The Coordinated Dual Choice Offering: An Innovative Broker Strategy to Overcome Low -Participation and Grow New Business
By Jim Arriola & Frank Garcia

Brokers are the em-ployee benefit pur-chasing advis-ors to employers. There are dozens of carrier options and hundreds of benefit plan designs at varying price points available to brokers to formulate a proposed benefit solution for their group employer cli-ents. Brokers are at their best when: their recommended healthcare coverage solution is within the employer’s affordability level; the coverage administration is efficient and easy; the vast majority of the employees enroll in the coverage, and employee satisfaction is high for the selected coverage. This is the utopia that all brokers seek. Being viewed favorably by employer clients certainly enhances the broker-of-record relationship favorable referrals.
      However, there are fewer and fewer opportunities for brokers to recommend a simple “one size fits all” single carrier approach to solve their client employer’s healthcare coverage needs. It will be more incumbent upon brokers to increase their market knowledge of available products and apply creativity in developing recommended solutions. Many brokers sell only what they know; they rarely sell what they haven’t yet learned or understand. It is much easier for a broker to learn, understand, manage; and apply the required knowledge for two or three carrier products than it is for all the available market options.
What if there is a much better market solution for your employer client than a single carrier turn-key approach? What would happen if the employer were presented a better market solution by another broker who was more knowledgeable and creative about other market product options?

The “Dual Choice” Model Surpasses the “One Size Fits All” Approach

When healthcare cov-erage was relatively affordable in the late 1980s and 1990s, many employers offered a healthcare coverage plan for the majority of their workers. The employer paid for most of the premium and benefits were much richer in terms of out-of-pocket costs. It was much more acceptable to have a single coverage plan for the vast majority of the employer’s workforce. Many remained with a single carrier solution. Only those large employers with employee volume were able to have more than one carrier offerings. The advent of the “dual and triple choice offering” allowed carriers to offer more differentiated plan designs to accommodate a wider spectrum of affordability. The introduction of dual choice offerings involved a standard level and a high level HMO plan options. The employee normally paid the difference for the higher level options. Soon carriers started offering PPO and HMOs in their dual choice offerings. In some cases, carriers offered triple choice options with a low level HMO, a high level HMO, and a PPO plan option.
      The distribution of plan coverage has greatly evolved with purchasing coalitions. Innovative distribution platforms greatly changed the market by allowing employees to select from several carrier and plan options. It advances the notion of multiple carrier alternatives with various plan designs options.
The key challenge, after affordability, is meeting the participation threshold. Carriers usually place a minimum parti-ci-pation requirement for enrolling em-ployees in employer sponsored group insurance. The minimum threshold is often expressed as a percentage of the total eligible employees. The reason for the minimum participation is that carriers need to enroll an acceptable number of employees in the group pool, otherwise they may fall into the adverse selection trap.

The Introduction of -Limited Benefits Plans

Most brokers and consultants are not aware or they do not understand the product class associated with limited benefits insurance sometimes known as “mini-med” plans. Like them or not, Limited Benefit Plans are starting to make significant inroads in the market. There are many articles in professional journals about limited benefit plans. Although there has been some controversy about the usefulness of limited benefit Plans, they do provide some levels of benefit and they are affordable. Admittedly, they are not the perfect coverage product for all uninsured workers and as they have shortcomings, but limited benefit plans can be helpful for many uninsured workers who cannot afford major medical/comprehensive health coverage. Now not all limited benefit plans and carriers are the same. This is where broker knowledge and education will be essential.

Broker Knowledge and -Creativity Shall Drive the Coordinated Dual Choice Offering

The coordinated dual choice offering relates to the concept of the pairing of two separate carriers – one that offers HMO major medical/comprehensive coverage and the other that offers limited benefit insurance coverage within an employer’s benefit program.
      Here is an illustration on how the Coordinated dual choice offering can work: Company XYZ has 40 employees – five management/office and 35 field workers. The employer wants to offer employer sponsored health coverage, but can only afford a $150 a month contribution. The broker found a reputable major medical carrier that will offer rates that average $225 for single employee, $400 for two-party and $600 for family. Some employees want the healthcare coverage (including all of management), but most employees will waive coverage because of affordability. The carrier requires that 50% of eligible employees participate and only 10 employees actually indicated a commitment. The case falls apart as the carrier declines the group for fear of adverse selection.
      The creative broker will suggest that the employer set up a more flexible company benefit program that involves employee classing. The five management employees are designated as “Class A” and the 35 field workers are designated as “Class B.” An HMO Plan is offered on a carve-out basis for the “Class A” employees. All five management employees enroll and agree to pay the employee contribution. A limited benefit plan is offered to the “Class B” employees. The employer pays 100% of the “Class B” employee premium, which includes coverage for family dependents. No employee contribution is necessary for the “Class B” employees. The broker helps the employer develop a written policy for classifying employees and coordinates with both carriers so the open enrollment is conducted at the same time. The employer can designate different contribution and coverage plans for each employee class.
The creative broker will help more companies like XYZ that face participation challenges.There are many companies like the one depicted in this simple illustration that can benefit from the creative approach in finding a way to offer health coverage.
      Already there is great activity in the limited benefits market. Several of the large carriers have already purchased or are marketing limited benefit plans. The limited benefit plan market is expected to grow by 20% in 2007. Although carrier consolidation and growing product portfolio have made it easier for brokers to recommend a sole carrier coverage solution, there are situations similar to the illustration above, when a single carrier benefit plan offering becomes part of the problem, instead of part of the solution.
––––––––––
Jim Arriola is CEO of Sekure Healthcare. He can be reached at Tel 619.210.4836 or e-mail Jarriola@MySekure.com. Sekure Healthcare focuses on providing affordable limited benefits healthcare coverage especially to employers with part-time, seasonal or with a large Hispanic workforce with access to healthcare benefits in the US and throughout Mexico. www.MySekure.com
Frank Garcia is CEO of InsuranceKO. He can be reached at Tel 800.700.7844 or e-mail fg1@insuranceKO.com. InsuranceKO focuses on providing innovative solutions including coordinated dual choice coverage to employers wanting to provide health insurance. www.insuranceKO.com