Adding Direct Healthcare Plans to Your Solution Suite
How Brokers Can Break Free of the PPO Trap
Are your corporate clients fed up with their health plan options? Every year, surging prices erode value. Brokers are left scrambling to offer the best carrier plan they can find, but their clients are often forced to pick the the plan that sucks the least. Brokers can break free from the PPO trap by adding direct plans to their suite of healthcare solutions.
Direct plans bypass carriers entirely, enabling employers to contract directly with their community healthcare providers. By offering this revolutionary alternative to the standard PPO fare, you can establish yourself as a trusted advisor, bolster your close ratio, and win increased customer retention and loyalty.
A New Way of Thinking About Healthcare
If health insurance is supposed to protect individuals from the financial impact of medical challenges, why do so many people with health insurance still go into medical debt?
Health insurance premiums keep rising, eating up more and more of the employer’s budget and resulting in effective pay cuts for workers. But it’s not just premiums that are rising. Out-of-pocket costs are also going up. As a result, employers and employees spend more and more on pricey plans that members are afraid to use. Members delay care because they’re worried about costs, sometimes resulting in even worse health outcomes – and when they’re forced to use their health coverage for major health issues, they often take on medical debt.
When a plan becomes unworkable, brokers and their clients look for a different carrier and a different plan – but the same old problems persist. It’s not a cycle. It’s a downward spiral. A direct plan lets you break free of this trap.
Four Components of a Direct Plan
Access
The employer contracts directly with community health systems and providers to gain access to services.
Prescriptions
A transparent, pass-through pharmacy benefits manager facilitates access to drugs.
Stop-loss
Catastrophic coverage is provided through a captive and/or reinsurer.
Administration
A third-party administrator handles claims. A repricer adjudicates claims outside of the direct partnership.
What You Need to Get Started
Direct plans require a new way of thinking. If you’re willing to dig in and become a true partner to your corporate clients, and if you’re OK with a new way of getting paid, you can succeed with direct plans.
Here’s what you need:
- Education: You’re pitching an entirely new approach to healthcare, so you’ll need to explain it to your clients clearly. Before you can educate your clients, you need to educate yourself. How you frame the direct plan matters. Many brokers start with questions about self-funding and risk tolerance, and employers lose interest right away. Instead, the goal is to engage the employer by talking about taking control of their health plan. Show them how they can provide access to a community health system. Then move on to the other aspects of a direct plan – prescriptions, stop-loss coverage and administration.
- Enthusiasm: Your clients will often follow your lead. If you’re afraid of trying something new and you discourage your clients from pursuing a direct plan, they’ll likely stay away from it. Once you’re on board with the concept, your clients will share your confidence, and your close ratio should improve. Your close ratio should be around 50%. If it’s lower than that – and especially if it’s only around 2% — there’s a disconnect.
- A Partner: H2B is your program manager partner. We oversee the development and execution of the program, including the Direct Corporate Health Partnership Agreement between your employer client and their direct healthcare system parter. We can also help with materials to educate your clients.
Investing More to Earn More
A direct plan is a type of self-funded health plan. The carrier has been eliminated from the process, so the employer becomes the payer.
To make this work, both you and your employer clients need to be committed.
- As the broker, you’re switching from a spreadsheet-based system to a consultant-based model. You’re no longer just comparing plan options so your clients can pick one and you can pocket a commission. Instead, you’re establishing yourself as a trusted advisor and earning transparent fees for your work.
- As employers, your clients are taking on the role of payer. Going from a fully-insured plan to a self-funded plan can be intimidating, but the advantages make it worthwhile. Fully-insured programs are a black box. The carrier creates it and controls it, and employers often have little knowledge of, and even less control over, how it works or what drives costs. A direct plan is a self-funded alternative, providing transparency, control, opportunity and sustainability.
FAQs
Is a direct plan suitable for mid-sized employers?
Yes. Companies with as few as 20 employees can implement a direct plan. Large employers have embraced self-funding. Clearly there’s an advantage. Smaller employers sometimes avoid self-funding because they’re afraid of risk, but that risk can be controlled through plan design as well as stop-loss insurance strategies.
Are employers limited to one hospital? How can I sell them on this?
No, employers are not limited to one hospital. The plan design can steer members to the preferred direct provider partner for affordable, high-quality care while using a tiered system to provide coverage for other providers.
This is similar to how carriers use networks, only those networks can be confusing and subject to change, leading to expensive out-of-network costs that catch members by surprise. The direct partnership model provides a transparent alternative. It works especially well in small communities with one or two healthcare systems, but it can also be used in larger urban areas.
Is a direct plan a long-term solution?
Yes, the direct plan model is a sustainable alternative to the carrier model. Unpredictable price hikes in the carrier model are not sustainable. By switching to the direct plan model, employers typically save 20% to 30% in the first year, with average annual price hikes of only 1.9%.
How do I earn as a broker in the direct plan model?
You can earn transparent fees as a trusted advisor and consultant. You set your own fees and they’re built into the model. Brokers often earn more with a direct model than they do with traditional plans, and that’s because there’s more work involved.
For brokers who are used to earning commissions, this is a significant change. However, it’s one that can benefit you. Your clients may need a lot of handholding as they make the switch from a fully-funded plan to a self-funded direct plan. You’ll need to guide and advise them, and you’ll be providing true value in the process. This is a fantastic way to stand out in a crowded market where everyone is frustrated with the status quo, but few know what else to do. You can earn loyal clients and gain referral business as you build a reputation as the go-to source for direct plans.