Large Group View from the Top

Compiled by Thora Madden

California Broker went to two insurance industry insiders — David Fear, Sr. and Rob Carnaroli –for their view of what’s happening with the large group health market…

Cal Broker: What are the most important trends affecting large groups in California? For example, do believe the AHP rule will have an impact on the large group market?

David L. Fear, Sr. RHU, president, Shepler & Fear General Agency: The biggest trend that we see right now is the continuing battle to contain health care costs. Employers of all sizes are very concerned about this, yet it is the large employers who have the ability to do something about it that will directly affect their health benefit plan costs. Considering that a majority of large employers are now “self-funding” their health benefits, they are looking at cost containment alternatives including “Reference Based Pricing”. By limiting their health plan payments to a factor of Medicare, employers are seeing a reduction in the cost of their stop loss coverage, as well as a leveling out of their claim costs. Many employers still offer a managed care option such as an HMO which transfers risk back to the provider. That is an effective tool to manage costs. But at the same time we see large employers adopt more consumer directed programs such as Health Reimbursement Arrangements and are now offering these through both HMO and PPO/RBP plans.

Rob Carnaroli, vice president, health plan products, Sutter Health: One of the biggest trends I see that impacts large groups in California is the external market pressure to re-imagine what health care should look like. This includes pending mergers between large pharmaceutical companies and insurance carriers, and with non-health care companies like Amazon, Berkshire Hathaway and JPMorgan Chase. Alphabet, Google’s parent company, is another disruptor spending significant capital to influence health care delivery. All of this places a heavy demand on the traditional healthcare marketplace that we elevate the model and look for ways to become better. It is no longer about just price, benefits and network—digital capabilities, unexpected convenience and modernization are the real motivating factors.

As far as the latest news on the federal government allowing association health plans, AHPs, for small groups, I’m not convinced this is the silver bullet for small groups and associations. It’s certainly too early to opine on how this will play out in the large group market.

Cal Broker: How are you advising brokers to deal with all the uncertainty about health insurance reform?

David L. Fear, Sr.: Frankly there is more uncertainty outside of California because California is one of a few states that strongly supported the ACA and passed enabling legislation to make it firmly in place here in the Golden State. For fully insured plans, California reforms will continue to apply regardless what happens in Washington, D.C. We tell brokers that while the individual mandate is going away at the national level, it might come back in some states like California that want to continue to have a higher percentage of insured population. And we advise brokers that in spite of the termination of the individual mandate, the employer mandate (called the “Shared Responsibility” provision of the ACA) has not gone away. In fact IRS began last November to start sending out letters to employers to collect fines/penalties for not offering coverage to their employees. That first wave of IRS letters applied to “Applicable Large Employers” for the 2015 tax year. The next wave of letters have gone out from IRS to employers who appear to be liable for this for the 2016 tax year. So we are telling brokers to get over to their large employer clients (50+ employees) and check on their status as an ALE since 2014 because IRS is definitely sending out collection letters. So to summarize: Tell clients that reform here is California is not going away and tell large employers that they are still subject to the employer mandate – the IRS is seriously going after them for money they may owe.

Rob Carnaroli: While there’s still much uncertainty around the current health insurance reform, the most important factor in any future proposal is that it protect health care coverage and keep the existing reforms that have positively transformed health care delivery in place—especially for consumers. At Sutter Health, we have a clear path forward based on what we know consumers want and need from us: access to high-quality and affordable care.

It’s incumbent upon the consulting community to stay current on state and federal changes and how local, regional and national payers and providers are innovating amidst all this—and then share this information with clients and advise them as subject matter experts.

Cal Broker: What are the most effective ways to sell to large groups?

David L. Fear, Sr.: The tried and true method is the CONSULTATIVE APPROACH. Many brokers today work the 5500 filing database for large employers in the market and this tells them the basics of what they need to know about the prospect: What carriers they offer, how much they pay, who is the existing broker and how much they are paid.  A good broker will meet with the employer, ask a lot of questions about what they have now and what services they expect to get from their broker.  A big focus will be on compliance assistance, alternative funding, provider issues, medical cost containment strategies and related issues. This process will take months (not days) and brokers need to know that going in – they need to present a strategy to the employer that meets their needs and helps contain costs of their benefits. Simple spreadsheets won’t cut it anymore – everyone can do them, so you have to present solutions to the challenges that you were able to glean from the employer in the consultative process. If the broker is not capable of that, then they need to partner with someone who can support this method of sales.

Rob Carnaroli: The most effective way to sell a large group is to deliver on the commitment of quality care at an affordable price. At Sutter Health, we believe it’s critical that employers see the value we bring to Northern California and our continual focus on innovating to meet customer demands. The launch of Sutter Health Plus in 2014 and the recent formation of a new joint venture healthcare company, Sutter Health | Aetna, introduced new health plan options for employers to purchase for their employees. New models that combine the delivery system with the financing of care give us the unique opportunity to work toward a goal of operating more efficiently, coordinating care among providers to improve outcomes, creating a differentiated member experience, and making healthcare more affordable. Additionally, today’s consumer expects innovation in health care beyond the traditional brick-and-mortar provider office—they want new and convenient front doors such as retail clinics and virtual care—and that’s something we’re now able to deliver through walk-in care centers and video visits. Employers see the value in this and recognize what we’re offering—and they want it for their employees.

Thanks David and Rob!


David L. Fear, Sr. RHU, is president, Shepler & Fear General Agency, in Roseville, California. He can be reached at


Rob Carnaroli serves as vice president of sales for Sutter Health Plus. Prior to joining the health plan in November 2014, Carnaroli served as Health Net’s Northern California director of sales and Health Net’s Western Region director of major accounts for Arizona, California, Oregon and Washington. He can be reached at