategists W. Chan Kim and Renée Mauborgne. A red ocean is an oversaturated market. Supply exceeds demand, so it’s hard to get noticed and grow your business. A blue ocean is an underserved market. Very few people have entered the market yet, so there’s ample opportunity for new entrants.
What Makes a Blue Ocean Strategy Successful?
A blue ocean strategy sounds easier, but success isn’t guaranteed.
Many people focus on the red ocean because it’s proven. Imagine that you want to open a food business on a busy beachside street. There are already five ice cream parlors, and they do good business.
- You could open up the sixth ice cream parlor. That’s a red ocean. The market is crowded, so carving out a share of the market might be difficult, but at least you know ice cream is popular.
- Or you could open up a different type of business, like a shop that sells chocolate-dipped frozen bananas. That’s a blue ocean. Your business will stand out, so it may be easier to attract customers – but only if people actually want frozen bananas.
To succeed with a blue ocean strategy, you need to be bold. You’re trying something different, and there’s some risk involved. You need to learn new skills and branch out from the normal path.
You also need to identify a market that’s underserved but has significant potential. This is often the hardest part of making a blue ocean strategy work.
Why Direct Partnership Plans Are a Blue Ocean Opportunity
A direct partnership plan is a self-funded health plan in which the employer contracts directly with community healthcare systems and providers to access health coverage. You can learn more about direct partnership plans and how they work here.
In employee benefit sales, direct partnership plans are a prime blue ocean because:
- The demand exists. Employers are struggling under the pressure of rising healthcare costs and health plan exits. They need new health coverage options that are both affordable and sustainable. Direct partnership plans deliver average savings of 24% in the first year, with a 90% average reduction in employee out-of-pocket expenses and average premium increases of just 1.9% in years two through four.
- But the market is underserved. Enrollment is rapidly growing as this model gains traction, but it still represents a small share of the overall benefits market.
Is It Time to Differentiate Your Benefits Practice?
Employee benefits brokers can try to win by offering excellent customer service or value add-ons, but if your competitors are doing the same, this won’t help you stand out.
The real way to stand out is to offer something that few other brokers offer.
Most brokers approach health plan options with spreadsheets. Every year, they break down the various plan options so employers can compare them. It’s not working. Costs keep rising, so all the plans are becoming less and less attractive. Employers end up picking the best of the worst, and they’re increasingly unsatisfied.
Brokers who diversify beyond traditional health plan comparisons are better positioned to create long-term value for employer clients, and that’s the sort of value that earns loyalty. You can stand out by offering a truly innovative solution – but it means breaking away from the status quo.
You’ll need to learn about the direct partnership model. It’s a totally different approach to health benefits, so developing expertise will take some effort. You’ll also need to rethink your role. Instead of earning commissions, you’ll earn a transparent fee as part of a consultant-based model. That may sound scary, but at a time when some health insurers are cutting commissions, it’s worth consideration.
The direct partnership model isn’t for everyone. If your employer clients are happy with their health plans, and if you’re content with your career as it is, you might not want to put in the work. But if your clients are increasingly dissatisfied with the healthcare solutions you provide, and if you’re interested in a way to take your employee benefits career to the next level, this is your chance.
Because here’s the thing about blue oceans – they don’t stay blue forever. Once they catch on, the market starts to get crowded, and it becomes harder to establish yourself. Brokers who diversify their portfolios now will be better positioned to seize the opportunity created by direct partnership plans.
If you’re interested in exploring how direct partnership plans can fit into your employee benefits practice, Health2Business can help you get started. Learn more about the role of brokers in direct partnership plans.
