Finding Opportunity In A Changing Landscape
Health insurance professionals have definitely felt the effects of changes brought about by the Affordable Care Act, as has the insurance industry as a whole. With some companies cutting commissions in response to medical loss ratio requirements, many brokers have seen substantial reductions in income. And while the new president has promised to make dramatic changes to the ACA, much remains to be seen about how and when those changes may take effect.
The $300 billion government-contractor market represents a huge opportunity for brokers who want to continue working in the health insurance industry. Federal contractors are required to spend a certain amount of money to provide benefits–including health insurance–to workers on contracts that fall under either the Davis- Bacon Act or the Service Contract Act. Many states and municipalities have similar laws and requirements as well.
Here are some of the advantages of working with government contractors:
- While most know they’re required to spend a specified amount on benefits, many don’t realize that doing so results in significant savings on payroll burden and other taxes. Contractors that use these funds to pay for health insurance, dental insurance, life insurance, vision insurance, disability insurance and retirement plans–rather than including the funds as additional cash wages for their workers–can increase their profitability as a result of these savings.
- Funds to pay for worker benefits are included in the “wage determination.”
Government contractors are required to pay workers what’s called a “prevailing wage,” which is determined by the Department of Labor and varies for each job classification on a contract. The wage determination includes both a base wage and a set amount to be spent on fringe benefits, including health insurance.
- Savings realized by using fringe dollars to provide benefits make contractors more competitive. When contractors prepare bids for government work, every dollar counts. Contractors that use fringe dollars for benefits lower their payroll burden, in turn lowering job costs. This makes them more competitive and increases their chances of winning contracts.
- Construction is rebounding, making employee attraction and retention even more critical. Housing starts have risen in each of the past six years, and several industry sources predict healthy advances in commercial construction as well. That means competition for skilled construction workers is tough. One way employers can differentiate themselves when it comes to attracting and retaining good workers is by offering a robust benefits program.
Help is available. There are third-party administrators that specialize in working with brokers and their government contractor customers. These TPAs can provide guidance when it comes to working with this niche market, and they can be a valuable resource when it comes to prospecting for new clients. Some providers that specialize in benefits for contractors working on Davis-Bacon Act projects handle the administration of the program for their contractor clients and offer a unique program called hour banking.