EBA recently spoke with IHC's Scott Wood, who serves as co-chief operating officer, about the dynamic environment facing health brokers today.
Q. Finding a broker that knows about IHC is hit and miss. Please give EBA readers a quick thumbnail description of the company.
Independence Holding Co., better known as IHC, is a $1.3 billion dollar New York Stock Exchange company. It's a holding company for three insurance companies: Standard Security Life, Madison National Life and Independence American Insurance Company as well as several other subsidiaries. The company has been in business since 1980, and since the late 80s has held a leading position in the medical stop-loss business. In addition to employer stop-loss and traditional life and disability insurance, in 2005 we expanded into the fully-insured business. Today we're in six different segments of fully insured business - short-term medical, individual medical, small-group medical, dental, vision, mini-med and student accident.
Q. The emergence of a new carrier is big news for brokers who regularly lament the lack of competition. Do you agree that the medical market is starved for competition?
Relative to small group I think there is a lack of competition in many aspects, but it often depends on the part of the country. Certain states have more competition than others. Much of that is driven by the regulatory environment. An example would be states in New England and some others that have very strict community rating laws, strict underwriting laws and other restrictions that make it difficult to do business. In those states the competition can be very limited. It can be two, three companies. You can have other states that don't have those types of limitations where the competition is better. There are more options.
Q. Are you going to compete everywhere or are you going to limit your regional and geographic reach?
In general it depends on the product line. Some of our products are not limited by or don't have state regulations that are impacting them very significantly, like dental, vision and short-term medical. Relative to small group major medial and individual major medical we work in regions of the country that fit our niche that have a regulatory environment that allows us to do business in a way that we can achieve our objectives. [Also] the competitive nature of an area will dictate where we market as well as provider network contracts that we have. In general, with major medical we're not going to be in all 50 states, primarily [we'll be] in 30 to 35 states.
Q. You mention provider networks, which are often cited as a reason why new competitors don't emerge in major medical. Why do you think it is so hard for new competition to emerge and help these markets where consolidation has winnowed the field?
In some of the markets where health reform was passed years ago it became so stringent and difficult to do business that it drove a lot of the companies out of those markets. And the companies that stayed in the business ... were then able to gain a very large critical mass advantage ... [You] have a state that has several million people in population and is dominated by two or three companies, those companies would have gained a lot of leverage over the provider community and a new entrant coming into that market if they could overcome the regulatory restrictions would have a difficult time negotiating with providers based on volume of business, which is where most of the leverage exists with provider networks.
Q. Do you feel like brokers some times suffer from tunnel vision? If they are complaining about the dearth of competition doesn't it behoove them to seek out and support alternatives in the market?
I do. As in many areas of business people tend to take the path of least resistance in the short term. And that may solve short-term needs but may compound problems in the future by restricting competition ... Companies that are looking to do new and innovative things and provide products for brokers and their customers requires a broker to spend more time get educated and it takes time to learn new things. Sometimes people aren't in a position to invest that time to learn those new things.
Q. You mention new and innovative things. Where are the opportunities to be new and be different?
Relative to being ... different I would say you have opportunities that are product oriented and you have opportunities relative to service and [that are] relationship-based. As the emergence of and the growth of some of the big managed care companies has occurred there are a lot of opportunities that have opened up for our company to provide more of an agent-centric relationship with the broker community. We provide a lot of value-added education, training. This is a very consultative era of selling with consumer driven health plans and while most brokers believe CDH plans are valuable and the right solution for employers and individuals they are complicated and it takes time to get educated and be informed to be able to make those recommendations. A company like ours that has really made a commitment to really doing what we've always done, provide that high touch, personal service to agents, there is a big opportunity for that in today's market. Relative to products, the CDH products continue to evolve and the ways to deliver and execute on those types of products continues to change ... The results are showing better, more stable premiums and cost savings for employers. Cost is certainly one of the most important issues in health insurance today. So we believe there are a lot of opportunities to continue to develop new and innovative cost-saving plans that get to the budget that employers and individuals need. A lot of companies design products that they think people want. We tend to really focus on what people want, what their budget is, and try and design a product to meet that need and that budget.
Q. What does the current broker/carrier interaction look like and how is IHC different?
Traditionally, the best way to describe the market is there has been a lot of parity relative to plans and the market. It has been a spreadsheet type environment where employers are looking to replace a similar plan just at a lower price. That's created some of the issues that we have today. With consumer driven health care plans it's hard to spread-sheet those types of programs because there are so many different ways to design plans to meet the individual needs of employers. Whether it is an HRA or an HSA there are a number of different ideas that brokers are providing to employers and individuals. From our standpoint, that's where we believe our value can be added. We do a lot of education and training. We probably held over 250 Webinars last year focusing on unique and different health benefit plan programs and strategies for employers and individuals ... We're the only health insurance company today that I'm aware of that's rewarding shares of stock to its brokers for being part of our team. We're creating a sense of belonging. And agents - instead of kind of the spreadsheet environment of the past - are really looking to hitch their wagon to a company that can really help them build their business, that provides them with that value and education and training and not just a spreadsheet. That's where we're really differentiating ourselves from our competition.
Q. What are IHC's thoughts on common broker complaints around late renewal notices, dramatic rate increases, poor data transfer and communication?
We do hear those types of complaints. I agree with you a common theme is not feeling communicated with, not feeling recognized, not feeling appreciated. That really hits at our core competencies, which is recognizing and appreciating what brokers do and the value that they bring to the table. The key is communication. Most brokers feel they are taken for granted, that the employer or the individual is the insurance company's client and they forget who brought them the business. An emphasis and focus on communication is absolutely number one. With today's automation that's going to improve for all companies including ours and we're doing that today with the Internet and 24/7-type communications on status of new groups, status of claims. I think that the automation is already improving communication and the speed of information to brokers because that's also one of the other complaints - the feeling like they're hearing about things after the fact. With today's technology tools there is no reason for companies not to get information into the hand of their brokers first. Brokers simply want to be able to get information first, be able to absorb it and be able to be in a position to explain it to their clients before their client hears about it. We're very committed to that.
Q. Looking out at the horizon what advice would you give brokers in these tulmultuous times?
Today the opportunities have never been better for brokers to grow and diversify their business. There is a lot of pressure on cost. There is a lot of pressure on commissions. As that pressure continues, a way to combat it as a broker is to diversify and resell the existing customer base. The opportunity for brokers to cross sell and diversify has never been greater.
