“It is difficult to get a man to understand something, when his salary depends upon his not understanding it!”
I love this quote from Upton Sinclair. It speaks directly to one of challenges brokers face when it comes to private exchanges: dealing with “Exchange Skeptics,” including the HR director (man or woman) who feels threatened by the exchange evolution.
Employers largely fall into one of two camps: “Exchange Ready” and “Exchange Skeptic.” The Exchange Ready folks are those who want to offer benefits to their employees for competitive purposes, are willing to let go of controlling plan design, and are happy to let employees own their benefits decision.
Conversely, Exchange Skeptics want control over plan design, are patriarchal in nature, and need to see a substantial cost savings in moving to an exchange. This group also includes those who do not believe the benefits of an exchange are real.
While there is a migration underway towards the Exchange Ready camp (we call them “transitionals”), many brokers struggle to overcome the objectives of Exchange Skeptic employers. My advice to help you best serve a client is to start by sorting out which camp they fall into: exchange ready or exchange skeptic. To help, here’s some commonly heard objectives (and suggested response messages) from exchange skeptics.
- Objection #1: “I’m concerned about how defined contribution will affect my employees.”
Response: Employers have a lot of flexibility in how to implement an exchange. While defined contribution is often associated with exchanges, it’s not a requirement.
- Objection #2: “I’m worried about employee blowback with exchange plan designs. I would rather keep control by choosing the plans.”
Response: There’s good cause for optimism. Existing exchange implementations show high levels of employee satisfaction. Also, employees are more likely to “own” the decision when they have a choice.
- Objection #3: “I think I’ll wait and see how this exchange thing plays out before deciding.”
Broker response: Exchanges offer a lot of administrative advantage for employers. Among the biggest benefits is that individual employers can implement specific exchange features as they feel comfortable with them. You don’t have to dive into the deep end on day one.
To identify employer clients that are ready to move to a private exchange, look for these characteristics:
- Believes a private exchange aligns with the organization’s total rewards philosophy and organizational strategy.
- Desires better predictability over the impact of rising benefit costs.
- Places a priority on creating or reinforcing a culture of employee engagement and empowerment.
- Wants a vehicle for offering employees more benefit choices that can also help differentiate them from their competitors.
Once you understand where a client’s coming from, you’ll be well positioned to offer best-fit solutions to move them along the private exchange adoption route.
Guest blogger: Rhonda Marcucci, MBA, CPA; Partner and Consultant, Gruppo Marcucci
Within five years of setting her sights on the HR and Benefits Administration technology outsourcing marketplace, Rhonda Marcucci established Gruppo Marcucci as the industry’s go-to source for anyone wishing to understand, enter or penetrate the benefits administration market. Her extensive experience in finance and operations in a variety of industries—including insurance—provides a solid foundation for helping clients identify strategy and successfully execute against it.
Concentrating on the mid-size market, Gruppo Marcucci (GPM) is recognized for its well-researched and unbiased sourcing advice and service provider capability audits, including in the exchange marketplace. GPM works directly with brokers/consultants, employers, insurance carriers, service providers, investors and exchange sponsors. A deep working knowledge of the market and its many players, coupled with professional independence, allows GPM to excel at bringing together the right players to provide the right solution for the client’s needs.