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Thursday April 17th 2014

Archives

August 2010 California Broker

Table of Contents

Consumer Driven Health Plans Fit with Reform
by Chris Bettner • Throughout the healthcare debate, people speculated whether Congress would eliminate health savings accounts (HSAs), flexible spending accounts (FSAs), and health reimbursement arrangements (HRAs). Not so. Despite some changes in contribution limits and restrictions in how funds can be used, most industry insiders believe that their popularity will continue.

Limited Medical Offers Easy Access and Simplified Coverage
by Richard L. Lungen • Guaranteed issue limited liability medical insurance is one of the best low-risk products in the market. It’s excellent for people who don’t qualify for individual major medical coverage or are priced out of the market.

Dental Contracts: Why It Pays for Brokers to Take a Closer Look
by John Doyle and Dr. Timothy Custer
Contracts aren’t just for lawyers to review. There are great advantages for employee benefit brokers who are willing to get up to speed on these documents that are the foundation of any employee benefits program they sell.

Be Better Informed Than the Tooth Fairy…Read All Three Parts of Our Annual Dental Survey
by Leila Morris • We’ve asked the top dental providers in California to answer 28 crucial questions to better help you, the agent, understand their benefits, features, and services. Look for Part III in the September issue. Read the responses and sell accordingly.

Non-Can Disability Insurance Policies
Why Do Most Non-Can Policies (And All Group) Have A Benefit Period Cap Of Only 24 Months?
by Larry Schneider • Should the carriers become a little more aggressive and venture out of their safety net? It remains to be seen, but I believe it may be worth the risk for certain occupations!

A Recipe For Success: What to Look For In a Premium Vision Plan
by Bernadette Twist, CBC • At first glance, a basic vision plan may appear to have everything employees need. However, some ingredients can make all the difference in terms of how much the plan will pay off for employers and their workforce.

Individual Health Care Reform: An Intervention on Chronic Disease
by Ron Holman, PhD •Having operated a specialty behavioral health plan since 1985, I have observed a lot about the nature of health, disease, and how to help people with chronic diseases manage their symptoms in an effective, compassionate, cost-effective, and responsible way.

Life Preservers–Experts Buoy Brokers in Our Annual View from the Top
by Leila Morris • It takes one word to sum up this year’s survey of life insurance executives – “optimism.” Earnings reports prove that insurers are recovering from the financial downturn of 2008. And as the economy recovers, there is a pent up of demand for life insurance among consumers who curtailed their spending last year.

Selling Your Agency – What’s In It For You?
by Brian Jones • With an uncertain future, even brokers who are doing well have concerns about the long-term vitality of their business.

Update on Federal Estate Tax
by Paul Pichie • Most estate planning experts were caught by surprise on January 1 when Congress allowed a repeal of the federal estate tax for 2010.

Leading Edge Technologies Change the Face of Employee Enrollment
by Elena Wu • The trend toward employees managing their benefits online is taking off like online banking has done.

Life Settlements: Prudent Investment or Risky Proposition?
by Curtis M. Cole • With life settlements getting a lot of industry and media attention, it’s no wonder that your clients are asking questions like, “What if the insured lives longer than expected?” and “What kind of risks do future premium payments create?”  While these are good questions, they do not address the foundational issues and most important questions that need to be asked when considering this type of investment.

HSAs–Consumer Driven Health Plans Fit with Reform

by Chris Bettner
When health savings accounts (HSAs) were created in 2004, no one envisioned the sweeping changes to the U.S. healthcare system that would pass into law in March 2010. Throughout the healthcare debate, people speculated whether Congress would eliminate health savings accounts (HSAs), flexible spending accounts (FSAs), and health reimbursement arrangements (HRAs).

Not so. Despite some changes in contribution limits and restrictions in how funds can be used, most industry insiders believe that the popularity of these products will continue. It is a good thing for employers and employees when healthcare reform allows consumers to play a role in how they pay for their healthcare and encourages them to make good healthcare choices.

The new healthcare reform law does change how FSA, HRA, and HSA funds can be used since it changes the definition of a “qualified medical expense.” In January 2011, expenses for over-the-counter medications will no longer be eligible for payment or reimbursement from any of these healthcare accounts. The law still allows these accounts to provide reimbursments for over-the-counter medicines and insulin when the patient has a doctor’s prescription for them.

Other Changes to HSAs

Only one other provision affects HSAs directly. The tax penalty for HSA withdrawals that are not used for qualified medical expenses will be increased from 10% to 20% as of 2011.

The IRS will not change what individuals and families with high deductible health plans can contribute to their HSAs in 2011. The contribution limits are the same as for 2010 ($3,050 for individuals and $6,150 for families). Catch-up contributions for individuals 55 and older remain at $1,000 annually.

These are all positive signs that HSAs will continue offering a tax-advantaged benefit to employees with their high deductible health plans. HSAs will continue to allow employers to reduce healthcare costs and allow employees to benefit from the tax advantages and portability of HSAs. The money is theirs to keep even if they change jobs.
However, changes that have been proposed to all health insurance policies may present a legal wild card. It is unclear how the changes will affect high deductible health plans when it comes to people’s eligibility to contribute to HSAs. Some of the impact may not be known until regulations are written implementing the final provisions.
The healthcare reform law sets new requirements for all insurance policies including high deductible plans. For example, all insurance policies must provide first-dollar coverage for preventive care services without any cost sharing, such as co-payments or deductibles. Most high deductible plans already provide first-dollar coverage of preventive care services. But, all high deductible plans will be required to do so in 2014.

The U.S. Preventive Services Task Force (and the Secretary of HHS) will prescribe the scope of preventive care services. Currently, what constitutes “preventive care” is defined differently by the HHS and the IRS. The IRS may need to revise its guidance on preventive care. More political wrangling will likely ensue as the implementation of the healthcare reform law takes shape.

Other Changes to FSAs

As of 2013, the new law sets $2,500 annual limits to healthcare contributions that employees can make to FSAs. Currently, employers set these limits. Despite this change, industry insiders expect FSAs to continue to grow because the advantages outweigh the new restrictions. And the healthcare reform law has introduced a new type of FSA called a “Simple Flex or Simple Cafeteria Plan,” which does not require discrimination testing for small businesses with fewer than 100 employees.

Changes to Most Healthcare Plans and Accounts

The new law imposes a 40% excise tax on employer-sponsored coverage with a benefit value of more than $10,200 for single coverage and $27,500 for family coverage (indexed annually). The benefit value would include the value of the group health plan as well as contributions to employees’ FSAs, HRAs, and HSAs. This tax would be imposed on insurance companies (including self-insured plans), plans sold in the group market, and plan administrators. However, the provision does not go into effect until 2018.

Another new requirement is for all insurance policies to provide a minimum actuarial value for the benefits covered (estimated to be at least 60%). However, it is still unclear how “actuarial value” will be defined and whether it will include employer and individual HSA contributions. If contributions were included in the calculation of a plan’s actuarial value, it would be easier for more high deductible health plans to meet the minimum actuarial value requirement.

As of 2014, all insurance plans will have to limit out-of-pocket expenses using the 2010 limits for HSAs, which are $5,950 for individual coverage and $11,900 for family coverage (adjusted annually for inflation).
In conclusion, the fundamental benefits of HSAs, HRAs and FSAs are still intact despite these proposed changes — the opportunity for consumers to save for medical expenses and fund their needs today and in the future. Accounts that are used to finance healthcare needs meet all of the eight principles for reform outlined by President Obama in his mandate to Congress:

1. Protect families’ financial health.
2. Make health coverage affordable.
3. Aim for universality.
4. Provide portability of coverage.
5. Guarantee choice.
6. Invest in prevention and wellness.
7. 
Improve patient safety and quality care.
8. 
Maintain long-term fiscal sustainability.
––––––––––
Chris Bettner, EVP, Business Development for Sterling HSA, is a founding member of the company’s executive team and has over 25 years of experience in healthcare sales and management with health insurance carriers. Prior to joining Sterling, Chris was vice president of Sales for Blue Shield of California. She held similar positions at Lifeguard, FHP, Independence Blue Cross and MetLife. Chris is also a national spokesperson on consumer driven healthcare plans and accounts. For more information, visit www.sterlinghsa.com or find us on Facebook.

Healthcare–Limited Medical Offers Easy Access and Simplified Coverage

by Richard L. Lungen

In the wake of healthcare reform, agents are under more pressure to generate value and transparency for their clients. One thing is clear: revenue will be curtailed with the onset of local exchanges as well as cost and medical-loss ratio requirements that are being imposed on carriers. Agents will have to work harder than ever to keep customers engaged and maintain their own revenue streams.

The situation is further exacerbated by recent trends, such as increased competition in the individual health insurance market, more insurers in the market, shrinking margins and opportunities, cost cutting among carriers, and more products with a broader range of prices. Agents who survive and thrive in the coming years will be those who provide exceptional, well-researched and backed options, as well as superior customer service.

Limited Liability to the Rescue

Guaranteed issue limited liability medical insurance is one of the best low-risk products in the market. It’s excellent for people who don’t qualify for individual major medical coverage or are priced out of the market. Limited liability medical insurance offers the following advantages:
• No declines.
• 
Immediate coverage – consumers can go the doctor or other medical provider the day they sign up.
• Low cost.
• Choice due to product options.
• 
Access through a national network of providers, a team of medical advocates, and tele-health programs.
• 
Web and telephone sales and ancillary services such as Rx, and tele-health.
• Rich commissions.
• 
Penetration into a previously underserved market.

Limited liability can serve businesses of all sizes as well as the self-employed and individuals. Limited liability, which provides best-in-class services, seems suited to deliver the greatest health benefit to the estimated 47 million people who are underinsured or unemployed in the United States.

The ideal candidate for limited liability is someone who isn’t eligible for medical coverage or works part-time. Virtually all employers have some employees who fit this category. Limited liability also can be a great complement to a high-deductible plan for those who do not have adequate health insurance or those who are burdened with high deductibles or out-of-pocket expenses.

Individuals who choose limited liability, through the right provider, can expect access to greater health coverage. Coverage has been simplified so that it’s easy to understand the purchase, the options, the appointment process, the communications, and the use of the plan. The simple and direct operations side of limited liability can be customized based on volume.  For brokers, it provides innovation and tremendous growth opportunity.

What to Look For in Limited Liability

A typical limited liability program should include the following key features:
• 
Membership and insurance benefits to people from 18 to 64 with coverage terminating at 65.
• 
Guaranteed issue for members and their spouses age 18 to 64 and dependent children to age 19.  Also guaranteed for children up to 25 if attending an accredited school full-time.
• 
$1 million lifetime maximum per covered person.
• 
U.S. Citizenship not required, only U.S. residency for 12 consecutive months.
• 
In-hospital daily indemnity of $500, $750, $1,000, or $1,500.
• 
Surgery, anesthesia, lab, X-ray, wellness, emergency department, and ambulance benefits.
• 
Doctor office visits with a choice of $25, $50, or $75 per-visit benefit.
• 
Doctor’s office wellness visit with a choice of $50 or $75 for one visit benefit.
• 
$2,000 accidental injury medical benefit.
• 
$10,000 accidental death and dismemberment.
The program should also include lifestyle benefits with a focus on wellness, often including gym memberships, vitamin discounts, hearing services, and weight-loss programs. Some forward thinking programs bundle in travel service discounts, car rental discounts, and shopping discounts at no extra charge.

Finding a Limited Liability Provider

The simplest way for agents to start offering limited liability is to find a top healthcare assistance provider. Similar to big box retail shopping clubs, these providers offer convenient and cost-effective options for healthcare services. They offer insured and discounted programs through a private network of dentists, physicians, pharmacies, and other healthcare professionals. Nobody is excluded, including non-citizens or those with pre-existing conditions.

It’s important to find a healthcare assistance provider that’s backed by companies that are experienced in the insured, limited liability, and discounted healthcare markets. A private label, custom healthcare program not only works with large employers, but can also provide care and attention to your individual customers through a healthcare advocate.  Look for a provider that has assembled best practice companies into a single platform and offers the following:

• 
A pharmacy benefit card with discounts and tiered co-pay programs.
• 
Competitive premiums: limited liability and short-term medical as well as hospitalization coverage, discount dental, telemedicine, and medical tourism.
• 
Programs that include guaranteed issue, price transparency, immediate coverage, and no declines.
• 
Bilingual/multi-lingual advocacy and customer support.
• 
Telemedicine: telephone calls from board certified licensed physicians that eliminate wait
times for office visits and reduce costly emergency-room visits.

Going Forward

As the gears of healthcare reform are being set in motion, it’s more important than ever for employers, groups, associations, and individuals to gain access to affordable and comprehensive medical care. High quality healthcare products and services improve health and welfare and address long-term health reform goals, such as greater health and financial sustainability for everyone.

Limited liability is a medical insurance option designed for people who would otherwise fall through the cracks. Plus, it serves as a boon for agents looking to distinguish themselves during tough times.  q
–––––––––
Richard L. Lungen is president of National Health Options. Following 16 years of leadership in managed care, life & health insurance, and overall healthcare service industries, Lungen co-founded National Health Options (www.nationalhealthoptions.com), the first healthcare assistance program of its kind designed to offer an affordable, accessible, and comprehensive coverage solution for Americans, employers, groups and associations including an estimated 47 million people who are under-insured.

Dental–Don’t Be Pennywise and Dollar Foolish

Dental Contracts: Why It Pays for Brokers to Take a Closer Look

by John Doyle and Dr. Timothy Custer
Contracts aren’t just for lawyers to review. There are great advantages for employee benefit brokers who are willing to get up to speed on these documents that are the foundation of any employee benefits program they sell. Perhaps nowhere is this truer than with dental coverage. In the short run, a plan may seem pennywise, from an actuarial standpoint, but prove to be a dollar-foolish approach that’s nothing to smile about in the long run.

It is common for many brokers and clients to embrace traditional dental plans involving co-pays, coinsurance, and deductibles. But patience, careful shopping, and a deeper dive into contract detail will help brokers bear fruit for employers as long as the contract is transparent and deep enough to treat dental benefits as a prudent investment in employee health rather than a line-item expense.

To provide the best service for clients, it’s important to accept the premise that all dental plans are not created equal. It is important for a broker to do a meaningful review to identify the devil in any of the details. A cursory review will not reveal a deeper contract with fuller benefit offerings nor identify limitations that may actually inhibit long-term wellness among members.

Eye on Limitations and Exclusions

Loading contracts with standard limitations and exclusions may help for-profit dental carriers raise their margins, especially in a difficult business climate where the numbers have been razor-thin. The danger of this approach is a watered-down contract that can erode outcomes and member satisfaction. That’s why it’s so important for brokers to do business with forward thinking service providers that go the extra mile to service a client’s needs.
There are numerous problem spots that should be avoided when seeking to secure the best possible contract for a client – one that dismantles barriers to care and/or adds features that promote good oral health, which can all have a positive impact on an employee’s overall health.

The limitations and exclusions of a contract should be closely reviewed. Many contracts have strict limitations toward the frequency and maximum age that some services can be performed. Examples include age limits for dental sealants (considered by some to be the gold standard for prevention of tooth decay), and frequency limits for fluoride treatments, standard cleanings, x-rays, periodontal scalings, root canals, and crowns. Many carriers have silently reduced how often and to what age these services and others can be covered.

Even more troubling are the exclusions hidden in contracts. The missing tooth exclusion is the most dubious exclusion found in most contracts. This exclusion kicks in when a new hire joins a plan or a company changes dental carriers. It penalizes members whose troubled tooth was removed before joining the new carrier. This exclusion eliminates the cost associated with replacing the tooth by the new carrier. This often puts a member in the position of searching for answers that typically never get answered. In addition, many contracts don’t allow for tooth-color fillings or porcelain crowns on back teeth. Further muddying the waters are network reimbursement levels associated with cryptic usual-and-customary charges based on questionable data.

A Cultural Change

One reason why the quest for deeper dental contracts has largely flown under the radar is that brokers and their employer clients have long devoted most of their time and attention every renewal season to medical insurance coverage. While dental plans are often an afterthought, the upshot is that with healthcare reform, ancillary benefits, especially dental insurance, become much more important in the group benefits sale. Brokers who seek to provide the best possible service to their client, across the entire benefits spectrum, will succeed in the long run.
Securing a more meaningful dental contract on behalf of clients can help brokers differentiate themselves from competitors and diversify revenue streams in a post-healthcare reform era. Some of the leading HR and benefit consulting firms are actively drilling deeper into the dental area, so it behooves enterprising brokers to quickly follow or potentially lose business. The larger implication isn’t that brokers must master the minutiae of dental benefit contracts – rather, they need to just know enough about the strategic importance and key details to enlighten clients about any missed opportunities. Brokers can always work closely with a carrier’s dental expert for the deepest possible expertise as part of a partnership approach.

For this to happen, it will require a cultural shift about the need to look more holistically at this employee benefit beyond securing the lowest rates. It’s also about ensuring that employers hold their carrier responsible for contractual language that removes barriers to appropriate care and adds features that promote oral wellness, both of which  will likely result in better patient outcomes and higher member satisfaction.

There’s tremendous pressure in the business world to initiate weekly or monthly discussions about profit-and-loss margins and meet expectations on Wall Street, but certainly nowhere near enough emphasis on adopting a longer-term view of select labor costs as a meaningful investment in human capital.

At the end of the day, any added effort that brokers are willing to put into the dental product line, by recognizing that deeper contracts are the linchpin of success, will pay meaningful dividends. A little persistency in this area will go a long way considering that it’s far more expensive to land a new account than it is retain a client. And as long as clients are happy, brokers can smile broadly about not only maintaining their business, but also growing their business.
––––––––––
John Doyle is president of dental operations and Dr. Timothy Custer is dental director for Dearborn National. For more information, call 800-331-0512.

Disability–Non-Can Disability Insurance Policies

by Larry Schneider

Why Do Most Non-Can Policies (And All Group) Have A Benefit Period Cap Of Only 24 Months?

Mr. Insured has a nervous breakdown as a result of being a top insurance producer. It seems the more applications he submits, the more frustrated he becomes. After a long siege to get underwriting to issue on a timely basis, he throws his hands up in the air and screams, “I’ve had it.” I’m outta here, as he runs down the street tearing off his clothes!

Finally, the police have him committed for evaluation and the psychiatrist says he’s had a severe nervous breakdown. His prognosis is that the patient will never be able to work in a sales environment with the associated stress! Fortunately he has a great disability policy that pays handsomely on a tax-free basis and with the own-occ definition for total disability he seems to be home free!

During this period, he has to visit his therapist for re-evaluation and to get a prescription. This proves to the carrier that he is indeed disabled from performing his material and substantial duties as a salesman. Twenty-two months go by. Along with his benefit check, there is a letter that says, “According to the benefits stated in your policy, any mental nervous disabilities (other than being confined to a hospital) are hereby payable for an aggregate period of no more than 24 months (a recurrent disability doesn’t help in this case).”

Why do some carriers pay for the full benefit period and most others only pay for the 24 months?
I can tell you this and it is my contention since it can be proved; in order to collect, there has to be some serious evidence that the claim is valid. As we all know, subjective claims are very hard to prove since objective data like a broken arm is difficult to come by.

Now granted, there are some cases that are clearly defined, but those are relatively far and few between when compared to the others. Again why do these kind of claims have the cap? The reason is simple — the carrier doesn’t want to have a duel among the opposing doctors whereby one says yes and the other says no!
What about the carriers that have no such caps? This is a fairly recent event, so the jury is still out. To protect themselves, there is no doubt in my mind, that to get paid past the 24 months will be no easy matter. Again, this is just my opinion!

If your prospect is eligible, should they only apply with a carrier that has no cap? There is easy an answer why not, especially since mental/nervous claims are amongst the highest when compared to other causes.
That being said, if the condition already exists will coverage be issued? It depends. If the carrier does issue, it might be with only a five year BP with fewer options, such as the future increase option, etc.
Why can’t the carrier issue for the full BP along with an exclusion rider? Think about that for a moment.
Your client is driving down a country road and becomes very depressed and begins to cry and wham, crashes into a tree. Was it an accident payable to 65 or a MN issue payable for 24 months? Should the carriers become a little more aggressive and venture out of their safety net? It remains to be seen, but I believe it may be worth the risk for certain occupations.
–––––––––
Larry Schneider, founder of Disability Insurance Resource Center, has published The Anatomy of Disability Income Insurance, a manual on selling disability insurance. Schneider draws on his 35 years of disability insurance selling experience to craft a manual ideal for new and experience agents, as well as home office trainers and personnel.  For more information, call Schneider at -800-551-6211.

Vision – A Recipe For Success: What to Look For In a Premium Vision Plan

by Bernadette Twist, CBC
No matter what kind of vision plan your clients may have or be interested in, they probably know that they should seek coverage from an experienced and well-respected provider. At first glance, a basic vision plan may appear to have everything employees need. Eye exams – check. Eyeglass allowance – check. However, some ingredients can make all the difference in terms of how much the plan will pay off for employers and their workforce. Here are some of the key elements that set premium vision benefits apart from their more basic counterparts:

Thoroughness of Eye Exams

A basic vision screening, like the one a school nurses performs, is not the same as an eye exam conducted by an optometrist or ophthalmologist – just as a basic eye exam is not the same as a comprehensive eye exam.
Medical experts say that a comprehensive eye exam should include an evaluation of family history and eye and vision health as well as tests of near and far vision, common refractive errors, and eye pressure. It should also include dilation, which allows the eyecare professional to examine the back of the eyes for early signs of eye diseases like glaucoma or macular degeneration and even conditions like diabetes, hypertension and certain tumors.

Frequency of Eye Exams

Many basic vision plans only cover an eye exam once every 24 months as opposed to every 12 months. The problem is that numerous vision issues and diseases can progress a great deal in two years.

Take the example of an employee who doesn’t realize they need a lens correction, or puts off an eyecare visit until the company vision plan will cover it again. Even slightly miscorrected vision can reduce productivity by 20% and your clients probably don’t want to see that loss multiply over the course of two years!

Plus, employees who find out early enough about an eye-related disease or medical condition can often turn their lifestyle around or pursue the appropriate treatment to avoid the condition or minimize its impact. Consider that hypertension can be detected through an eye exam. About four in 10 people who learn they have hypertension will successfully take steps to better manage it. This can cut down on medical expenses significantly and save up to $1,100 in productivity for every hypertensive employee, according to an American Health and Drug Benefits study and National Census data.

Regular eye care is also critically important for people who have been diagnosed with eye diseases or certain medical conditions. For example, employees with hypertension and diabetes need more frequent exams to check for the development or progression of related eye disease and address any visual side effects from their medications, such as light sensitivity.

The publicly available Healthy Sight calculator (HealthySightWorkingForYou.org) can help your HR clients quantify how much they can save in medical costs and productivity by detecting vision problems and eye/systemic diseases early. Having your clients plug their workforce data into the calculator offers an eye-opening perspective on the value of premium care.

Material Frequency and Frame Allowance

Some basic vision plans cover an annual eye exam, but they only allow the employee to get new eyeglasses or contact lenses every 24 months. It’s like taking your car to be inspected every year, but only being able to afford a repair every two years. A premium vision plan typically covers both within a given year. Also, a premium plan usually offers discounts on additional eyewear that’s not covered by the plan, such as purchasing contact lenses in addition to eyeglasses within the same year.

Also, a premium vision plan usually offers a higher frame allowance. Today’s brand savvy employees are looking for quality products that offer value for their money, especially in a tough economy. Even if employees have to pay up toward a certain name brand frame, they will appreciate a vision plan that makes it less expensive to do so.

Covered Lens Treatments

It’s obviously important to offer a basic lens prescription to correct vision, but there’s more to quality vision than just seeing near and far. A premium vision benefit fully covers or discounts certain lens enhancements that go beyond basic vision correction.

For example, photochromic lenses, like Transitions lenses, block damaging UV rays and minimize glare to reduce eyestrain and fatigue. Paired with an anti-reflective coating, they can further reduce distracting reflections, whether out in the sun or sitting under glaring office lighting. Employees can lose up to 15 minutes a day just from difficulty focusing their eyes, according to a KAZI study on office lighting, which suggests that glare-reducing products can make quite an impact.

No-line progressive lenses are almost a most-have for today’s aging workforce. As employees pass age 40, even those without a previous lens correction will need multi-focal lenses to help them focus on both near and far objects at work. Many want avoid the visible stigma of aging that comes with wearing bifocals.
A recent study showed that 60% of employees say they’d be more likely to enroll in or utilize their vision plan if it included premium lens options like these, and who can blame them?

Types of Covered Lens Materials

A premium vision plan often covers or offers discounts on impact-resistant lens materials, such as polycarbonate or Trivex material – at least for higher-risk individuals, such as children. The vast majority of eye injuries are preventable whether or not employees work in a physically active environment. An impact-resistant eyeglass lens can make the difference between a close call and a trip to the emergency room and the possibility of losing vision altogether.

Allowances for LASIK or PRK

A premium vision plan is more likely to offer special rates on refractive surgery consultations, and procedures, usually with a certain provider.

Additional Considerations To Enhance Value For the Workplace

Even if your HR clients offer vision benefits that cover an annual, comprehensive eye exams and eyewear, they may want to consider other aspects of today’s premium plans.
For example, employees who are at higher risk for vision problems may need to seek eye care more than once a year. Your clients might want to consider a plan that offers enhanced coverage for high-risk groups, such as kids, diabetics, and pregnant women. For example, some vision plans include full coverage of photochromic lenses for kids to protect their vulnerable eyes from UV damage and help them see more comfortably.
Before recommending a vision benefit, brokers should make sure that the plan’s network is large enough to offer employees a reasonable number of choices among providers in their area. These providers should be able to offer evening and weekend hours and prepare new eyeglasses quickly to fit around employees’ work schedule.

It Isn’t Enough to Simply Make the Premium Sale

A comprehensive premium vision benefit allows employers to offer a low cost and easy-to-understand resource to help employees maximize their sight and their health.

A premium plan is still a low cost option for your HR customers from $70 to $120 per employee each year. But no one wants to make even a small investment that doesn’t perform to its full potential. Simply offering a premium plan won’t be enough if employees don’t take advantage of it (and nearly half of them don’t), which is where employee education comes in.

Annual enrollment is an appropriate time for your clients to inform employees about the eye/overall health connection and the value of their vision benefit. Employers can also reinforce this message throughout the year. Many public resources have helpful eye health information and materials to share with employees, such as HealthySightWorkingForYou.org, SightSaved.org, and AllAboutVision.com.

Brokers need to emphasize that it is well worth it for clients to make a small investment of time to educate employees about vision care. If employees understand what vision care can do for them, they will be more likely to take advantage of their vision plan. Also, they will appreciate that their employer has made a quality choice on their behalf and has taken the time to explain the advantages of their premium plan. This translates into greater satisfaction with their benefit package, which plays a role in productivity and retention.
Your customers have a lot of heavy decisions on their shoulders, but with your help incorporating and promoting a premium vision benefit can be a no-brainer they’ll want to say “yes” to year after year.
–––––––––
Bernadette Twist, CBC, is senior vice president for EJA/Capacity Benefits Agency LLC, with 16 years of experience in the employer sponsored benefits marketplace. She recently participated in the managed vision care track at Transitions Academy 2010, an experience that – combined with the positive feedback she receives from HR clients and their employees — has strengthened her belief in the importance of offering a comprehensive and premium vision benefit to her customers. Twist can be reached at BTWIST@ejains.com.

Disability–Non-Can Disability Insurance Policies

by Larry Schneider

Why Do Most Non-Can Policies (And All Group) Have A Benefit Period Cap Of Only 24 Months?

Mr. Insured has a nervous breakdown as a result of being a top insurance producer. It seems the more applications he submits, the more frustrated he becomes. After a long siege to get underwriting to issue on a timely basis, he throws his hands up in the air and screams, “I’ve had it.” I’m outta here, as he runs down the street tearing off his clothes!

Finally, the police have him committed for evaluation and the psychiatrist says he’s had a severe nervous breakdown. His prognosis is that the patient will never be able to work in a sales environment with the associated stress! Fortunately he has a great disability policy that pays handsomely on a tax-free basis and with the own-occ definition for total disability he seems to be home free!

During this period, he has to visit his therapist for re-evaluation and to get a prescription. This proves to the carrier that he is indeed disabled from performing his material and substantial duties as a salesman. Twenty-two months go by. Along with his benefit check, there is a letter that says, “According to the benefits stated in your policy, any mental nervous disabilities (other than being confined to a hospital) are hereby payable for an aggregate period of no more than 24 months (a recurrent disability doesn’t help in this case).”
Why do some carriers pay for the full benefit period and most others only pay for the 24 months?
I can tell you this and it is my contention since it can be proved; in order to collect, there has to be some serious evidence that the claim is valid. As we all know, subjective claims are very hard to prove since objective data like a broken arm is difficult to come by.

Now granted, there are some cases that are clearly defined, but those are relatively far and few between when compared to the others. Again why do these kind of claims have the cap? The reason is simple — the carrier doesn’t want to have a duel among the opposing doctors whereby one says yes and the other says no!
What about the carriers that have no such caps? This is a fairly recent event, so the jury is still out. To protect themselves, there is no doubt in my mind, that to get paid past the 24 months will be no easy matter. Again, this is just my opinion!

If your prospect is eligible, should they only apply with a carrier that has no cap? There is easy an answer why not, especially since mental/nervous claims are amongst the highest when compared to other causes.
That being said, if the condition already exists will coverage be issued? It depends. If the carrier does issue, it might be with only a five year BP with fewer options, such as the future increase option, etc.
Why can’t the carrier issue for the full BP along with an exclusion rider? Think about that for a moment.
Your client is driving down a country road and becomes very depressed and begins to cry and wham, crashes into a tree. Was it an accident payable to 65 or a MN issue payable for 24 months? Should the carriers become a little more aggressive and venture out of their safety net? It remains to be seen, but I believe it may be worth the risk for certain occupations.
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Larry Schneider, founder of Disability Insurance Resource Center, has published The Anatomy of Disability Income Insurance, a manual on selling disability insurance. Schneider draws on his 35 years of disability insurance selling experience to craft a manual ideal for new and experience agents, as well as home office trainers and personnel. For more information, call Schneider at -800-551-6211.

Dental Contracts: Why It Pays for Brokers to Take a Closer Look

Don’t Be Pennywise and Dollar Foolish

by John Doyle and Dr. Timothy Custer

Contracts aren’t just for lawyers to review. There are great advantages for employee benefit brokers who are willing to get up to speed on these documents that are the foundation of any employee benefits program they sell. Perhaps nowhere is this truer than with dental coverage. In the short run, a plan may seem pennywise, from an actuarial standpoint, but prove to be a dollar-foolish approach that’s nothing to smile about in the long run.

It is common for many brokers and clients to embrace traditional dental plans involving co-pays, coinsurance, and deductibles. But patience, careful shopping, and a deeper dive into contract detail will help brokers bear fruit for employers as long as the contract is transparent and deep enough to treat dental benefits as a prudent investment in employee health rather than a line-item expense.

To provide the best service for clients, it’s important to accept the premise that all dental plans are not created equal. It is important for a broker to do a meaningful review to identify the devil in any of the details. A cursory review will not reveal a deeper contract with fuller benefit offerings nor identify limitations that may actually inhibit long-term wellness among members.

Eye on Limitations and Exclusions

Loading contracts with standard limitations and exclusions may help for-profit dental carriers raise their margins, especially in a difficult business climate where the numbers have been razor-thin. The danger of this approach is a watered-down contract that can erode outcomes and member satisfaction. That’s why it’s so important for brokers to do business with forward thinking service providers that go the extra mile to service a client’s needs.
There are numerous problem spots that should be avoided when seeking to secure the best possible contract for a client – one that dismantles barriers to care and/or adds features that promote good oral health, which can all have a positive impact on an employee’s overall health.

The limitations and exclusions of a contract should be closely reviewed. Many contracts have strict limitations toward the frequency and maximum age that some services can be performed. Examples include age limits for dental sealants (considered by some to be the gold standard for prevention of tooth decay), and frequency limits for fluoride treatments, standard cleanings, x-rays, periodontal scalings, root canals, and crowns. Many carriers have silently reduced how often and to what age these services and others can be covered.

Even more troubling are the exclusions hidden in contracts. The missing tooth exclusion is the most dubious exclusion found in most contracts. This exclusion kicks in when a new hire joins a plan or a company changes dental carriers. It penalizes members whose troubled tooth was removed before joining the new carrier. This exclusion eliminates the cost associated with replacing the tooth by the new carrier. This often puts a member in the position of searching for answers that typically never get answered. In addition, many contracts don’t allow for tooth-color fillings or porcelain crowns on back teeth. Further muddying the waters are network reimbursement levels associated with cryptic usual-and-customary charges based on questionable data.

A Cultural Change

One reason why the quest for deeper dental contracts has largely flown under the radar is that brokers and their employer clients have long devoted most of their time and attention every renewal season to medical insurance coverage. While dental plans are often an afterthought, the upshot is that with healthcare reform, ancillary benefits, especially dental insurance, become much more important in the group benefits sale. Brokers who seek to provide the best possible service to their client, across the entire benefits spectrum, will succeed in the long run.
Securing a more meaningful dental contract on behalf of clients can help brokers differentiate themselves from competitors and diversify revenue streams in a post-healthcare reform era. Some of the leading HR and benefit consulting firms are actively drilling deeper into the dental area, so it behooves enterprising brokers to quickly follow or potentially lose business. The larger implication isn’t that brokers must master the minutiae of dental benefit contracts – rather, they need to just know enough about the strategic importance and key details to enlighten clients about any missed opportunities. Brokers can always work closely with a carrier’s dental expert for the deepest possible expertise as part of a partnership approach.

For this to happen, it will require a cultural shift about the need to look more holistically at this employee benefit beyond securing the lowest rates. It’s also about ensuring that employers hold their carrier responsible for contractual language that removes barriers to appropriate care and adds features that promote oral wellness, both of which will likely result in better patient outcomes and higher member satisfaction.

There’s tremendous pressure in the business world to initiate weekly or monthly discussions about profit-and-loss margins and meet expectations on Wall Street, but certainly nowhere near enough emphasis on adopting a longer-term view of select labor costs as a meaningful investment in human capital.

At the end of the day, any added effort that brokers are willing to put into the dental product line, by recognizing that deeper contracts are the linchpin of success, will pay meaningful dividends. A little persistency in this area will go a long way considering that it’s far more expensive to land a new account than it is retain a client. And as long as clients are happy, brokers can smile broadly about not only maintaining their business, but also growing their business.
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John Doyle is president of dental operations and Dr. Timothy Custer is dental director for Dearborn National. For more information, call 800-331-0512.

Behavioral–Individual Health Care Reform: An Intervention on Chronic Disease

by Ron Holman, PhD
Having operated a specialty behavioral health plan since 1985, I have learned and observed a lot about the nature of health, disease, and how to help people with chronic diseases manage their symptoms in an effective, compassionate, cost-effective, and responsible way. Chronic disease includes: Asthma, Diabetes, CPD, Cancer, etc.
People with chronic disease, who go in and out of an acute hospital setting periodically, feel lousy a lot of the time. From experience, we know that a certain percentage of these patients are unable to follow doctors’ advice to some degree or another. How can we get these patients to follow doctors’ advice? To answer this question, let’s examine why these patients may be having such a hard time.

The answer seems to be rooted in the mental and psychological state of the patient’s mind. So what is the patient thinking? Is the patient making a conscious decision to ignore the doctors’ advice? Of course not! Yet, somehow not following doctors’ advice is what happens.

Let’s start our analysis by asking a few questions about the patient: How bad does the patient feel physically and emotionally? To some degree or another, both of these important factors cause patients to be less interested in getting up and going to work, visiting family, going to the gym, and participating in a hobby. Going to church is a hassle because friends want to know how they are doing, which brings up the reality of how bad they really are doing. Shopping is also a drag. Why is that? Think about yourself, for instance. When you have a bad cold or flu what do you want to do? I know for me, I want to stay in bed and have my wife wait on me like my mom did when I was seven years old. A chronically ill person is going to feel bad all or most of the time.

Many in our society have come to believe that the marvels of science have or should have solutions, that medicines that can fix anything, and that we should be able to live a long time with ease and comfort. Beliefs are important. A patient, who has to go into the hospital one more time, sustains a direct assault on this core belief about life. Rather than admitting that this core belief is wrong, most people ignore the evidence or bury it. When this happens, a chronically ill patient becomes less and less likely to follow doctors’ advice as their psychological resources and their immune system weaken further and further.

The solution is individual healthcare reform. Intervention is a psychological tool that mental health professionals and social workers use on a regular basis. They use intervention when a patient’s mental state causes them to behave in a way that brings grief and suffering to them and their family. The social worker gathers all the significant members of the patient’s family (all those who love the patient) to plan the intervention. The intervention starts with one family member at a time expressing how they feel and how they are suffering emotionally watching their loved one slowly deteriorate.

The desired outcome of the intervention is to get a commitment from the patient to start following doctors’ advice immediately and engage in individual and/or family counseling as indicated. Other goals are to have daily monitoring of the patient’s actions called for by the doctor’s advice; support the patient’s activity in their normal work, family, social, and religious/spiritual beliefs and practices; and coordinate intervention activity with the medical case manager through an exchange of data.

Each patient’s situation must be evaluated individually with sensitivity, compassion, and the patient/family’s willingness to participate. No two interventions are ever the same. Sometimes, the first intervention brings to light the reality that the patient is avoiding, so that the patient immediately takes the bull by the horns. In other families, a cooling off period follows the intervention before alternative action can be initiated. In yet another family, the intervention immediately relieves a tremendous amount of suffering for the family.
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Ron Holman, Ph.D., is president and CEO of The Holman Group. The Holman Group, licensed by the DMHC in 1985, is a Knox Keene Single Service Mental Health Plan in California. For further information contact Elizabeth Holman, MBA, Vice President Sales and Marketing at elizabethh@holmangroup.com or 800-321-2843.

Life Preservers–Experts Buoy Brokers in Our Annual View from the Top

by Leila Morris
It takes one word to sum up this year’s survey of life insurance executives – “optimism.” Earnings reports prove that insurers are recovering from the financial downturn of 2008. And as the economy recovers, there is a pent up demand for life insurance among consumers who curtailed their spending last year.

But even in the depths of the recession, the industry proved its value because of protection, guarantees, and security that life insurance products can provide to Americans. Over and over, executives told us the economy has popularized products that provide guarantees.

Industry-wide, whole life products continue to pick up steam while universal life is still the most popular. Some executives say term sales have slipped as consumers, who are still struggling, don’t have the money to buy it. Other executives have seen an increase in term sales from some consumers who are not ready to commit to purchasing a permanent product. Executives see emerging opportunities for accumulation products, such as variable UL or indexed UL as money starts to come off the sidelines or as tax laws change.

When it comes to demographic opportunities, executives cite the overlooked Hispanic market and the emerging middle market (ages 25 to 40) as well as the “inheritance boom” that is finally taking hold.

The industry is not without its challenges. Reinsurance pressures, tight credit, and the decline in interest rates are putting pricing pressure on carriers, especially those with products that provide competitive guarantees. Another concern is over proposals, in Congress, to tax the inside cash-value build-up of life insurance. The industry stands ready to fight if Congress seeks to address the national deficit by burdening life insurance products with this type of taxation.

Executives hope that new producer compensation disclosure regulations in New York won’t have a ripple effect on the rest of the country. The concern is that the National Association of Insurance Commissioners could adopt this disclosure approach as a national model regulation. The following is the executives’ take on a variety of issues.

1. 
How is the life insurance market faring in today’s economy?

Michael Burns, senior vice president, Life Product Management, Lincoln Financial Group: The industry took a hit in 2009 with sales dropping 16% for the year versus 2008. However, total life sales are already showing double-digit growth for the first quarter of 2010 compared to the same period last year. The life insurance industry continues to be increasingly relevant through the protection, guarantees and security that its products can provide.

Craig Nordyke, vice president and chief actuary, Dearborn National brand companies: A recent
LIMRA study indicated that new annualized premium for group life was flat during the first three months of 2010 compared to the same period from 2009. However, as we enter the second half of the year, we are seeing a better than average trend in our group life business. From the Dearborn National perspective, we are seeing growth in all of our lines of business. Of course, the overall industry is still recovering from the impacts of the 2008 financial crisis, recession and impacts on asset portfolios. The interest environment at such prolonged low levels impacts investment returns for the industry and affects a number of different product lines.

Larry Noyes, VP Sales, US Division, Foresters: It’s better than last year. According to LIMRA, annual premiums rebounded 10% over last year. Foresters has done very well in this economic climate and we are growing faster than the industry as a whole.

Michael Ferik, senior vice president, Individual Life, The Guardian Life Insurance Company of America: Reinsurance pressures, tight credit, and the decline in interest rates are putting pricing pressure on carriers, especially those with competitive guarantees in their products. We are seeing this trend in the continued rationalization of pricing in specific segments of the business, such as term and secondary guarantee universal life.

We are cautiously optimistic about growth in life insurance sales, specifically permanent life insurance sales. Clients continue to seek safe havens for their money. Whole life insurance is one of the last few vehicles that allows clients to protect their families and businesses, get a competitive tax-deferred rate of return, and get guaranteed cash value growth.

Michael Babikian, senior vice president and chief marketing officer, Transamerica Insurance & Investment Group: More than ever, people want and need solutions with long-term guarantees.

Peter Golato, CLU, ChFC, senior vice president, Nationwide Financial Services: Consumers weren’t spending money last year, so now we are seeing the effect of pent up demand as the economy recovers.

Paul LaPiana, Senior Vice President, US Distribution, Protection Product Wholesaling with MetLife: Earnings reports show that insurers are recovering from the financial downturn of 2008. MetLife core fundamentals have remained strong throughout the recession and now as the economy recovers. In fact, MetLife announced its decision to acquire Alico in March. At this time, not many companies could have considered a significant acquisition. We are not overly dependent on one product or line of business, which allows us to remain strong through many economic cycles. We provide a broad range of term and permanent solutions.
2. 
Has there been a significant change in product mix over the past 12 months in terms of guarantees, variable, or term?

Larry Noyes, Foresters: Carriers have had to eliminate or modify return-on-premium term products to comply with the Actuarial Guideline CCC. Whole life products continue their resurgence because of their simplicity; universal life is still the most popular product; and term sales have slipped. Significant growth of our final expense whole life product (PlanRight) has shaped our recent product mix. Our term sales remain strong and we have a growing block of BIG universal life sales.

Michael Ferik, Guardian Life: The market remains particularly strong for fixed products and products with guarantees. We continue to see growth in our core whole life product line. We’ve seen an increase in short pay plans and whole life dump-ins as clients seek safe havens for their assets. We expect this trend to continue as long as the market remains volatile. Clients are looking for steady returns and financial security. We have continued to see growth in our term portfolio. While we are not the cheapest competitor out there, our combination of features and conversion privileges give us an edge in the market.

Michael Babikian, Transamerica: Consumers’ appetite and demand for guarantees has definitely increased since the economic meltdown began. We anticipate that this newfound appreciation for guarantees to persist for the long term.

Peter Golato, Nationwide Financial Services: Guarantees have gained prominence. Consumers want to know that their life policy will be there when they need it most. According to LIMRA, universal life sales were up 43% in the first quarter, with single premium products and no-lapse guarantee products driving most of that strength. Term first-year premium is still down nearly 4%.

Consumers with money are purchasing permanent products with guarantees while consumers who have not fared as well in the economic downturn don’t have the funds even to purchase term products. Variable’s free-fall is starting to bottom out. If interest rates remain low, we may see an increase in variable sales from products that have longer-term guarantees.

Craig Nordyke, Dearborn National: At Dearborn National, we concentrate on group life and disability products as well as worksite products. Our main change in product mix is growth in our dental line of business, which has been a focus for the organization. In addition, we have included several value-added features with our group life to make the product an attractive offering beyond rate. These value-added features
help us position our product as more of a life cycle product by assisting employees with a variety of needs including will preparation, assistance for beneficiaries, travel assistance, online beneficiary management and an interest-bearing account for beneficiary proceeds.

Michael Burns, Lincoln Financial Group: We’ve seen a continued focus on simplicity and guaranteed protection with products, such as guaranteed UL and term. Greater challenges remain for accumulation sales, particularly in the variable space. As money starts to come off the sidelines or as tax laws change, we may see emerging opportunities for accumulation products, such as variable UL or indexed UL.

Paul LaPiana, MetLife: The most notable shifts are from variable life to whole life and an increased interest in term. Industry sales of universal life have remained flat, although UL still represents the largest block of industry sales. MetLife’s focus has been on cash value life insurance. The guarantees and protection available in cash-value life insurance, such as whole life, have become more popular as consumers and financial professionals are looking for ways to restore retirement portfolios and legacy plans.

MetLife expects to see continued interest in these products since they can serve two client needs:
1. 
Whole life can provide financial protection through tax-free proceeds to the client’s beneficiaries upon death (if properly structured).
2. 
Access to the cash value accumulated in the policy.
Some clients have been shifting to whole life as universal life prices have increased. While it may be an advantage to buy variable universal life when the market is down, clients do not often take advantage of this opportunity. Sales of this product are tied to consumers’ views of the equity markets. Many consumers already have exposure to the equity markets through other products. Further exposure through another variable product is not appealing when the equity markets are down. Some people who need life insurance are taking a wait and see approach and choosing term insurance since it’s a less expensive option for protection. This product will at least lock in their insurability.

3. 
Do you see growth in particular niche markets?

Michael Babikian, Transamerica: Estate tax planning is very much in vogue with a resurgence in activity and demand. With an absence of an estate tax, many high-net-worth individuals are realizing that they have to be prepared for several different scenarios. On the other hand, families with less than $10 million of net worth are worried about whether they will have enough to sustain themselves in retirement while providing for future generations.

Michael Ferik, Guardian Life: The opportunity for life insurance in qualified plans remains viable; permanent cash value life insurance can provide an attractive and viable alternative for small businesses with under-funded (or even un-funded) retirement plans. A few carriers still operate in this specialized space in which a strong whole life product is important and a great deal of technical expertise is needed.

Craig Nordyke, Dearborn National: While not a niche market, we’ve seen tremendous growth in our dental line. In fact, we’ve seen over 500% growth YTD 2009 to YTD 2010 including future effective dates. Also, our worksite products division continues to have significant growth in their permanent life and critical illness products.

Larry Noyes, Foresters: Growth in the Hispanic market is a significant opportunity given the demographics and size of this market. This market has been traditionally underserved by the life insurance industry. Point-of-sale decision-making abilities will increase the speed of underwriting decisions and they will differentiate carriers with superior technology and processes.

Peter Golato, Nationwide Financial Services: Short-term fixed annuity sales results do not influence our strategy or product mix. We continue to focus on the needs of consumers and advisors in the market. The much anticipated and talked-about “inheritance boom” is finally taking hold. Life insurance will play a vital role in estate planning as Baby Boomers’ parents seek to maximize their bequests.

Paul LaPiana, MetLife: According to brokers, wealthy clients have expressed more interest in whole life policies, not only for protection, but also as a way to earn attractive returns. They are also looking at the tax advantages of life insurance. People who are making at least $250,000 a year and will be targeted for higher taxes can access money in the whole life policy on a tax-favored basis.

Guaranteed universal-life policies continue to provide liquidity in estate planning solutions. The cash accumulation is not a driving factor for these clients since the cash value of universal-life policies doesn’t build dramatically. These policies provide a permanent death benefit for a relatively low cost. Although many financial professionals focus on the Baby Boomer market, the emerging and under-served middle market (ages 25 to 40) presents an excellent opportunity for growing new business.

4. 
What is happening with your distribution systems?

Michael Burns, Lincoln Financial Group: We continue to recognize the importance of a broad range of distribution.

Larry Noyes, Foresters: We continue to experience strong recruiting of independent IMOs and producers.

Peter Golato, Nationwide Financial Services: Our distribution systems have remained stable.
Our P&C agency force is increasing its focus on life insurance sales. We are increasing the number of specialized agents in P&C agents’ offices who are hired and trained in financial services. We even implemented a financing package to help principal agents with this process. Agent attrition is down 4% over the previous year as a result of these and other better practices.

Craig Nordyke, Dearborn National: We operate primarily through group broker and employee benefit consultant distribution for our group business and we operate primarily through general agencies for our worksite business. We do not sell directly to employers or consumers. Dearborn National is rapidly expanding the sales force to serve the broker and consultant community. In fact, from the end of 2009 to the end of 2010, we will double our sales force to address the demand for our products and services.

Paul LaPiana, MetLife: I oversee a team of life insurance, long-term care insurance, and disability insurance wholesalers who support our own agents and those in well-known independent firms. Our brokerage channel represents the majority of our independent sales. It focuses on independent marketing organizations and successful brokerage general agents. We also have a National Accounts Channel representing a volume of sales through third-party banks and wirehouses.

With regards to our affiliated distribution channel, my colleague Mike Vietri, an executive vice president, leads our agency force representing MetLife, New England Financial, and MetLife Resources. He just announced further investment in this distribution channel and a strategy to continue to support our career agent firms. He is bolstering local infrastructure and is investing in training and continued education for agency managers and agents. At the same time, he is focusing on multi-cultural recruitment and retention of our existing financial professionals.

5. 
What kind of growth do you see in life insurance sales as an employee-paid or employer-paid benefit?

Craig Nordyke, Dearborn National: Dearborn National views the employer-sponsored market as a large opportunity for life insurance and other ancillary products. We continue to see growth in our group product lines and worksite product lines. It’s a very economical way to reach an uninsured or underinsured population. We continue to focus on products that can reach the employee purchaser. We do see a continuing trend of employer-paid benefits being reduced; but as that happens, employers will continue to look to offer voluntary employee-paid products.

Larry Noyes, Foresters: Market downturn has created market opportunities for us. Foresters is committed to independent distribution.

Michael Ferik, Guardian Life: We see a substantial opportunity to position life insurance as an ancillary benefit, especially as small businesses look for ways to retain talent while shifting some benefit costs to their employees.

Michael Burns, Lincoln Financial Group: There should be increased opportunity for growth as an employee-paid benefit, particularly with the changes taking place in healthcare reform. The life insurance industry should reach a broader market due to the increased awareness of the security and protection that our products provide. The funding of benefits will increasingly be transferred to the employee.

Paul LaPiana, MetLife: Supplemental life insurance provides growth opportunities for group life. It has become an increasingly important workplace benefit as employees take on more responsibility for building a financial safety net. Brokers and consultants have a unique opportunity to help employers promote the need for adequate life insurance coverage, educate employees on the protection, and get the right amount of coverage to protect themselves and their families.

6. 
Are you more or less active with alternative distribution systems? (banks, stockbrokers, direct)?

Craig Nordyke, Dearborn National: We do not emphasize alternative distribution systems in this way. Dearborn National focuses on benefits brokers and employee benefit consultants as well as general agencies specializing in worksite product distribution.

Michael Ferik, Guardian Life: We are doing direct business with alternative distribution in our non-core product areas. Our bank owned life insurance (BOLI) product has been well received. We also have a strong offering in non-qualified (NQ) deferred compensation platform in which we sell NQ plans – corporate owned life insurance (COLI) and mutual funds through COLI brokers. Both the BOLI and COLI products are sold through our career agents as well.

Peter Golato, Nationwide Financial Services: Alternative distribution systems have been standard at Nationwide for a long time and remain a strong focus of ours. Banks have been instrumental in the success of our single premium universal life product.

Paul LaPiana, MetLife: MetLife is very active with alternative distribution systems in the institutional markets. Our National Accounts Channel provides point-of-sale support for a select few national broker dealers and banks. Securities-based professionals, like stockbrokers, need help identifying opportunities in their books of business, engaging clients in meaningful discussions about protection products, and implementing solutions with clients. It’s very important to have credentialed professionals who can provide expertise in case design and support throughout the sales process. In addition, having the back-office expertise to provide case design work can be a tremendous value because it gives them time to focus on acquiring new client relationships and providing service to their best relationships.

7. 
How have recent events, such as the market downturn and the AIG scandal, affected the way you do business, if at all?

Michael Babikian, Transamerica: It is devastating to many parents and grandparents who realize that future generations will inherit a colossal legacy of debt and face an uphill battle just to have the same opportunities they enjoyed. These clients are staring at their portfolios, wondering how they can take care of themselves and still be able to provide opportunities to their families. Clients are looking for and demanding guarantees. The life insurance community is responding by increasing its customer focus.

Craig Nordyke, Dearborn National: The entire industry has been affected by the economic downturn and its impact on investments. But, as a whole, the insurance industry has weathered the economy better than other industries primarily because of the focus on policyholder reserve standards and risk management. The overall situation has not changed Dearborn National’s core method of doing business. Low interest rates have affected returns on investments and the on rates we offer on some of our products. But, our core focus is on financial strength, independence, and solutions for our customers.

Peter Golato, Nationwide Financial Services: Nationwide has always been a strong and financially stable company with Midwestern values that producers and customers can rely on. Our estimated RBC ratio (as of March 31, 2010) is an impressive 550%.

Michael Burns, Lincoln Financial Group: The recent economic events have only reinforced the core messages that are the basis for our business – transparency, integrity, and relevance of product for fundamental protection needs.

Michael Ferik, Guardian Life: Recent events have reinforced the importance of financial strength in the eyes of consumers. And the good news is that Guardian has received high ratings from the four major ratings agencies, so we have a very, very good story to tell our policyholders and prospective clients. Moreover, our mutuality means that our policyholders can take comfort in the fact that we are managing for their long-term benefit, and not for the next quarterly stock analyst call.

Paul LaPiana, MetLife: According to LIMRA surveys, recent events have negatively affected overall consumer impressions of the insurance industry. However, MetLife continues to be set apart as a strong, stable leader in the financial services industry during a challenging environment. MetLife is well capitalized, with a strong balance sheet and financial strength ratings that are among the highest in the industry. Our long-term approach in managing our investment portfolio, combined with our diverse mix of businesses, will continue to serve us will in the years ahead. In addition, we believe that we have benefited from a flight to quality from financial professionals and their clients.

Our disciplined approach to risk management and strong capital position allows us to preserve market share and differentiate ourselves from other companies. Our financial strength ratings continue to be among the highest in the industry, even during volatile markets. We continue to look for opportunities to grow both organically and through acquisition. Staying true to our strong, stable history positions us well to be an opportunistic acquirer.

8. 
What, if any state or federal legislative issues are you concerned about?

Michael Ferik, Guardian Life: New York has adopted producer compensation disclosure regulations for all products sold in the state effective January 1, 2011. The greater concern is that the National Association of Insurance Commissioners could adopt this disclosure approach as a national model regulation.

Individual life insurance sales are a concern because the front-loaded nature of the compensation could upset or confuse the customer. Guardian and the life industry are negotiating over compliance interpretations with the New York state Insurance Department to minimize this problem and other technical difficulties. Meanwhile, the Council of Insurance Brokers has sued the Department, challenging its authority to issue the regulation.

Congress is completing work on major financial services regulatory reform. Life insurers have generally fared well due to the following:
• 
Being exempted from the jurisdiction of consumer protection agency.
• 
Being excluded from the FDIC-run “resolution authority” for insolvent institutions.
• 
Supporting the creation of a Federal Insurance Office (with no direct regulatory authority).
• 
Participating on the Financial Oversight Board with one voting and one non-voting member from the industry.
The SEC will perform a study to determine whether a common fiduciary standard for investment should apply to all advisers and broker/dealers including insurance agents who sell variable products. There is also a proposal to create a massive “bank tax” to fund the bill and to recoup TARP payments, but, as of this writing, its passage is uncertain.

The significant majority of states have enacted tough regulatory standards to restrict marketing of stranger-owned life insurance (STOLI), which is life insurance purchased with the intent of selling the policy to investors for speculative purposes. New York and California have among the most recently enacted and strongest anti-STOLI laws. Companies have increased their surveillance of new policies to prevent violations of the insurable interest rule and abusive treatment of customers, who are typically older, in poor health, and wealthy. Recently, a version of STOLI using annuities, called STOA, has emerged. It is similarly abusive of the life insurance system and customers. Since underwriting of annuities is far different, the ability to regulate STOA presents unique challenges. The National Association of Insurance Commissioners (NAIC) is investigating the issue and potential regulatory approaches.

NAIC recently adopted a more comprehensive set of suitability rules for annuity sales, replacing a regulation that is in force in more than 40 states. The new rule establishes the company’s continuing responsibility for compliance even though the actual sales are performed by producers who are not controlled by the company (for example, outside broker-dealers). The standards are also very detailed for income, assets, the purpose of the purchase, and other customer information. Annuity writers opposed the changes since the prior regulation was easy to comply with and seemingly effective. It remains to be seen how many states will adopt the new rule, other than Wisconsin, which advocated the changes, and Florida.

Michael Burns, Lincoln Financial Group: The main concern is to ensure that any broad, sweeping changes, affecting the financial services industry, don’t hurt our products. The potential issues can be far ranging, from the tax treatment of our products, how changes in the tax code could affect where our solutions are relevant, to how our products get regulated. The industry needs to continually monitor, evaluate, and address these issues.

Craig Nordyke, Dearborn National: It is still unclear what effect financial reform will have on the industry. It has yet to be seen whether financial reform will affect insurance companies directly or indirectly through the businesses that insurance companies deal with. Also yet to be determined is the effect of healthcare reform on overall employee benefit offerings. It would also be unfortunate if the reforms resulted in redundancies between state and federal regulation. However, we believe Dearborn National is well positioned to adapt to the changing marketplace with our diversified product portfolio.

It would seem logical for brokers and consultants, specializing in health benefits, to broaden their horizons to include all available product lines.

Peter Golato, Nationwide Financial Services: Nationwide continues to support legislation to combat stranger originated life insurance while preserving the policyholders’ ability to exercise their contractual rights. Another concern is the potential taxation of life insurance inside cash-value build-up. The industry stands ready to fight should proposals arise on this front due to the national deficit.

Michael Babikian, Transamerica: The uncertainty of the estate tax situation has created a great deal of anxiety from a planning perspective. At the same time, clients have a great need for predictability. Addressing these issues is top of mind for us.

Paul LaPiana, MetLife: The industry has been on high alert due to the deficit and revenue picture at the federal level. We want to make sure that the tax treatment of protection and retirement savings products do not get adversely affected. Changes could come as “pay fors” to offset the cost of spending or tax cuts, or as part of a broader tax reform (less likely). We are reviewing the comprehensive financial services reform legislation. Since it calls for several studies to be completed and regulations to be written, it is not yet certain what effect final rules could have on MetLife, the industry, or policyholders.

9.
 What are some of the common characteristics of your most successful brokers?

Michael Babikian, Transamerica: All successful brokers share one quality: they are customer-centric. They have a strong and accurate read of the marketplace and the environment in which they operate. These are the men and women who understand what keeps their clients up at night. They seize the opportunity to solve the problem and guarantee the outcome. They identify risks and uncover needs that clients aren’t even aware of and they help clients find solutions to protect their families and their businesses.

Larry Noyes, Foresters: They are focused on business quality and not just on quantity.

Craig Nordyke, Dearborn National: The most successful brokers have trusted relationships with the various touch points in the sale, beginning with their client and then with our highly trained sales representatives. They also have an in-depth knowledge of the products and a great desire to do what’s in the best interest of their clients.

Michael Ferik, Guardian Life: Our most successful brokers are doing the same basic things that have made them successful in up or down markets: good, sound planning advice and simple sales approaches. In the past year or so, we have seen a strong growth in whole life sales through our brokers as clients look for quality carriers with strong financial strength.

Michael Burns, Lincoln Financial Group: They have strong relationships with companies; they meet clients needs; they work with the utmost integrity for client’s best interests; they have a long range view of the business; and they have a commitment to establishing strong partnerships with the company and company’s culture while acting on the client’s long-term best interests.

Peter Golato, Nationwide Financial Services: The most successful brokers in the economic downturn are those who are in continual contact with their most important clients. Consumers have needed reassurance in these tough times and producers who have reached out are bouncing back even stronger today.

Paul LaPiana, MetLife: Professionalism, persistency, and patience are the qualities I’ve seen in all the successful brokers that I have had the pleasure to work with. They also have expertise in multiple products as well as excellent interpersonal skills. They need to be able to work well on a team of advisors to address the holistic planning needs of today’s clients.

An increasingly important trait is the ability to help educate clients and their advisors about financial products and the companies behind the products. Financial professionals have a huge opportunity to become even more successful by educating clients and their advisors about the economics of life insurance and how to position it as an asset rather than an expense.

Clients usually view life insurance as an expense. But, if properly designed and owned, life insurance can be one of the best performing assets — in or out of a client’s estate. The internal rates of return can be very attractive on cash surrender values and/or death benefits whether it is being used to accumulate supplemental retirement income or take care of beneficiaries for multiple generations. As brokers help clients and their advisors select products, they need to reinforce the tax advantages of life insurance and guarantees provided to individuals, their families, and businesses. Brokers who can deliver this message are well positioned for greater success. The most successful brokers have integrity and focus on the long-term financial success of their clients. q
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Leila Morris is editor of California Broker Magazine.

Selling Your Agency – What’s In It For You?

by Brian Jones
It’s not the best of times to be a health benefits broker, particularly for those carrying a significant book of small business. Clients are reducing and eliminating benefits, and in some cases, closing their operations. With tremendous changes occurring in the benefits business, management of small accounts requires as many resources as do the more profitable, large clients.

At the same time, commissions are being reduced. In today’s challenging environment, many agents now work harder and earn less. Yet, the current era of shrinking commissions may be small potatoes compared to what may happen as a result of healthcare reform. With an uncertain future, even brokers who are doing well have concerns about the long-term vitality of their business.

Some agency owners are ready to retire or sell, but again, market forces are working against them. Credit is tight, capital gains taxes will rise in 2010, and few potential buyers are in an acquisition mode seeking this type of business. What exit strategies can help owners gain maximum value while protecting their customers? Let’s look at trends and considerations that may help you determine whether to sell your business.

Current Affairs

Regardless of what happens on the national front, states are enacting their own healthcare reform measures. Calif., along with Mass., Okla., N.M., and Utah are among those where the status quo is changing. While the initiatives vary, small businesses are often affected by new mandates. For example, some in Washington have access to buying co-ops while others have access to pooled coverage. Utah is creating a small group exchange to be operational early 2010.

Another force at work is that the insurance industry is undergoing consolidation, which has implications for brokers. Carriers have joined forces or been acquired while hospitals and physicians are jointly addressing challenges created by managed care. These actions create fewer marketplace options for healthcare, meaning your clients’ choices are being reduced. With fewer carriers, there are fewer products, particularly those designed for small employers. As a result, it becomes more difficult to distinguish offerings from your competitors.

At the same time, the number of insurance brokers is shrinking. Small agencies with revenues between $500,000 and $1.25 million will diminish from about 5,500 brokers to 2,700 during the same period, according to one estimate from MarshBerry, a leading insurance industry information resource.

Some trends are more personal. With a flat housing market, it’s probably not the right time to sell your home, yet it could be the ideal moment to purchase the place where you’d want to retire or that vacation home you’ve desired. Because sellers are offering incentives, a cash infusion could stretch your purchase. And, selling your agency might make it affordable to maintain two homes until market conditions become more conducive to sellers.

There are additional timing factors to consider that may affect your wallet:
• 
Capital gains taxes: In 2010, tax on the sale of an agency will rise from 15% to 20%. With an aggressive and expensive legislative agenda, most experts expect the rate to increase in the coming years.
• 
Stock market performance: In 2009, many people saw a mild rebound to the difficulties experienced in 2008. Is your portfolio in a position to protect your money if a future financial collapse occurs?
• 
Shrinking commissions: With carrier consolidation and pressure to perform for stockholders, commissions are shrinking, especially on smaller accounts. In this climate, it is increasingly difficult for independent brokers to operate a viable business.

The financial picture is just one aspect of selling your business. If you can’t make ends meet, then you may have to work for the foreseeable future. For many, the sale of a business is the means to retirement. For those contemplating this route, a self-evaluation is in order. Some questions to consider are: What’s next? Where am I going to spend my time? What about my employees? It’s also wise to probe deeper because the decision to sell may evoke strong feelings to protect the legacy you have built, as well as the customers you’ve cultivated.

Selling to Family

Handing over ownership to a family member is a natural succession strategy for many who created the business to provide financial security, income and employment for relatives. These owners are faced with an enormous dilemma. How will their replacement achieve long-term success given today’s marketplace? And, with a tight credit market, many sellers would be forced to self-finance this transaction with no guarantees that the agency will flourish.

Selling, But Remaining Employed

Selling, but remaining employed eliminates the day-to-day trials of operating a business, yet appeals to those who want to continue working. On the upside, you receive money and ensure your clients are well served because you are still there to care for them. On the downside, becoming an employee again requires relinquishing control and attending mandatory Monday sales meetings! If you’re considering this option, regional firms could be a place to consider.

Sell to a Small Group Specialist

Selling to a small group specialist provides several advantages. You can sell your entire agency or a portion of it to achieve some liquidity or a change in lifestyle. If you select the right company, you gain the same benefits offered by regional firms. You receive an immediate infusion of capital or, if preferred, payment over a period of time, particularly if you arrange to stay on board during a transitional phase. You can also continue interactions with your clients. With the right partner, you can deliver services that would be cost-prohibitive for most brokers. Backed by the proper technology and systems, a small group specialist can improve customers’ experiences using one-on-one outreach, dedicated websites and wellness resources.

Another advantage? You could further improve your own income during the transitional period by maximizing renewals.

Regardless of which route you take, the insurance industry is destined to change. With so many unknown factors, there may never be a better time to sell.
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Brian Jones is vice president of the Southwest Region for Digital Insurance, the nation’s fastest-growing employee benefits agency, representing the largest market share of small group insurance business. His responsibilities include helping independent agents and small brokers develop succession-planning solutions.

Update On the Federal Estate Tax

by Paul Pichie
Most estate planning experts were caught by surprise on January 1 when Congress allowed a repeal of the federal estate tax for 2010. Just over nine years ago, the legislative and executive branches of the U.S. Government passed the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). The government posted surpluses and the national budget was declared balanced. The driving force behind EGTRRA was the phasing out of a no longer needed tax (the federal estate tax). This phase out was to take place over a 10-year period with the 10th year (2010) boosting a zero federal estate tax rate.

In all its wisdom, Congress realized that we may not always have a national surplus or a balanced budget and it put constraints on the EGTRRA law that was to ultimately eliminate a federal tax source. EGTRRA was to be subject to a 10-year shelf life, commonly referred to as the “Sunset Provisions.”

The idea behind these sunset provisions was that, if repealing the estate tax was still a good idea in 2010, Congress would have a full 10 years (2001 to 2010) to codify EGTRRA and extend the repeal beyond 2010.
As of today, Congress has failed to pass any bicameral legislation addressing the estate tax. Most legal and tax advisors assumed that Congress would extend the estate tax before it expired at the end of 2009. While the House of Representative did approve a bill (H.R. 4154) on December 3, 2009, it failed to win the support in the Senate. So we started 2010 with the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) intact.

As of January 1, 2010, federal estate and generation-skipping transfer (GST) taxes are temporarily repealed. In addition, transfers during life are now subject to a 35% gift tax (with the $1 million lifetime gift tax exemption still in place). If no legislation is passed to address the estate tax, EGTRRA calls for the reinstatement of the estate and GST tax in 2011 back to the 2001 estate tax rate levels. The following chart summarizes the current state of the federal estate tax law and 2011 levels when EGTRRA expires under the mandated sunset provisions:

Year Tax Highest Estate Gift Tax Highest
Exemption Tax Rate Exemption Gift Tax Rate
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2010 $0 $0 $1 million 35%
2011 $1 million 55% $1 million 55%

This all means the following:
• 
If you died with $10 million in cash in 2010, your children would inherit $10 million in cash and would owe no federal estate taxes, thereby netting $10 million.
• 
If you died with $10 million in cash in 2011, your children would inherit $10 million in cash and would owe $4,590,800 in federal estate taxes, thereby netting $5,409,200.
Now consider that not everyone dies with all their assets in cash. Some may have companies, stock portfolios, homes, and real estate, IRAs, pensions, or other not-so-liquid assets. The federal estate tax is due nine months after the date of death and these types of liquidations to pay estate taxes are commonly referred to as “estate sales.” Prior to the EGTRRA laws, this shortfall in transferred wealth and liquidity was protected with a properly structured life insurance plan.
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Paul Pichie is the owner and president of Synergy Financial Services Inc. in Thousand Oaks, Calif. He has been designing and implementing these types of insurance plans since 1993. He is licensed to transact these types of plans for clients in 15 U.S. states and offers a complimentary 20-minute consultation. He can be reached at (818) 221-0010.

Enrollment – Leading Edge Technologies Change the Face of Employee Enrollment

by Elena Wu
The trend toward employees managing their benefits online is taking off like online banking has done. Consumers have become more comfortable using the Internet to manage confidential information, like personal finances. This comfort level can foster usage for other aspects of their lives, including enrolling in and managing employee benefits.

Consider this, 61% of full-time employees used computer-based enrollment for some portion of their last enrollment of employee benefits compared to just 23% five years ago, according to a recent survey by The Guardian Life Insurance Company of America. This virtually equals the percentage of employees (63%) who paid their monthly bills using online banking.

A marriage of Internet convenience and cutting-edge software has opened a new world of how employees understand and use their life, disability, health, dental, and vision benefits. Leading-edge technologies make it possible for consumers to access information faster and in a more environmentally friendly, putting more control in their hands. The past five years have seen a 165% growth in the proportion of employees using some combination of Web-based technology to enroll in their benefits, according to the Guardian survey. So, will the future of employee benefits be a purely Web-based experience?

Complementing the 165% Online Growth Rate

Employees can now enroll or make changes to benefits, view a claim, or check on the status of an evidence-of-insurability application. The Internet will increasingly play a key role. But, the Web is just a single component of the benefits experience. To really achieve employee participation and satisfaction in plan offerings, offline activities must complement the online experiences that brokers and employers provide. There has been an increasing number of best practices for offline enrollment adapted to complement the Internet. Consider the following:

Multi-Media Announcements of Benefits Offerings

Posters and check stuffer announcements are still used to raise awareness about benefits and upcoming enrollment meetings, but so are new vehicles like video and audio-recorded e-mail announcements, which engage employees early on and signal them for an enrollment experience that is not paper-based.

Web-based Educational Resources

Carriers can provide an infinite number of resources on the Web that offer interactivity and give employees direct access to their online account. Engaging educational resources include videos featuring sports or entertainment heroes who help raise awareness about the importance of certain kinds of insurance, quizzes that test a person’s benefits knowledge, and online decision support tools that help employees decide which benefits are best for them.

Face Time

On-site group enrollment meetings, led by certified enrollment specialists, offer critical support to employees. In a survey by Spring Consulting Group, employees were asked to consider all of the factors that influence purchasing decision. Those who attend group enrollment meetings attribute 42% of their purchase decision to the benefits counselor. During these meetings, employees can get face-to-face advice and an opportunity to learn about the Web-based educational resources they can use to further evaluate their options before enrolling.

Advantages for Busy Employers

The efficiency of online benefit management gives employers more time to spend on strategic and revenue-generating activities. Administrative work, like updating employee information and managing eligibility data can take up a valuable part of the employer’s day. But with the Web, employees themselves can manage these tasks conveniently throughout the year. Plus, sophisticated support tools that help employees make better decisions will reduce disruptions to the workday.
Having a paperless environment pays off. Filing just one document can cost $20, according to a 2007 study done PricewaterhouseCoopers. The potential savings are often significant when you multiply savings by the number of employees in a company and the number benefits changes they experience in a year.

What happens to non-tech savvy employees?

Three out of five full-time employees enroll for benefits online, according to the Guardian survey. While this number may grow, it may never be possible to achieve a goal of having 100% of employees go online. Some factors probably will ne