July 2012 California Broker

Preparing For the Real Cost of Critical Care
by Chris Covill • In today’s environment, brokers play a key role in helping their clients understand the high medical costs that go along with unforeseen accidents and illnesses. Brokers should advise companies that voluntary insurance like critical illness policies are valuable and needed, rather simply being nice-to-have benefit options.
Self-Funding– The Truth Behind Self-Insurance Expenses
by Eric Egeland, CPCU, AU • When it comes to individual and group self-insurance, the main lure is saving money. Self-insured workers’ compensation and health insurance are the most popular with the majority of states having regulations that allow their formation.
Self-Funding – Making Good on a Bad Decision
by David Zanze • Even the best brokers can misadvise clients, even through no fault of their own. After all, every business — even the insurance business — has its moments. And although some situations are unavoidable, there are some steps you can take to remove the politics out of decisions and keep clients when things don’t work out well.
Employee Assistance Programs–How they fit into the Benefit Portfolio for a New Sales Strategy
by Deidra Finney Bausano • As a broker/consultant, a good employee assistance program will add another arrow to your portfolio quiver and a new revenue source for your agency. For your clients, it can be a miracle in today’s stress-filled world. Bear in mind that not all EAPs are the same.
 Making LTC Insurance Work for Retired Clients
by Steve Cain •  Too many producers over-emphasize the financial benefits of LTC insurance, forgetting that the notion of managing an LTC need (selecting facilities and choosing providers) can be every bit as intimidating as meeting the financial challenge.
Voluntary Benefits View From The Top
by Leila Morris • If this year’s survey of executives is any indication, voluntary benefits are becoming more relevant and popular than ever.  With consumer driven plans becoming prevalent, consumers are left with higher out-of-pocket costs. That’s where voluntary benefits can come to the rescue.
Is The Timing Right for Fixed Index Annuities?
by Eric Taylor • These products may be of particular interest to those who are within 10 years of retirement and recent retirees since many have been hit particularly hard by the economic downturn. Unfortunately, this group has fewer years to rebuild their shrunken portfolios and cannot be assured of a market recovery to save the day.
Tuning In To Our Annual Dental Survey
Welcome to Part I of California Broker’s 2012 Dental Survey. 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 II in the August issue. Read the responses and sell accordingly.
Look Beyond the Price of Life Policy Guarantees To Assess Strength of The Company That Backs Them
by Alan (Al) Lurty • Many brokers who sell life insurance today are getting puzzling and conflicting signals from insurers in regard to a range of guarantee-driven product offerings. In the current environment, many carriers are adjusting pricing, indicating a reduced appetite for taking on new business or shying away from selling certain guarantees altogether. What’s driving this behavior? In short: interest rates.

Preparing For the Real Cost of Critical Care

by Chris Covill
Many people are overly optimistic that they won’t get a serious accident or illness. But no one is immune to life-altering events, such as heart attacks, strokes, or cancer. As if the physical recovery isn’t enough, the out-of-pocket expenses of these illnesses are often beyond what many are prepared to deal with.

Employers and HR managers should be aware of how a critical illness can affect their employees financially. Five million Americans are admitted to intensive care units each year, with the total costs of critical care services exceeding $80 billion annually. The average total cost to the patient of a severe heart attack is about $1 million, including direct and indirect costs, according to the Roundtable on Critical Care Policy. With these staggering costs, it’s alarming that not many employers offer critical care insurance to help their employees with unexpected out-of-pocket costs. Only 13% of U.S. workers have a critical illness insurance policy, according to the 2012 Aflac WorkForces Report, an online survey of nearly 1,900 benefit decision-makers and more than 6,100 U.S. workers. This is an opportunity for brokers to educate business decision-makers on the many advantages of offering voluntary critical care policies to their workforce.

Seize the Opportunity to Inform

Brokers should inform current or potential clients about the need for policies, such as critical care insurance, that safeguard workers against the high cost of out-of-pocket expenses. Brokers should educate employers about the real costs of critical care and the fact that many employees are not prepared to pay out-of-pocket health care expenses. An unexpected hospital bill will certainly throw most consumers further into the red.

Brokers should take on the dual role of benefit advocate and educator to help protect employees and their families. Voluntary lump sum critical illness policies can help by providing cash benefits to policyholders for many covered critical illnesses, such as comas, heart attacks, or strokes. The cash benefit can be used beyond medical expenses to help with gas, travel, mortgage payments, rent payments, or even groceries.

Brokers can guide their clients on marketing and benefit communications strategies. HR managers can implement online surveys, workshops, and continued conversations to gauge workers’ views about their benefit options; educate workers on available policies; and make changes to benefit offerings.

Ensuring that employees have benefit choices, including supplemental insurance, will help provide a safety net so policyholders can focus on recovery, not financial stress. Employers that offer solid, substantial benefit options and communicate effectively will enhance employee satisfaction, loyalty, productivity, and retention.

More than half of all employees say voluntary insurance plans affect their job satisfaction and 48% say they affect their productivity, according to the survey. In other words, overall happiness and productivity increases when voluntary benefit options are offered.

The Appeal of Critical Care Policies

While being diagnosed with cancer or a heart condition may seem many years away for young workers, it is a health risk they should keep in mind early in life. These are the facts:

• In the United States, men have slightly less than a one-in-two lifetime risk of developing cancer; for women, the risk is a little more than one-in-three, according to the American Cancer Society.

• One American has a heart attack about every 34 seconds and one suffers a stroke about every 40 seconds, according to the American Heart Assn.

Brokers should reiterate to employers that average premium will be lower the younger the applicant is at the time of purchase. Regardless of a company’s demographic, critical care policies can help protect families’ finances when they need it most.

Employees are concerned about their financial security and they’re distracted by fears that they’re underinsured, under-protected, and vulnerable to costly unexpected expenses due to an injury or illness. They want added protection and they’re relying on their employers to provide access to better insurance coverage.

Brokers may have to overcome purchasing hesitation from misinformed HR managers and business decision-makers who use cost as an excuse to not offer critical care insurance to their workers. But employers are often unaware that voluntary insurance policies are available at no direct cost to the company.

Another advantage is that many critical care insurance policies can be expanded to include coverage for immediate family members. Similar to other voluntary insurance policies, critical care cash benefits can be used how the insured sees fit, such as helping to pay car payments or travel and lodging expenses.

Brokers can help businesses give employees the tools they need to prepare for rising health care costs, especially year-round out-of-pocket and unexpected medical expenses. It’s essential for brokers to educate employers on how the right coverage can help safeguard their employees’ finances.

Conclusion

In today’s environment, brokers play a key role in helping their clients understand the high medical costs that go along with unforeseen accidents and illnesses. Brokers should advise companies that voluntary insurance like critical illness policies are valuable and needed, rather than simply being nice-to-have benefit options. Voluntary insurance helps fill coverage needs for employers and employees alike. It solves challenges on both sides of the benefit equation by providing a no-direct-cost solution for employers while giving employees the choice in additional coverage that best suits their needs.

In short, voluntary insurance allows companies to enhance their benefit offerings, differentiate themselves from competitors and provide the added protection and peace of mind employees seek. q

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Chris Covill, a 25-year insurance industry veteran, is Aflac’s President of Aflac Benefits Solution. He leads strategic planning and direction as Aflac works with the largest national and regional brokerage firms in the nation. Visit aflacforbrokers.com, call 1888-861-0251, or send an email to brokerrelations@aflac.com to learn more.

Self Funding–The Truth Behind Self-Insurance Expenses

by Eric Egeland, CPCU, AU

When it comes to individual and group self-insurance, the main lure is saving money. Self-insured workers’ compensation and health insurance are the most popular with the majority of states having regulations that allow their formation. Third-party administrators (TPAs) and even regulators, in some of these states, perpetuate the belief that money will be saved on lower administrative expenses and/or better experience (less claims).

You may be expecting me to throw TPAs or regulators under the bus right about now, but most have their hearts and expertise in the right place. They truly believe that self-insuring is a better option and it sometimes certainly is. Further, most regulations require a feasibility study showing that a self-insured program will work before the state will allow its formation. But, let’s examine what actually makes up the expenses and why they can be lower, but aren’t guaranteed to be lower.

Lower Administrative Expenses 

Insurance premiums consist of two pieces: claims expenses and underwriting expenses. Claims expenses are the dollars used to pay a claim and the expenses directly attributed to the claim. For a workers’ compensation claim these expenses might include independent medical exams or surveillance on an injured worker who is suspected of committing fraud.

The other half of the premium includes the underwriting expenses. This is the insurance company’s operational expense, which includes things like the building expense; reinsurance; and salaries for the underwriters, claims adjusters, loss control, administrative, and executives.

The theory is that a self-insured entity will have lower underwriting (operating) expenses than the big insurance company even if they have to pay a TPA to do all the insurance stuff. The problem is that the TPA has the same kinds of expenses as does an insurance company. Even if the self-insured decides to self-administer, it still has to hire people and buy or build systems to handle billing and claims, just like an insurance company or TPA would. The self-insured also has to pay the same types of outside expenses. That includes regulatory fees/taxes, excess insurance (improperly called reinsurance), actuarial rate studies, and collateral, which is typically satisfied by a bond or letter of credit. The collateral mirrors an insurance company’s surplus requirements.

The other marketing sizzle that is often used is that self-insurance excludes the profit layer that insurance companies have built into their pricing. That theory gets shot down when you look at the facts. NCCI looked at the combined ratio (profit) statistics for private carriers and found that only two in the past 21 years (up to 2010) were profitable. The year 1995 had a ratio of 97, meaning that private carriers made three cents on every dollar of premium charged; the year 2006 had a ratio of 93. If you do a simple average for those 21 years you get 109, which means that the industry has lost an average of 9% a year for the past 21 years. Oh, and your TPA is absolutely making a profit.

Many argue that self-insuring is actually more expensive because of the lack of economies of scale. On the other end of the spectrum, a large group that shares these expenses has the potential to save money as does a large individual self-insured with its own building, risk management team, and tons of cash.

I don’t intend to debate whether it’s possible for operating costs to be less for a self-insurance plan. But when it comes to a blanket statement, let’s call operational expenses a draw between standard insurance and self-insurance. Every individual and group self-insured is different; a proper third party feasibility study can help predict profitability.

Lower Claims Expenses

This is where things get interesting. I will ruin the build up and get right to the point: An insured can absolutely lower its claims expense by getting employees to get hurt less often or make smaller and less frequent claims. But that’s easier said than done.

Many regulators actually focus on this area as the main place to save money by self-insuring. The self-insured workers’ compensation group regulation in Georgia and Hawaii, for instance, requires all members to be part of one association. The theory is that, since the members are all in the same club, the group will pressure individual members with poor claims history to institute a better safety or return-to- work program.

This is a fantastic theory and it does work for smaller associations. But most large associations have little influence over their members. They don’t have the resources or wherewithal to identify the perpetrators of high rates anyway. With all that said, it works if an association can herd the cats (members) to care about their safety and losses.

Adverse Loss Experience 

We discussed the potential to lower your claims from what might normally be expected or what has occurred. But those who are not in the industry need to understand that claims can spike above what is expected. Self-insurance means what it says – you are responsible for those expenses, whatever they may be.

If losses are above what is expected in a self-insured group, members can be assessed the difference. Groups are typically “joint and severally liable.” This means that all members are responsible for an assessment even one that was caused largely by a small sub-group. Protective caps can limit the damage, but the potential still exists.

So Is There a Benefit? 

The entire purpose of this article is to create realistic expectations about self-insurance expenses. A company that chooses to self-insure is choosing to retain their risk of loss, which is inherently, well – risky. There is no guarantee that it will cost less in the long run. Employers should not go into it assuming that they will save money without any extra effort. They should go into it knowing they are now responsible for their own destiny. They should take extra measures to ensure that they fare better than if they were insured by a standard insurance company; make sure that management is involved in safety and wellness from the top down; and pay attention to their losses. A business that is in a self-insured group needs to be responsible for itself as well as other members. The business should question the TPA and have it reviewed. (The good ones like this being done). And the business should take the time to understand its state’s self-insurance regulations or hire a third party to explain them.  An employer that does all of this might just see the real benefit of self-insurance – consistent and predictable insurance costs.

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Eric Egeland, CPCU, AU is the president of Capacity Consulting Inc. who provides consulting for multiple industries including insurance, real estate, education, energy, and internet. He has personally created 10 successful start-ups, including seven insurance groups, and has consulted on hundreds of projects, closures, startups, plans, assessments, turnarounds, and reorganizations. He can be reached at ericegeland@capacityconsultinginc.com and by phone at 845-430-1347.

Self Funding: Making Good on a Bad Decision

by David Zanze

Even the best brokers can misadvise clients through no fault of their own. After all, every business – even the insurance business – has its moments. Recently, a client of one California broker demanded a change to their third-party administrator. The client asked the broker to prepare a request for proposal to bring in alternatives. Of three potential candidates, the client selected a third-party administrator based on pricing and the impression it made at its onsite visit. Ultimately, the decision to change to the new administrator resulted in more problems for the client. Even though the broker didn’t make the decision, he still felt responsible for bringing the administrator to the table.

Situations like these aren’t uncommon, whether there’s an issue with a benefit plan change or a suggestion to change vendors, third-party administrators, medical networks, or stop-loss carriers. It’s called “the politics of decision-making.” Although some situations are unavoidable, there are some steps you can take to remove the politics from decisions and keep your clients when things don’t work out well.

Do Your Homework

Dennis Lee, a broker who serves clientele out of his own shop, Lee Insurance Services, always errs on the side of caution. “I see my role as an advisor more than anything,” he says. “It’s my job to make sure my clients have all of the information they need to fit their situation. I do my best to stay out of the decision-making process.” He does his homework. He reviews the legal implications, researching possible discrimination issues and whether the advice he is planning to give his client adheres to federal and state law. Before making any recommendations about changing some facet of the self-funded program, he confides in various vendors and business partners for advice and looks at trends in the marketplace to determine if the client’s benefit plan is competitive in the industry.

Remember, a Number of Variables Are Outside Your Control

There may be implementation problems or the vendor may not be meeting the client’s expectations based on what it initially delivered to win the business. You and your client may have swooned over the presentation, seeing dollar signs and savings, not realizing that there would be a downgrade in customer service, reporting, functionality, or any number of services that made up an integral part of the client’s health plan administration. If there has been a network change, provider disruptions may upset the ongoing health related services of the employee population or the savings aren’t what you or the client expected. In any event, you advised your client and your client made a decision.

Avoid the Blame Game

Whether the vendor misguided you; you misunderstood the data that supported the final decision; or you didn’t ask enough questions in the beginning, someone will be pointing fingers and someone will be held responsible for the perceived lapse in judgment. Employees are upset; the client’s HR department is flooded with complaints; the TPA is getting an excessive number of customer service calls; and your client is frustrated. Whether things actually went awry or it’s just the pains of change, spreading blame, expressing denial, or trying to force things to work will only make a bad situation worse. For example, an implementation issue is usually first blamed on the previous vendor, then on the current vendor, and then on you. But it doesn’t matter whose fault it is; if you assisted with the decision-making, expect to be held accountable.

Don’t Act Based On Assumptions, Reactions, or Opinions Alone

Take the politics out of decision making and avoid the blame game by sticking to the facts. How much would it affect the client financially to make it work? How significant would it be financially to turn back? Survey the customer satisfaction of your client and its employees. What is the feedback? All of these things can and should be measured to determine next steps and control the damage. You can help reverse a bad decision and put the client back on track by offering the following:

• A cost-benefit analysis that examines the bottom line and reviews the decision in terms of dollars and cents.

• A customer service and satisfaction survey.

• A strategy to align the client with their ultimate goals.

Keep Your Client’s Business

The broker who assisted his client with the third-party administrator change realized that he would have lost the client’s business if he had been defensive about his involvement. He knew enough to remain humble and to try and rectify the decision on their behalf. By reviewing the third-party administrator’s performance metrics, he advised the client to wait out the year to allow the business relationship to fully develop. If it didn’t improve, he would help the client to leave. At the end of the contract year, the broker went back to the bargaining table with the previous third-party administrator; ironed out performance guarantees; and moved the client back. It was a good decision for everyone and things are going well for the client.

Honesty Is the Best Policy

Lee advises that, if there is ever a time when you may have misled a client, it’s always best to be honest. “Don’t ever hide that you may have misguided the client,” he says. “The last thing you want to do is besmirch your reputation, or worse, have someone come along and do it for you.” Whether a mistake was perceived in the decision-making process or the end result wasn’t what you or your client expected, you can’t offer a pragmatic solution until you admit that things didn’t go as planned. Not every decision that you or the client make is going to work out. Yes, there will be consequences to face, but unless you advised your client based on some personal incentive, blamed others for your own actions, or have been forcing it to work because your pride will not allow you to turn back, there is an upside to being honest and working it out for your client’s best interest. It retains your dignity and dignity, above all else, helps you remain credible with the client.

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David Zanze has nearly 30 years of experience serving as a leader and innovator in the health care industry. He joined Pinnacle Claims Management, Inc. as president in 1996. Pinnacle Claims Management, Inc. (Pinnacle) is an all-inclusive health benefits third party administrator (TPA) that offers competitive, cost efficient claims management in tandem with the latest technology. Pinnacle administers benefits for a diverse range of small to large sized employer groups from all business sectors of the marketplace. For more information call 866- 930-7264 or visit them online at www.pinnacletpa.com.

Employee Assistance Programs – How they fit into the Benefit Portfolio for a New Sales Strategy

by Deidra Finney Bausano

Today’s broker has evolved from salesperson to benefit consultant, with more and more products and services being added to the sales portfolio. However, the area of mental health has been largely overlooked with the exception of larger employers. Health and productivity programs or “employee assistance programs,” fall under the behavioral health label as part of a sound mental health plan. Most brokers are familiar with free employee assistance program (EAP) riders in some medical plans. These are typically pared down benefits for phone or online counseling on a limited number of topics; they are not promoted by the carriers or the client companies whose employees could use them.

Stand-alone employee assistance programs are available to groups from two to 10,000+ employees for relatively inexpensive monthly premiums. For the new benefit consultant, they offer an integral piece to the benefits and insurance puzzle.

Take a look at these very common examples: Joe’s teenage son has been driving him up the wall lately, hanging out with the wrong crowd, with failing grades and curfew infractions. Joe has come to suspect that his son is experimenting with drugs. The stress at home is pretty unbearable. He and his wife, Rose, can’t see eye to eye on much of anything lately. To top it off, his elderly father has just been diagnosed with cancer and now Joe needs to spend time caring for his father and mother as the disease progresses. Going to work has become a mixed blessing. It’s a reprieve from the stresses at home.

Terry works for a well-known cabinetmaker. Business was booming until the downturn in the housing market. Over the past few years, the company has had to downsize and everyone is nervous about their future. Terry hasn’t had a raise in three years and with a mortgage, car payments and a daughter going off to college, he’s stressed. He’s so stressed and distracted that he doesn’t have his mind on his work. The unthinkable happens and Terry is suddenly on his way into surgery to repair the damage a skill saw has done to his hand.

Diane needs some legal advice about child support, but she can’t afford to retain an attorney on an administrative assistant’s salary. This situation is weighing heavily on her mind and she knows her job performance is suffering, but what can she do?

The people in these all-too-familiar scenarios could use some help. Counseling could work miracles for Joe, his wife, and his son. Substance abuse treatment for the son could halt a fledgling drug habit. Referrals to senior services and hospice could greatly ease the added stress of dealing with his father’s illness and his aging mother’s ability to cope. For Terry, financial counseling could help the family set a new budget and learn to live within their income until business picks up; it  would help ease the burden and alleviate the stress financial shortages bring. For Diane, a free legal consultation may be just what she needs to learn her rights under the law and set a course of action.

Each of these employees, their families, and their employers would be well served by a comprehensive, hands-on employee assistance program. In today’s stress filled world, a good EAP pays for itself in greater employee productivity, a happier workplace, and a confidential place to find solutions to stressful problems. It can also curb workplace accidents, which greatly affect Workers Comp premiums.

Depression is the most common mental health disorder in the workplace – affecting about one in 10 employees, according to a January 2010 newsletter article Mental Illness in the Workplace by the National Alliance on Mental Illness (NAMI).

When untreated or under-treated, mild or severe mental illness often manifests as a performance issue, such as absenteeism or compromised productivity. Mental illness causes more lost work days and work impairment than do chronic health conditions, such as diabetes, asthma, arthritis, back pain, hypertension, and heart disease. The same article states that employee assistance programs produce direct cost savings for employers in the form of reduced medical, disability, and workers’ compensation claims and improved work performance. EAPs increase worker productivity and decrease absenteeism. The return on investment of EAP services is about a $2 to $4 savings for every dollar invested.

Work loss was avoided in 60% of cases, in which EAP services were provided, with an average savings of 17 hours per case, according to a 2008 report the National Business Group on Health. Furthermore, 72% of the people represented by these cases also showed improved work productivity, with an average gain of 43%. An additional study found that when legal/financial, work/life services were included as part of the EAP, work loss was avoided in 39% of cases and work productivity improved in 36% of cases.

How many of your clients have experienced the following:

• Death of an employee or employee loved one.

• Employee alcoholism or drug use.

• Company downsizing.

• Violence or threats of violence in the workplace.

• Increased customer/client complaints.

• Drop in employee productivity.

• Increased absenteeism.

• Increased company interpersonal conflicts.

• Increased employee stress.

• Increase in medical or disability claims.

• Increase in workers’ compensation claims.

• Accidents on the job.

• High employee turnover.

• Increase in employee counseling needs from management.

• Organizational restructuring.

If you checked off three or more on this list, your client could benefit greatly from an employee assistance program. A good, comprehensive EAP will help a company address and find solutions to all these issues.

As a broker/consultant, a good employee assistance program will add another arrow to your portfolio quiver and a new revenue source for your agency. For your clients, it can be a miracle in today’s stress-filled world. Bear in mind that not all EAPs are the same. Shop around; make inquiries; and find the one that best suits the needs of you and your clients. Make an employee assistance program a vital component of every benefit proposal for both new and renewing business.

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Deidra Finney Bausano is a member of the Business Development team for Avante Behavioral Health. She is responsible for broker relations and client sales from Central to Southern California and the Central Coast. A founding member of Kern AHU, Deidra has served the chapter in every office and has also served CAHU as VP of Communications. She has worked in the broker, carrier and General Agency areas of the health insurance industry. For more information about Avante visit www.avantebehavioral.com or contact Deidra at deidrab@avantehealth.com.

Long Term Care – Making LTC Insurance Work for Retired Clients

by Steve Cain

People in the 55 to 64 year age group are widely regarded as the sweet spot for long-term care insurance (LTC) because they comprise the majority of LTC insurance purchases. But what about the 65 and over crowd as well as retirees in general? Since they represent about almost 20% of sales, they’re clearly too important to ignore. And while this market holds some distinct challenges, it offers a wealth of opportunity for producers who take the right approach.

Retiree Concerns and LTC

Three concerns weigh heavily on retired Americans:

1. Longevity. Longer lifespans, along with a vulnerable Social Security system and fewer defined benefit pensions, heighten retirees’ concerns about running out of money. At the same time, living longer also heightens the chance of someday needing LTC services.

2. Rising health care costs.  Seniors are grappling with ever-costlier health services. They are also wary of a scenario that causes their need for care to grow.

3. Financial insecurity. A faltering economy, low interest rates, and volatile investment markets have left retirees increasingly uncertain about their future.

These three concerns leave retired Americans in a defensive state of mind, which makes them far more receptive to recommendations for strategies that address these worries. By offering a way to protect retirement savings from LTC costs, LTC insurance does just that. It can be an important part of a more comprehensive approach to managing retirement risks when embedded in a linked benefit product – that is, incorporated into a life insurance or annuity solution.

Two Challenges

Among all your current and prospective clients, retirees are perhaps the most aware of their potential need for LTC. They are also the most anxious about how they would manage it from both a health care and financial perspective. While their position in life may boost their interest in addressing these concerns, you face two challenges in helping them take action with a LTC insurance solution:

• Age. With older ages come not only higher premiums, but also an increasing likelihood of being rejected for coverage. Only 14% of applicants in their 50s are rejected for unacceptable health, but that number leaps to 23% for clients in their 60s and 45% for those in their 70s, according to the American Association for Long-Term Care Insurance.

• Cashflow. With their working years behind them, retirees must live within the confines of their pensions, Social Security income, savings, and investments. Adding a new, ongoing expense to their monthly math isn’t something they relish.

A Shift in Managing LTCI Costs

Fortunately, yielding to the realities of the long-term economic environment and prudent planning, advisors are shifting their approach LTC insurance for retirees and pre-retirees alike.

The focus used to be on building a benefit-rich coverage plan that transferred nearly all of the financial risk to the LTC insurer. Today, insurance professionals are taking a more balanced approach, which significantly reduces their clients’ LTC expense exposure, but stops well short of eliminating it altogether.

While this approach is broadly applicable to your clients, it’s especially useful for retirees. By choosing longer elimination periods and more modest benefits, you can make LTC insurance solutions more affordable while still securing significant protection.

That’s especially true of inflation protection features. By its very nature, inflation is most harmful over longer periods, which is why robust inflation benefits make more sense for a client in their 40s than a client in their 70s. After all, older clients have shorter life expectancies, which means that they don’t have the same exposure to the destructive power of inflation. Given that dynamic, a wise advisor may want to recommend a lower inflation protection option or none at all and perhaps emphasize having a higher daily benefit instead.

A Valuable Benefit You Needn’t Reduce

It’s important to note that, even without full financial coverage, clients still benefit fully from the valuable coordination of care benefits embedded in their policies. Too many producers over-emphasize the financial benefits of LTC insurance, forgetting that the notion of managing a LTC need (selecting facilities and choosing providers) can be every bit as intimidating as meeting the financial challenge.

Even with slimmer daily benefits, longer elimination periods, and less inflation protection, your clients can still benefit from geriatric care managers who guide them through the process and the many decisions along the way.

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Steve Cain is executive vice president and sales leader at LTCI Partners, a brokerage general agency specializing in long-term care insurance.  He can be reached at steve.cain@ltcipartners.com or 877-949-4582 x237.  

Voluntary Benefits – A View from the Top

by Leila Morris

If this year’s survey of executives is any indication, voluntary benefits are becoming more relevant and popular than ever. With consumer driven plans becoming prevalent, consumers are left with higher out-of-pocket costs. That’s where voluntary benefits can come to the rescue. Voluntary benefits have also become more attractive to brokers with the advent of higher commissions. When asked which voluntary benefits are becoming more popular, critical illness plans were mentioned over and over. Also on the list are accident insurance, life insurance, disability insurance, hybrid permanent or term life insurance products with an LTC component, as well as LTC insurance. Below, executives give their take on key market trends as well as tips on having a successful enrollment.

1. What’s a compelling argument for employees to have extra money taken out of their paychecks for voluntary benefits when they’re cutting back on all kinds of small expenditures in a tough economy? 

Amy Friedrich, vice president of specialty benefits for the Principal Financial Group: Employees who value protection are likely to see the cost of voluntary benefits as a good use of their dollars. According to the Principal Well-Being Index, 74% of employees find it important to be able to buy voluntary benefits at work.

Debbie Cecil, director of Product and Market Development for Unum: Some employers are having to stop contributing for short-term disability. But, employees can purchase this important voluntary benefit to supplement long-term disability. Also, voluntary benefits, such as accident and critical illness insurance, can fill the gap for deductibles, co-insurance, and other needs. The average weekly premium for these benefits is usually only $5 to $8.

Shawn Smith, vice president, western region, for Transamerica worksite marketing: Consumer driven health plans have left most employees and families in a financial void; paying $1,000 or more out-of-pocket medical expenses is simply unaffordable. Voluntary life, disability, critical illness, accident and gap products can provide strong financial benefits at affordable group rates with pre-tax savings through payroll deduction.

Sean Duggan, Territory Sales Manager, Orange County Colonial Life: Voluntary benefits can help employees pay out-of-pocket medical and non-medical expenses that even the best major medical plan won’t cover. Since individual voluntary benefits are portable, employees can keep the coverage if they suffer an interruption in employment.

Christopher Covill, president of Aflac Benefits Solution: Unplanned out-of-pockets costs are inevitable when an illness or injury occurs. Voluntary insurance plans pay cash benefits for covered illnesses or injuries. These benefits help with out-of-pocket expenses, such as medical-related travel, food, utilities, and rent or mortgage payments. What’s more, employees can take advantage of payroll or group rates when premiums are deducted directly from their paychecks.

Scott R. Llewellyn, Western Regional sales vice president, Ameritas Group: People re-evaluate their priorities during tough times and personal health and protection of assets are always ranked one and two. With voluntary benefit plans employees usually have a great opportunity to purchase benefits at rates that are normally not possible to the individual. Voluntary dental insurance is a great example. Dental is the second most requested health benefit after medical insurance. Regular cleanings, exams, and X-rays, which are usually covered at 100%, protect people from bigger and more expensive problems down the road

Mark Sylvester, vice president of sales for Assurant Employee Benefits: By spending a little additional money on voluntary benefits, employees can help protect themselves from unforeseen financial risks.

Glenn Petersen, vice president, Voluntary Benefits Sales, MetLife: MetLife’s 10th Annual Study of Employee Benefits Trends found that the economy is causing employees, particularly younger generations, to turn with greater interest to employers for help with establishing financial security. Forty-nine percent of employees surveyed say that because of the economy they are counting on employers’ benefit programs to help with their financial protection needs. That percentage climbs to 55% for Gen X workers and 66% for Gen Y workers. Fifty-seven percent of Gen Y and Gen X employees are interested in a wider array of voluntary benefits offered by their employer.

2. Do Brokers make less commission on voluntary benefits? How can they offer these benefits to clients in an efficient way that provides a good return on investment for their efforts?

Scott R. Llewellyn of Ameritas: At Ameritas, brokers earn the same commission levels on voluntary business as they do on employer-paid benefits. In fact, we continually promote the advantages of selling voluntary offerings alongside the employer-paid offering as a way for the broker to increase their income and provide additional value-added services to the client. A volunary vision benefit alongside an employer-paid dental plan is a perfect pairing. In this tough economy, some employers may be forced to eliminate a benefit or two that it has paid for in full or partially. Employers can lessen the impact by offering the benefits on a voluntary basis and generally at a cost negotiated with the broker that improves the employee’s buying power. Carrier reps should be more than willing to help the broker make the process as smooth as possible for everyone at voluntary enrollment meetings.

Debbie Cecil of Unum: Employee-paid voluntary benefits usually have a higher first year commission than do group benefits. This is necessary to help fund the enrollment of the benefits since a good communication strategy is necessary to ensure that employees are well informed.

Shawn Smith of Transamerica: Lower broker commissions for voluntary products used to be prevalent, but the landscape has changed considerably. It is no longer necessary for the broker to split commissions unless outsourcing is needed for face-to-face or call center enrollment. In the past, with most voluntary worksite products, brokers would pass the servicing and enrollment to the carrier rep. The broker’s commission split was much lower than that of the carrier rep. It was usually 25% of the total commission or roughly 10% to 15% of annualized premium for the first year only, with broker renewals of around 2%. But today, there are many options for the small to mid-size group broker to retain 100% of the voluntary commissions. Comissions usually fall between 20% to 90% for first year commissions and renewal commissions average around 10%. A good example is that many former voluntary-only products are now employer paid and used in conjunction with major medical plans to encompass an overall employer benefits strategy. Products such as gap, critical illness, and accident insurance are being used extensively as employer paid products providing brokers with 100% of the commission. The broker enrollment is simply using a spreadsheet similar to the major medical enrollment without requiring wet signatures from employees.

Sean Duggan of Colonial Life: Adding voluntary benefits to their portfolio helps brokers protect their revenue stream while they may be seeing reduced income from other lines, such as major medical. Brokers don’t have to be experts in voluntary benefits; they just need to partner with a carrier that is. A turnkey voluntary carrier can offer plug and play capabilities including products; benefit communication and education; and enrollment services. The broker doesn’t have to invest in training or time. The voluntary carrier does the work and pays the broker the commissions.

Amy Friedrich of the Principal Financial Group: “Voluntary” doesn’t necessarily have to mean less commission. When voluntary benefits are offered in the right way, it can result in higher participation and more premium per employee than what you typically see across the industry. To get a good return on investment, team with a quality voluntary benefits carrier that not only offers a variety of benefits, but also understands the importance of needs-based education. Look for carrier services, such as pre-meeting promotion, salaried enrollers, one-on-one education/enrollment meetings, and enrollment tools like pre-filled forms and online access that have a positive impact on employee participation.

Mark Sylvester of Assurant: Brokers don’t always make less commission on voluntary benefits. In fact, some providers, like Assurant Employee Benefits, offer a higher commission scale on voluntary benefits because we understand the amount of work that is involved in selling them. Because the brokers’ sales efforts contribute significantly to employee participation in a voluntary benefits plan, we reward producers who follow our process to sell voluntary benefits with participation-based commissions. The higher participation levels they achieve, the more they can earn, particularly during the first year coverage is in place.

Christopher Covill of Aflac: Utilizing enrollment technology and effective communication media that maximizes employee engagement will allow brokers to offer voluntary benefit options to clients efficiently while paving the path to a good return on investment for the broker.

Glenn Petersen of MetLife: For many voluntary benefits, brokers earn a commission based on the premium sold. To maximize their commissions related to voluntary products, brokers are looking to work with carriers or administrative solution providers to help them market the offering, educate the employees about the need and solution, and facilitate the enrollment process. Streamlined enrollment options enable employees to conveniently enroll for multiple benefits, combined with educational information and tools help make enrollment easy for employees. Enrollment support tools, like educational videos, needs calculators and service avatars to guide employees through the process, can help drive employee interest, engagement, and ultimately, participation. Brokers can also maximize their return on investment, in terms of resources, by working with carriers and service providers that can simplify the initial case set-up for the employer and employees so that the ongoing program administration is smooth, requiring minimal broker involvement down the road.

3. How can you tell whether a particular voluntary benefit product will provide real value to your clients?

Shawn Smith of Transamerica: Think of how the product would fit with the clients overall benefit strategy. It should complement other core and ancillary products. Or consider creating a new voluntary benefit strategy that’s based on the client’s demographics, logistics, and benefit objectives along with consumerism and wellness education.

Glenn Petersen of MetLife: A benefit provider should carefully match benefit recommendations to the needs of an employer and employees by using tools, such as census and benchmarking data and employee surveys while aligning with an employer’s overall benefits delivery approach. It is important to understand the demographics of a particular workforce.

Scott R. Llewellyn of Ameritas: There are dozens of voluntary benefits on the market, but a skilled agent will meet with the group and closely pair up the offerings to the needs of the group’s employee population. A good broker can tailor the offerings, simplify the process; and help the HR department attract and retain high quality employees.

Sean Duggan of Colonial Life: It’s all about choice and personalization. The idea is to offer a variety of products to give employees the choices to meet their different family needs. Nearly every employee can benefit from voluntary coverage because the products are designed to help fill gaps in coverage and add additional protection for financial risks.

Amy Friedrich of the Principal Financial Group: The answer is easy; ask the employees. Whether it is a formal survey or an informal conversation, talking to employees can help determine the benefits that they need and will purchase. Ask questions to uncover their needs. For example, “If you weren’t working, how long could you pay bills before tapping into your retirement? A month? Three months? Six months? A year?”

4. Are there certain types of voluntary benefits that go well with different types of employer groups, such as blue collar vs. white collar?

Mark Sylvester of Assurant: We’re seeing a greater need for accident and short-term disability coverage among blue-collar employees while white-collar employees tend to purchase critical illness and long-term disability coverage. However, it really depends on the employer-paid benefits they’re offered and the products needed to supplement them.

Amy Friedrich of the Principal Financial Group: One-size-fits-all benefits don’t meet the needs of today’s diverse employee groups. For example, a bank with a majority of single, female tellers probably has different benefit needs than a law firm with older, more highly compensated attorneys.

Scott R. Llewellyn of Ameritas: It all boils down to knowing your group. Brokers should tailor voluntary plans to the employees’ needs and their ability to afford the premiums. Benefits would be tailored differently for a company with workers whose average age is 28 than for a company with workers’ whose average age is 40. (By the way, 40 is the average age of a civilian worker in the United States.) For example, it may not make sense to offer a dental plans with orthodontics coverage to a young start up employer with the average worker’s age of 25. But it would make sense to offer the coverage to a employer with an average employee age of 35 since up and coming families need the coverage.

Glenn Petersen of MetLife: MetLife’s 10th Annual Study of Employee Benefits Trends found that an equal percentage of white collar and blue collar workers said that non-medical benefits like dental, disability, and life insurance, were very important influences in their feelings of employer loyalty.

Debbie Cecil of Unum: Most voluntary benefits are designed for a target market of employees earning $20,000 to $75,000 without access to financial planning.

Shawn Smith of Transamerica: The personal insurance needs for all employees are basically the same regardless of class, status or income. However, the benefit amounts will vary based on employees needs and disposable income.

Christopher Covill of Aflac: Voluntary benefit options are more about demographics and out-of-pocket risks than about white-collar versus blue-collar segmentation.

Voluntary insurance policies, such as accident, critical illness, hospital indemnity, and disability help people cope with incremental out-of-pocket costs associated with serious accidents or illnesses that major medical insurance does not cover. Comprehensive benefit options, like voluntary insurance that extends beyond major medical insurance, can lead to higher employee satisfaction. Forty-nine percent of employees said “Improve my benefits package” is what current employers could do to keep them in their job, according to the 2012 Aflac WorkForces Report.

5. Which voluntary benefits are becoming more or less popular?

Sean Duggan of Colonial Life: We’re seeing strong interest from employees in supplemental health plans that will help cover their out-of-pocket expenses before major medical kicks in. The benefits from supplemental health plans also can be used to pay non-medical expenses that aren’t covered at all by major medical plans. Clients are very interested in these plans because they can be used along with a higher-deductible major medical plan to drive down their overall benefits costs. Cancer and critical illness plans are also very popular because nearly everyone has a family member or friend who has been touched by these kinds of health problems. They’ve seen the financial burden treating cancer or a stroke can cause for a family.

Debbie Cecil of Unum: Accident and critical illness have been the most popular benefits over the past three years.

Shawn Smith of Transamerica: In the past few years, critical illness and accident insurance appear to be the fastest growing voluntary products. Of course, life and disability insurance remain the most popular voluntary products. Recently, many group LTC carriers have exited the group market, thus hybrid permanent or term life insurance with an LTC component have become more popular as an inexpensive means of purchasing an uncomplicated LTC insurance product. Also, combining life, critical illness and LTC insurance into one product has created a more popular and affordable method of purchasing these three essential products as opposed to purchasing three separate policies.

Amy Friedrich of the Principal Financial Group: Voluntary disability is a product that has increased in popularity. This probably isn’t a result of changing needs, but a result of carriers and brokers doing a better job of simplifying a product that has been seen as complicated.

Christopher Covill of Aflac: Supplemental policies are becoming more popular, such as accident, critical illness, hospital indemnity, and disability. Also, many employers aren’t taking advantage of voluntary products available through group purchasing, which may provide cost savings to their company.

Mark Sylvester of Assurant: Critical illness is one of the fastest growing voluntary benefits in the industry due to growing awareness and availability. Critical illnesses can expose individuals to unexpected gaps in income protection. While health insurance may help cover many of the direct costs associated with an illness, related expenses such as lost income, child care, travel to and from treatment, high deductibles and co-pays may quickly diminish savings.

Scott R. Llewellyn of Ameritas: Many companies struggle to maintain contributions to employee benefits and some are forced to eliminate paid benefits. So voluntary benefits such as dental, vision and disability, have become top picks by employees. To the extent that voluntary benefits are being offered in lieu of employer-paid benefits, they are increasing as a percentage of what is sold today. In this economy, more people may be purchasing additional or incremental benefits above and beyond their employer benefits. Offsetting some of the lack in demand created by the down economy is a host of very new and creative voluntary benefits. Brokers are using these benefits to help increase their income given the new realities of lower commissions from medical carriers. Voluntary benefits will remain strong with dental, vision, life, disability and a host of others leading the way.

Glenn Petersen of MetLife: Voluntary benefits, as a whole, are gaining traction and popularity in the workplace. A decade ago, these benefits were largely confined to larger companies. Now, many smaller employers (fewer than 100 employees) are offering them to build employee loyalty. MetLife’s 10th Annual Study of Employee Benefits Trends found that 41% of employers say voluntary benefits represent a significant benefit strategy, up from 32% a year earlier. Employees like to have choices and popular products include life, auto and home, legal services, disability insurance, critical illness, accident insurance, and vision. Education helps drive popularity, too. One example of this is critical illness insurance, which is growing rapidly. Once the product was explained to them, fully 75% of employees surveyed in MetLife’s 2010 Critical Illness Insurance Awareness Study who did not own CII or had never heard of it found the concept appealing, with most even willing to pay the entire premium.

6. How do you choose a voluntary insurance carrier?

Shawn Smith of Transamerica: Many carrier spreadsheets are surfacing that include side-by-side product feature comparisons. It is difficult for the broker to stay abreast of product information in this manner due to consistent product enhancements and new product offerings that could test the validity of the spreadsheet. Company ratings, product portfolio, features, marketing materials, electronic product delivery systems, claims, billing, commissions, customer service and carrier representatives are important ingredients of choosing the right carrier. More importantly, products and services that provide a strategic needs-based benefit solution may help many employers that are searching for ways to cut benefits and benefit costs. For most employers, the number two operating expense is their employee benefits. If a voluntary benefits carrier can strategically provide a better overall benefit solution for the employer and employees, plus lower or minimize the employer’s overall benefits cost, they would probably be the best carrier choice for that employer.

Glenn Petersen of MetLife: An employer’s choice of benefits providers should include evaluation of financial stability, benefit delivery experience, the quality of administrative and claims capabilities, and breadth of products and solutions. In addition, it makes sense to evaluate the program that the carrier offers to make enrollment a simpler, more helpful process for employees and an efficient, informative and cost-saving solution for employers.

Amy Friedrich of the Principal Financial Group: All carriers have products, but the best carriers also have knowledge, data, and tools that put those products in context and support the customer experience. An example of how a carrier can move beyond product and pricing is to provide benchmarking data to help employers understand how their benefit package compares to that of their peers.

Scott R. Llewellyn of Ameritas: Selecting a carrier on price, alone, is a dangerous proposition because all carriers are not created equal. A carrier recommendation is the most important service a broker can provide to a group. Brokers put their reputation on the line with their recommendations. You wouldn’t select your hospital or doctor on their low price. Some carriers have customer service calls answered in foreign countries to hold down costs while some pay claims in weeks instead of days. Look for reputation, administrative support, ratings, experience and, most of all, the relationship with your agency. The company you select should have a solid history of proven performance. Also look at their relationships with the carrier representative. It is the people behind the company that are the most important.

Christopher Covill of Aflac: Brokers and insurance agents must take on the dual role of benefits advocate and educator to help protect the needs of employees and their families.

Find a carrier with the following attributes:

• Financial stability.

• A reputation for high ethical standards.

• Quick claims payment turnaround.

• A great track record of customer satisfaction.

• Strong brand recognition.

Mark Sylvester of Assurant: Brokers should choose a provider based upon the complete package, including products and support.

Sean Duggan of Colonial Life: Some brokers want to default to a spreadsheet approach. But, to really get value for your clients and your agency, it’s important to base your decision on more than just products and price. Your voluntary partner should offer a broad portfolio of products; a variety of enrollment options and services; effective benefit communication and education; a reputation for great service; and proven experience in this market. Low price won’t matter if employees don’t value and understand the coverage or if your client has trouble with billing or claims.

7. When you are presenting voluntary products, do some types of coverage just naturally sell well together?

Shawn Smith of Transamerica: Gap, critical illness, and accident insurance naturally go well together since they can provide important first-dollar benefits for the out-of-pocket medical expenses associated with unpredictable and expensive medical claims. Life, LTC, and critical illness provide living benefits. Also, all three are significant family needs based benefits. Once again, life and disability are the foundation of voluntary benefits

Debbie Cecil of Unum: Life and critical illness products fit well together, as do the accident and critical illness products.

Mark Sylvester of Assurant: Critical illness and accident coverages seem to sell well together because they prepare employees for two very different, unexpected events.

Christopher Covill of Aflac: Voluntary accident, critical illness, hospital indemnity, and disability plans naturally sell well together.

Sean Duggan of Colonial Life: We really recommend taking an individual needs-based approach when presenting voluntary coverage. It’s important to listen to the employee and help identify the gaps in coverage and types of protection that person needs.

Amy Friedrich of the Principal Financial Group: The goal with voluntary benefits should be to help employers offer a more comprehensive benefit package when they can’t afford to pay for all the benefits. Voluntary products fit best when they fill gaps in employer-paid benefits.

Glenn Petersen of MetLife: It can work well to have benefits, like critical illness and accident insurance, positioned alongside medical on the core enrollment ballot. Auto and home as well as group legal plans are designed to meet people’s personal situations and everyday needs. Life insurance and disability are often paired to provide a solid financial safety net in an era when people are often under-insured by objective standards.

8. How do you present voluntary benefits in a way that doesn’t overwhelm employees with confusing options?

Christopher Covill of Aflac: We suggest talking about three facets:

1. Protection for out-of-pocket costs as showcased in accident, critical illness, hospital indemnity, and disability insurance plans.

2. Family protection through whole life and term life insurance plans.

3. Possible cost of savings available through group purchasing.

Mark Sylvester of Assurant: Brokers should work closely with employers and providers to find the most effective timing for enrollment. For example, if the employer is rolling out a lot of changes to their medical plan, it may be best to conduct voluntary enrollment at the same time, so employees can consider their benefit package as a whole. But, if the employer is offering the same medical plan, you may get better results by holding voluntary enrollment at a different time. To help employees understand their benefits better and increase job satisfaction, we also recommend developing enrollment materials that highlight the need for the benefits, the plan designs, and how the coverages will pay in the event they are utilized. Enrollment communications and materials should be easy to understand, personalized, and well organized.

Scott R. Llewellyn of Ameritas: Just because some benefits are normally sold together, such as dental and life, dental and vision, or life and disability is not reason enough to offer these plans together. The group’s needs will determine which voluntary offerings make sense. A broker can analyze the current benefit offering and look for holes in coverage or caps in programs that can be filled with a strong offering of voluntary benefits.

Glenn Petersen of MetLife: It is best to create a plan that emphasizes education and effective communication. It is also advisable to offer a defined range of coverage amounts for each benefit to streamline and enrich the enrollment process. Remember that a good benefit strategy begins with a good enrollment process. Employees should be able to get help along the way, have a range of tools and relevant information their fingertips, and get personalized help when needed.

Amy Friedrich of the Principal Financial Group: Creating an education and enrollment plan is an important, but often overlooked step. People consume information differently and have varying degrees of understanding of how benefits work, what they cover, and, more importantly, why they need them. Creating a plan that takes into account a group’s demographics or the successes or failures of previous benefit introductions can prevent employees from getting overwhelmed and can help them make informed decisions.

Scott R. Llewellyn of Ameritas: Voluntary benefit presentations can be confusing and overwhelming for anyone outside the insurance industry. Benefits should be straightforward and honest. Offerings should be tested for an ease of understanding by employees, not just HR. Create a sample group of employees to see whether employees truly understand the cost benefit of each program.

Sean Duggan of Colonial Life: Offer two or three voluntary products at first. Take the time to help employees understand their coverage gaps and their most pressing needs. Having a benefit counselor conduct a one-to-one benefit session can help employees figure out where they’re most at risk financially and select products to protect them against their most important risks. Additional products can be added to the benefit program over time.

Shawn Smith of Transamerica: First and foremost, providing a long-term voluntary benefits strategy with the client’s initial product offering is vital for the future success of the program. “Keep it simple” is an overused phase, but makes sense when employees are already overwhelmed with trying to understand the core benefits as well as retirement benefits during open enrollment. Here are five important facts to remember:

• It is always less confusing to offer fewer voluntary product options. Use a maximum of three products during initial enrollment, but typically only two voluntary products works best.

• It is important that the two or three new voluntary product options are not similar so that they will not compete directly for the same premium dollars. Offering fewer products will improve employee participation.

• Product plan designs should fill the holes in the core benefits, so employees understand why they are being offered. Limit the number of options for each product.

• Adding a new voluntary benefit year-to-year may allow new access to employees and increase participation for all voluntary benefits including re-educating employees each year on existing products.

• Proving advanced written communications and short employee group meetings, followed by short individual meetings is imperative for an overall successful client enrollment and advanced employee product education.

Debbie Cecil of Unum: It is absolutely critical to present a limited number of products at enrollment – two, but definitely no more than three. It is also a must to provide communications in a format that is easy to understand. Employees have a limited amount of time to spend during enrollment as well as limited discretionary income.

9. Do you see more unbundling of voluntary benefit options?

Scott R. Llewellyn of Ameritas: Some companies say they offer a discount when you bundle benefits, such as 1% off the medical when you purchase the dental, but this is really more marketing than reality. Where was this 1% before? Was the medical simply priced 1% higher? No one is just giving away 1% on the medical. Benefits should be tailored to the needs of the company. A broker should spend time analyzing the current benefit offering and look for holes in coverage or caps in programs that can be filled with a strong array of voluntary benefits. The broker can select and build a voluntary product that exactly meets the needs of the employer, and is selected from the best carrier for that specific coverage.

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Leila Morris is the senior editor of California Broker Magazine.

Is The Timing Right for Fixed Index Annuities?

by Eric Taylor

Californians enjoy the benefits of geographic location, climate, and varied cultural attractions that offer its residents the opportunity to pursue active lifestyles. Many choose the Golden State to enjoy the great outdoors – virtually year-round in some places and remain active into their golden years. But for some of them, including middle to upper-middle income clients, the reality of living the retirement they anticipate may be financially difficult.

The combined forces of ongoing market volatility driven by global economic uncertainty and lengthening life spans have made it particularly challenging for many Californians to accumulate the funds needed to maintain their standard of living throughout retirement.

According to a 2011 survey by the Federal Reserve, “Surveying the Aftermath of the Storm: Changes in Family Finances from 2007 to 2009,” in California and other Western states:

• 67.5% of households saw their net worth decline in recent years, compared to 62% across the U.S.,

• The median drop in the West was 27%, which is far higher than the national average of 18.1%

How can advisors suggest ways to provide more financial stability to clients who may find themselves surrounded by financial uncertainty? How can they help their them keep their retirement goals on track? One answer is to help them formulate a retirement plan that can provide a guaranteed income stream for life.

No single product or strategy is right for every client. However, it’s important to consider the fixed index annuity for many clients who need more guaranteed income to ensure their living expenses can be paid. While some annuity products have lost favor in recent years, fixed index annuities are an attractive option today.

Fixed index annuity sales have risen dramatically over the past decade, enjoying record sales for three straight years and reaching a new high of $32.3 billion in 2011, according to the Employee Benefit Research Institute and Mathew Greenwald & Associates’ “2012 Retirement Confidence Survey.” Many consumers find the value offered by a fixed index annuity to be attractive. Their principal is protected from negative market declines while they enjoy the potential for greater accumulation than with traditional fixed annuities when the product’s chosen index rises. And today, many fixed index annuities offer an optional rider, usually for an additional cost. It guarantees a minimum withdrawal benefit, which creates the opportunity for lifetime income while allowing clients to maintain some control over their account value.

These products may be of particular interest to those who are within 10 years of retirement and to recent retirees since many have been hit particularly hard by the economic downturn. Unfortunately, this group has fewer years to rebuild their shrunken portfolios and cannot be assured of a market recovery to save the day.

Moreover, the current low interest rate environment has made many other “safe money” alternatives less attractive, such as money markets, CDs, and many bonds. This confluence of events has created a tremendous opportunity for financial professionals.

Fixed index annuities offer agents and advisors a way to help their clients bridge the gap between an individual’s guaranteed income from other sources – like a pension or Social Security – and the amount they will need to maintain their standard of living.

When structured properly, these products can also help consumers whose retirement expectations do not match their real-world experiences. Surprisingly, half of current retirees left the labor force earlier than they planned, according to The 2012 Retirement Confidence Survey conducted by the Employment Benefit Research Institute. Most often, they retired early due to unforeseen events, like health problems, a debilitating injury, or company downsizing.

When considering different income solutions, it makes sense for advisors to review how each product performs not only on the future date when clients plan to receive the income, but also throughout their retirement planning horizon. If unforeseen events change a client’s timeline, income could be needed at any point after their plan is put in place. It’s important to know that specific riders are designed to help maximize a client’s potential lifetime income, crediting daily growth to the income benefit base.

Fixed index annuities feature other options that can be tailored to a client’s needs. Clients determine how their funds are allocated across fixed and index-based growth strategies. Fixed strategies offer a guaranteed interest rate over a set time. Index-based strategies are generally tied to a market index such as the S&P 500. If the index increases, clients have the potential to receive interest credited up to the caps and limits of their annuity contract. A client’s principal will never decrease because of poor market performance. In some cases, rider charges, surrender charges, and market value adjustments could reduce the principal of an annuity.

Another benefit that’s built into many fixed index annuities gives the consumer the ability to establish income for life – for both the owner and a spouse – as joint annuitants of the contract. In many cases, if one member of a retiring couple has a qualified retirement plan, it can be rolled to an IRA using a fixed index annuity with an optional withdrawal benefit rider. That way, either spouse can receive income for the balance of their life.

Bear in mind that there is no additional tax deferral benefit for annuities purchased in an IRA or any other tax-qualified plan, since these plans are already afforded tax-deferred status. The other benefits and costs should be considered carefully before purchasing an annuity in a tax-qualified plan. Annuity withdrawals may be taxable and a 10% federal penalty tax may apply to withdrawals taken before age 59 1/2. All annuity guarantees are based on the claims paying ability of the issuing insurance company

Given the current wave of economic instability that appears to be stretching from California to Crete, the need to protect hard-earned nest eggs and generate dependable lifetime retirement income is reaching critical mass for many. Fixed index annuities may be the perfect option for middle market clients seeking protection of principal, a reasonable rate of return based on market index gains, and the dependability of guaranteed retirement income.

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Eric Taylor is a National Sales Manager with Genworth. He can be reached at eric.taylor@genworth.com.

Tuning In To Our Annual Dental Survey

Welcome to Part I of California Broker’s 2012 Dental Survey. 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 II in the August issue.

Read the responses and sell accordingly.

1. What types of plans do you offer?

Aetna: We offer the following dental plans:

• Aetna Dental Maintenance Organization (DMO) plan, PPO, PPO Max,

• Freedom-of-Choice Plan Design (offering members their choice of two dental plans),

• Aetna Dental Preventive Care, Aetna DMO Access, Aetna Dental Care Reward, Aetna

• DentalFund (our consumer-directed dental plan), Indemnity, Vital Savings by Aetna, a dental discount program.

Aflac: Aflac Dental – voluntary insurance policy – has the simplicity of a Voluntary Individual Table of Allowances plan that pays a fixed benefit amount for each procedure, regardless of what the dentist charges.

Ameritas: has the following types of dental plans available nationwide: PPO, indemnity, voluntary, non-voluntary, groups from two lives and up, individual, consumer driven and cost containment plans.

Anthem Blue Cross: Anthem Blue Cross and Anthem Blue Cross Life and Health Insurance Company offer a comprehensive line-up of dental plans and products that include: PPOs and DHMOs for individuals, small groups, large groups and national accounts. We offer voluntary dental plans for small and large groups.

BEN-E-LECT: BEN-E-LECT offers fully insured PPO, high deductible, pre-paid and self-insured dental plans for the group market. Employer-paid and voluntary plans with multiple network and out-of-network options down to the employee level are available to groups with as few as two lives.

BEST Life: In California, we offer employer-contributory PPO, and indemnity dental plans to groups with two or more employees enrolling. Voluntary PPO/Indemnity dental plans are available to groups with five or more employees enrolling. Custom dental plans can be offered for groups with 100 or more employees enrolling. Group term life and vision coverage are also available.

Blue Shield: Blue Shield provides a wide range of affordable and comprehensive dental PPO, in-network only (INO) and HMO plans to meet your clients’ needs, whether they’re large or small groups or individuals and families. We offer dental PPO plans and INO plans with MAC, UCR, and fee-for-service schedules. Our group dental plans are offered on a contributory or voluntary basis and can be sold with or without Blue Shield medical plans. Individual and family plans (IFP) dental PPO and HMO plans are available to our IFP medical members as well as on a stand-alone basis for dental PPO plans. We also offer two comprehensive dental PPO plans developed specifically for Medicare Supplement plan members.

Cigna: We offer the following dental plans:

• DPPO

• DEPO

• Cigna Traditional – dental indemnity

• DHMO Standard plans and split copays for general dentists and specialists

• DHMO Value Plans – including flexible plan options with alternative treatment provisions.

• DHMO Preventive Plans

• CignaFlex Advantage (monthly switch feature between a DHMO and DPPO or Dental indemnity plans)

• Cigna Dental WellnessPlus – Progressive Maximum, Progressive Coinsurance & Progressive/Regressive Coinsurance.

• Cigna Dental Waiver Saver

• Cigna Dental ProactivePlus – Two lower cost benefit design options – Class 1 coverage only and Class 1 & 2 coverage only.

• CignaPlus Savings, a dental discount card program (not an insurance product) which helps meet the needs of employers looking to offer an extra benefit to part-time employees, seasonal employees, or retirees. This is an affordable alternative to offering traditional dental insurance that provides access to dental care services at discounted rates

• Dental Shared Administration — provides qualified funds and clients the administrative flexibility to pay their own dental claims and still take advantage of Cigna Dental DPPO negotiated discounts and utilization management tools.

All plans are available on a stand-alone basis. All plans except the discount card are also available alongside medical and/or vision plans. Cigna also has three WellnessPlus features, which can be paired with DPPO, DEPO, or dental indemnity products. Individuals who get any preventive care in one plan year qualify for increased benefits in the following plan year. All plans are available on a contributory or voluntary basis. In addition to WellnessPlus, Cigna offers Cigna Dental Waiver Saver, where customers Class 1 (preventive) services can be waived for maximums and deductibles, providing an incentive for customers to seek preventive care.

Delta Dental: Managed fee-for-service, PPO and DHMO group dental plans; individual DHMO dental plans and group HMO vision plans.

Dental Health Services: Prepaid dental benefit solutions for groups and individuals. We also offer PPO, EPO, and indemnity (reimbursement) products for groups of all sizes and ASO services for self-funded groups.

Guardian: Dental PPO (active or passive), Prepaid/DHMO, and Indemnity plans are available on a voluntary or employer-sponsored basis. Dual and Triple Choice, Monthly Switch (between a DHMO and PPO), and Administrative Services Only plans are also available. Guardian specializes in customized plans based on the needs and price points of the employers and employees.

Health Net Dental: Health Net Dental HMO (DHMO) plans and dental PPO plans offer robust benefits covering most dental procedures. Dental plans may be purchased in conjunction with a Health Net medical plan or on a stand-alone basis. In addition, the dental plans may be purchased as dual choice. Contributory and voluntary plans are also available.

Humana: PPO, prepaid/DHMO, traditional preferred, and preventive plus plans available on a voluntary or employer-sponsored basis. Humana also has a robust ASO dental plan available in California.

MetLife: Dental PPO, managed dental plans and indemnity plans, with flexible designs and funding arrangements available to accommodate employer plan requirements — single or multi options, fully insured or self-funded as well as a full range of contribution options.

Principal Financial Group: We offer both employer paid and voluntary plans, including PPO, EPO and POS. We also offer a choice between our plans and dental HMO plans through marketing alliances.

Securian Dental: Group Dental PPO and Indemnity

United Concordia: United Concordia offers flexible fully insured PPO and DHMO plans as well as an individual product, iDental. ASO funding arrangements are available based on client size. Most plans are offered on an employer-sponsored or voluntary basis.

Western Dental: Western Dental offers DHMO mixed-model provider panel comprised of (a) contracted independent, general dentist and specialists, along with (b) Western Dental employee dentist and specialists, who work in the company-owned Western Dental Centers. Western Dental currently operates general dentistry and orthodontic offices throughout Calif., Ariz., and Nevada.

2. How do plans you offer for the individual and/or small group compare in rates and benefits to the large-group plans?

Aetna: The key difference between Aetna small group plans and larger group plans is that small group plans are pre-packaged plan designs. While larger groups can select from an array of benefits, the packaged small group plans are comprehensive yet price sensitive and make it easy for our customers to choose from plans that are competitive in the market.

Aflac: Aflac dental rates and benefits do not vary based upon the size of the account. However, when replacing existing dental coverage in larger accounts, waiting periods may be significantly reduced.

Ameritas: Ameritas’ small group and one life group plans are rated by industry and are pooled in full or in part. Large groups: Experience is rated and includes lower rates in most cases. Ameritas offers a wide variety of plan designs, regardless of group size, to meet the needs of our customers. The pricing of our non-group individual plans will be higher than group individual because of the nature of the risk.

Anthem Blue Cross: There are different underwriting considerations for each business segment depending on the product offered. With our new Dental Prime and Dental Complete plans, both small and large group can customize benefits to fit their employees’ needs.

BEN-E-LECT: The majority of BEN-E-LECT’s plans compete very well in the large group market. The benefit design and structure of these plans remain consistent across the small and large group markets.

BEST Life: Rates vary by plan design, group size and employer contribution. Typically the larger the group, the lower the rates. However, we offer a lot of plan design flexibility for groups with 10 or more enrolling. Waiting periods for major and ortho services are waived for groups with 10 or more employees enrolling – regardless of employer contribution. Some benefits are standard regardless of size. We offer a dental supplemental accident benefit on all our dental plans, regardless of size. A children’s vision benefit is also standard on plans with orthodontic coverage. Other benefits vary by group size: Adult orthodontic benefits are available to employer-contributory plans with 25 or more enrolling. Groups with 100 or more enrolling can customize benefits. Discounts are available if vision and/or life coverage is sold with a BEST Life dental plan.

Blue Shield: There are different underwriting considerations for each business segment. Our ability to customize offerings for groups with more than 300 employees typically results in lower rates and more choices to meet the employer’s needs. Group plans come in a range of deductibles and annual benefit maximums. Our Individual, Family and Medicare Supplement dental plans may vary in waiting periods, deductibles, and annual benefit maximums depending on the plan selection. All dental plans include generous benefits, competitive premiums, and strong California and national provider networks that are available to all members; we don’t differentiate our provider network for small groups or individual or family markets.

Cigna: Dental plan designs and rates for small groups are similar to those of large groups. There are a series of standard DHMO plan designs and DPPO/indemnity plan designs. Cigna offers an individual plan in the state of California, available as a buy-up option to our medical plan offering. That plan is a DPPO offering, very similar to our group plans aimed at businesses trying to control costs while offering a broad network. Larger groups generally want more robust and flexible plans, while smaller groups gravitate toward standard offerings. We can custom-fit DPPO plans to offer a variety of cost-savings options for employers that want to keep claims costs low, such as missing tooth limitations, class shifting, low maximums, varying coinsurance, deductibles, waiting periods, etc. Our DHMO plans start with basic coverage, specialty discount, split copays, and other cost savings mechanisms and go up to very rich, low-copay plans at the higher end of the cost spectrum. Through recent acquisitions, Cigna can also deliver solutions for the smaller employer segment through the Cigna Voluntary limited benefit dental plan as well as leveraging the small segment capabilities of the former Great West distribution channel. We provide the full spectrum of products, each with varying price points based on product, funding type, and voluntary vs. contributory.

Delta Dental: While benefits offered to smaller groups are comparable to those offered to larger groups, larger groups have more options in terms of plan designs. Rates can be slightly higher for smaller clients and individuals, but Delta Dental strives to be competitive while balancing our financial risk. With individual DHMO plan benefits, we offer three different plan options — two for individuals and families and one customized for seniors. The individual and family plans offer a wide range of covered services. The senior plan is designed to offer services most utilized by this particular population.

Guardian: Guardian offers nearly the same plan options to small group employers as to large employers. We offer an array of cost-reducing options, such as waiting periods, deferral of services, and tie-ins to Guardian vision products.

Health Net Dental: DHMO plans offered to individuals provide a comprehensive schedule of benefits at a monthly fee that is slightly higher than rates quoted for groups. Small groups (two-50 employees) have two comprehensive Health Net Plus DHMO and 13 DPPO plans from which to choose. Mid-market groups (51-250 employees) may choose from five DHMO plans and 15 new DPPO plans. Mid-market rates are based on location, benefit plan chosen, employer contributions and participation. Individual and small group rates are based on book rates. Risk evaluation is taken into consideration when underwriting larger groups (over 250 eligible employees).

Humana: We offer flexible plan designs with a range of deductibles, co-payments, and out-of-pocket expense limits to meet the needs of small to large groups. We also offer large groups the additional flexibility to customize plan options. Customers who see dentists participating in the HumanaDental PPO Network receive deep discounts. In Calif., our negotiated discounts average 34% off billed charges. All our dental plans provide employees with incentives for preventive dental care, which promotes their overall health. A free vision discount program is included.

MetLife: MetLife offers individual plans in Calif. Fla. and Texas though SafeGuard, a MetLife company. Dental HMO plans offered to individuals provide a mid-range level of benefits at a monthly fee that is slightly higher than rates quoted for groups. Small groups have a broad range of options within the Dental PPO and Dental HMO/Managed Care benefit plans. Rates are based on location, plan chosen and participation. Risk evaluation is taken into consideration when underwriting larger groups; individual plans are quoted using shelf rates.

Principal Financial Group: The only significant rating difference pertains to experience rating, which is used on groups with 150+ employees.

Securian Dental: Small group rates are developed on a pooled basis. Large group rates are developed on a custom basis.

United Concordia: While larger clients have more flexibility in customizing benefit options than smaller clients, United Concordia offers an array of standard client products and options that provide small businesses and individual consumers with cost-effective, quality choices. To control the risk associated with individual insurance, we utilize waiting periods for selected types of procedures. To keep the small client premiums comparable to those found in larger clients, slightly higher deductibles, lower coinsurance percentages and lower maximums are more commonplace within this market segment.

Western Dental: Our individual and small group rates are a little higher for standard benefit plans. Customized benefits plans are available for large groups.

3. Is your plan(s) better than previous incarnations? If so, how?

Aetna: We continuously review which services should be covered based on major dental studies, new clinical advances, recommendations from the leading health and dental organizations, consultations with academic leaders on the latest technology and techniques now taught in dental schools. We offer the following:

• Freedom-of-Choice Plan Design — packages our DMO plan with one of our Indemnity or PPO plan options. Members pay one rate and can switch between the plans as often as monthly. It can be a lower cost alternative to a PPO plan.

• Aetna Dental Preventive Care — a low-cost PPO or Indemnity plan covers preventive and diagnostic procedures from 70% to 100%. Members may also get reduced fees from dentists who participate in Aetna’s PPO network for non-covered services like fillings, adult orthodontia, and cosmetic tooth whitening.

• Aetna DMO Access — a fixed-co-pay DMO plan offers broader network access at a lower cost. There are no out-of-pocket deductibles for the member to pay and no claim forms to file. It also includes the Aetna Dental Access discount network, which gives members access to more dentists and discounts of 15% to 50% for non-covered services like bleaching.

• Aetna Dental Care Reward — By going to the dentist for preventive services in one plan year, Aetna will cover a greater percentage of coinsurance and/or annual maximum next plan year.

Aflac: Employers are seeking ways to shift costs and employees are looking for more value. The Aflac Dental plan is designed to increase the policy year maximum, which will satisfy both employers and employees.

Ameritas: Ameritas is known for our flexibility and expertise in dental. We talk to employers all over the country for input on their needs. Our plans are updated constantly to meet those needs. We have released several industry firsts including a rollover maximum product; fully insured Lasik eye benefits; dollar reimbursement plans; combined dental/vision deductible, frequency and maximum plans; shared family maximum plans; $5000 maximum plans, and stand-alone hearing care benefits. Our newest individual plan release is very popular across the nation.

Anthem Blue Cross: Yes, our plans are significantly better than previous incarnations.  Our new Dental Prime and Dental Complete plans are open-access models that include the freedom to see any dentist – with lower out-of-pocket costs at in-network dentists. These plans are better than previous incarnations because they (a) incorporate evidence-based benefit designs and claims processing guidelines, for greater savings and consistency with clinical oral health science, (b) include a more robust California provider network and (c) automatically include access to the national Dental GRID, one of the nation’s leading dentist networks, with dentists in all 50 states. The GRID is exclusively for customers of participating Blue Cross and Blue Shield plans.  In short: our new plans have better benefit designs and a larger network locally and nationwide.

BEN-E-LECT: BEN-E-LECT plans offer more employer and employee options than any other dental plan in the market. They can be written stand-alone or the employer may combine various BEN-E-LECT plans for a complete package offering PPO, DHMO and fully self-funded options.

BEST Life: Our current dental plans offer a lot more options compared to the dental plans we’ve offered in the past. All of our dental plans can be tailored to offer rich or lean benefits, depending on a company’s needs. We continually evaluate our dental plans to ensure the competitiveness of the benefits, and our underwriting guidelines.

Blue Shield: Yes, we are always looking to enhance our plans and provide richer benefits. An oral cancer screening coverage is not only a value-added benefit, but comes at no out-of-pocket cost to the member. We offer enhanced dental services for pregnant women for all dental PPO plans. Pregnant women receive one additional routine adult prophylaxis, and/or one course (up to 4 quadrants) of periodontal scaling and root planing, and/or periodontal maintenance if warranted by a history of periodontal treatment. Treatment is payable at 100% of the allowable amount for both in and out of network.

Cigna: Yes, our DHMO 08 Series provides an array of plan/benefit options to respond to clients’ dental plan needs. These plans feature easy access to four cleanings per year, two at $0 copay and another two available at a minimal copay, when recommended by the network dentist; expanded fluoride treatment options; coverage for prosthesis over implant procedures and a robust variety of schedules and copay structures. We’ve also added Identity Theft resolution services and access to a Dental Information Line free of charge exclusively with this Series.

Cigna added the affordable D Series with preventive and diagnostic coverage only, which provides preventive dental services. The E Series provides coverage for the majority of restorative services in addition to preventive and diagnostic coverage. Cigna’s dental plans include several enhancements we’ve made in recent years, such as coverage for oral cancer screening procedures including brush biopsy and VizilitePlus to aid in early detection of oral cancer. In addition, we removed the age limit on sealants for DHMO plans. And on most schedules, individuals don’t need a referral for their dependent children under age seven to seek dental care from a pediatric dentist. Individuals can also visit network orthodontists without a referral.

With the Core and Radius Networks, employers have the flexibility to select the network that best meets their benefit plan goals.

Our large network of private practice dentists encourages employees to choose Cigna Dental PPO over more costly options. DPPO/DEPO Discounts — those enrolled in either the Cigna Dental PPO (DPPO) or Dental EPO (DEPO) plan — can enjoy discounts on non-covered services (in states where allowed by law). The discounts also apply to covered services when they exceed their annual maximum or other plan limitations, such as frequency, age or missing tooth. This enhancement allows individuals to enjoy lower out-of-pocket expenses because most of our DPPO network dentists have agreed to offer enrollees their negotiated contracted fees for most non-covered services (in states where allowed by law). The Dental Network Savings Program (DNSP) is a standard cost-containment feature for DPPO (except MAC and Scheduled benefit plans) and Indemnity clients. Finally, we have added both identity theft and will preparation enhancements to the CignaPlus Savings discount card (not an insurance product).

Delta Dental: Most mid- to large-range plans offered by Delta Dental are customizable within basic parameters, and we incorporate changes in treatment standards and technology as they evolve.

Dental Health Services: We offer a number of cosmetic procedures as standard benefits in our plans. In addition, monthly premium rates and co-payments for services are evaluated frequently to ensure that they are appropriate and competitive.

Guardian: The key is flexibility, especially in today’s market as employers and employees are under more pressure than ever to balance costs with benefits. Guardian offers customized options to fit each employer’s needs and budget. Our recent focus has been on innovative plan designs with flexible solutions, things like Guardian Freedom, our newest plan, which is a new lower cost dental option that gives members a choice of networks with access to providers in Guardian’s premier PPO network,

DentalGuard Preferred, or in Guardian’s DentalGuard Alliance PPO, which offers even greater claims savings  through a select pool of dentists. We also are focusing heavily on developing more voluntary options, a market we see poised for tremendous growth particularly with the legislative changes on the horizon..

Health Net Dental: Health Net offers DPPO plans for small and mid-market groups. All of our DPPO plans include extra services for pregnant women in their second and third trimesters, including extra cleanings, scaling, and debridement covered at 100% in and out of network and not subject to the plan’s deductible. Our Classic Plus DPPO Plans include MaxAdvantage, our rewards program that allows members to carry over a portion of their calendar year maximum into the next calendar year. Our Basic DPPO is a unique plan offering in- and out-of-network coverage for preventive, diagnostic, and restorative procedures (oral surgery, endodontics, periodontics, major services and orthodontia not covered).

For new groups purchasing a dental PPO plan with coverage for orthodontia, the orthodontic lifetime maximum starts over, even for members who have previously started treatment. We do not require the prior carrier’s PPO orthodontic paid claims and there is no reduction of the member’s lifetime orthodontia maximum for treatment already in progress.

The Health Net Dental Plus DHMO plans offer more than 340 covered benefits, including oral cancer screenings, additional teeth cleanings, teeth whitening and veneers. In addition, members have access to one of the largest DHMO networks in the state.

Humana: Yes, we continually explore ways to offer more choices and flexibility for our customers. Please see next response.

MetLife: We are continually improving our program contracts, plan-design flexibility, claims-processing guidelines, customer service, and quality programs based upon clinical research, consumer-value approaches, and dental industry trends. MetLife continues to expand our product offerings and plan design flexibility in the small (<1,000 employees) market by providing customers with more choices to help them meet cost objectives without sacrificing quality.

Principal Financial Group: Our current plan offers significant flexibility in plan design, optional coverage for cosmetic services, TMJ treatment, dental implant coverage, accident coverage, employee choice options and multiple price points. Employers can design any combination of plan options to meet their needs. In addition to our Maximum Accumulation feature, which allows members to carry over a portion of their unused annual maximum for use in future years, we also rolled out a new Preventive Passport feature. This allows for preventive charges to not count/reduce the annual maximum.

Securian Dental: Yes, we have added greater flexibility.

United Concordia: In recent years we have done the following:

• Introduced more voluntary plan options and added optional coverage for posterior composite restorations and implants to clients with 10 or more enrollees.

• We launched Preventive Incentive®, which covers diagnostic and preventive services without counting them toward the member’s annual maximum.

• Enhanced our employee oral health educational offerings.

• Launched a series of plan designs through iDental, our dental product for individuals and families without coverage elsewhere.

• Introduced the UCWellness Oral Health Rider in 2012, which offers enhanced coverage for members with diabetes and other diseases to clear away concerns they may have on the cost of treatment. UCWellness also provides oral health education and program details for all members and targeted messaging to motivate those eligible for UCWellness benefits

Western Dental: Western Dental Benefits Division recently launched the DHMO Series 7 dental plans. Our new plans offer an increase of covered procedures to include the availability of cosmetic alternatives and more orthodontic options for children and adults

4. What have been the most recent changes in your plan(s)?

Aetna: Full mouth debridement will be covered as a major service and will be a standard on all new DMO, dental PPO and indemnity plans with effective dates of October 1, 2010 and later. This procedure is part of our Dental/Medical Integration program enhanced benefits.

Aflac: Along with an increased policy year maximum, Aflac Dental continues to provide a simple, no direct-cost option for employers to enhance employee benefits offerings. The Aflac Dental plan provides the ease of administration without the hassle of network restrictions, deductibles, precertification for treatment, or annual premium reviews.

Ameritas: Individual dental, dental/eye care and a $5000 maximum option for dental.

BEST Life: Last year we expanded our in-network access by contracting with an additional national PPO network. All our dental PPO plans now offer a regional and national PPO network. Our California network is one of the largest, with 17,920 provider locations throughout the State. Our national PPO network offers 122,00 provider locations in the country. By expanding our PPO network access, BEST Life members can access their in-network benefits anywhere in the country and receive excellent in-network savings.

Anthem Blue Cross: We recently introduced our Dental Prime and Dental Complete products, which include modernized benefit designs, lower premiums, and a more robust dentist network locally and nationally.

These plans include benefits such as dental implants, annual maximum carryover and composite fillings on all teeth. Plus, there are more options for out-of-network reimbursement, including the 90th percentile of FAIR Health.  Voluntary plans are available with a minimum of 5 enrolled employees.

BEN-E-LECT: BEN-E-LECT has evaluated its Freedom PPO benefits portfolio and narrowed it down to four plans that have proved to be most beneficial to its members. By focusing on development of those four plans, BEN-E-LECT is now more able to create sustainable rates for its groups taking into account size and location. BEN-E-LECT has also eliminated the waiting period for groups and new hires on its employer-paid plans for added convenience.

Blue Shield: In response to market demand, Blue Shield developed two stand-alone dental plans for the IFP market – one comprehensive Smile PPO dental plan and one affordable Value Smile PPO dental plan. Now brokers can sell Blue Shield dental coverage to individuals and families with or without Blue Shield medical coverage.

We also added a portfolio of in-network only (INO) dental plans for the small and mid-large markets. Dental INO plans have a plan structure like a dental PPO but without out-of-network coverage.

For our Medicare Supplement plan members, a third teeth cleaning per year is covered at 100% when using a network provider for dental PPO plans. Additionally, we’ve expanded our dental PPO/INO network of providers to more than 172,000 nationwide.

Cigna: In addition to our response to question number three above: We developed the Cigna Dental Oral Health Integration Program (OHIP) in 2006 to encourage members to seek appropriate treatment for gum disease as part of their overall treatment plan. This made us the first carrier in the dental insurance industry to offer enhanced coverage for members who have cardiovascular disease, diabetes or who are pregnant. This coverage includes 100% reimbursement of coinsurance or copays for certain dental procedures associated with treating gum disease. In January of 2011, we enhanced the program to include coverage for stroke, head and neck cancer radiation, chronic kidney disease, and organ transplants. We also included additional caries (tooth decay) protection procedures for conditions that may cause dry mouth.

Program participants are also eligible for the following additional coverage:

• Discounts of up to 50 % off retail prices for chlorhexidine, fluoride toothpaste, and other dental prescription plan coverage’s targeted at patients with a high risk for oral health problems through Cigna Home Delivery Pharmacy

• Discounts on non-prescription plan coverage’s targeted at this group are also available through other companies.

• Behavioral guidance on subjects such as fear of going to the dentist, tobacco cessation, and stress and its impact on oral health. Additionally, employees may access discounts of 25% to 50% off Xylitol gum through the Cigna Healthy Rewards program.

Cigna provides coverage for the oral cancer screening procedure known as a brush biopsy for members enrolled in the Cigna Dental plans.

Members will have access to our consumer-driven tool, the dental Treatment Cost Estimator (TCE).  Members can also access our dental Cavity Risk Assessment tool.

Our Periodontal Risk Assessment tool allows members to assess their risk for periodontal (gum) disease in minutes by answering 20 simple questions. Cigna’s Dental Oral Cancer Awareness Quiz is a fast and easy tool that’s designed to help members test their knowledge about the basics of oral cancer and understand what they can do to help reduce their risk. To take a tour of myCigna.com, go to https://my.cigna.com. The user ID is “userdemo123” and the password is “review1” (case sensitive). Please look for the various dental presentations throughout the site, and take a look at the myCigna.com tour offered on the main page. Both assessment tools are available in English and Spanish.

Cigna also developed an Oral Cancer Awareness quiz and an online toolkit to help parents care for their children’s teeth.

Delta Dental: We continue to promote our dental wellness program for our enrollees, the SmileWay Wellness Program. SmileWay provides an array of wellness resources, including plan designs that emphasize preventive care, enhanced oral health communications and an expanded online presence that promotes oral health through social media channels such as Facebook and Twitter. Our SmileWay Wellness Program is self-managed, enabling enrollees to determine their level of participation and encourages users to review their habits and take our free cavity and periodontal risk quizzes that will indicate their risk level based on oral health habits and lifestyle choices. In the risk assessment results, we encourage users to stay connected with us by signing up for customized communications based on their results. Our extensive dental health article and video library contains more than 100 articles and videos.

Dental Health Services: Our plans provide coverage for composites on posterior teeth, re-treatment on root canals, fixed fees for precious metals and porcelain on molars, titanium crowns, teeth whitening, and other cosmetic procedures.

Guardian: Guardian constantly develops new, innovative ideas in order to meet our customers’ needs by keeping their teeth healthy and saving them money. Guardian Freedom, allows members to choose among networks.

Health Net Dental: All of our Classic Plus, Classic, Essential and Basic DPPO plans include extra benefits for pregnant members in their second and third trimesters.

Humana: Plans in our new generation of products are available as voluntary plans, and to groups with as few as two employees. Our new plans offer an extended maximum benefit, in which members get 30% coinsurance on services rendered after they reach their annual maximum. In addition, no waiting periods for major services for voluntary groups with 10 or more enrolled, open enrollment options, and orthodontia benefits. Updates include reimbursement options for out-of- network reimbursement: maximum allowable fee, or based on in-network fee schedules. Additional deductible choices, implant coverage, and acrylic filling coverage have also been added. Due to the connection between oral health and overall health, we have added, free of charge, oral cancer screenings to all of our products, excluding DHMO/prepaid plans.

MetLife: 

• Managed Dental Products Launch in NJ & NY — MetLife recently expanded its Dental HMO/Managed Care plans into New York and New Jersey, increasing choices for lower cost and higher coverage plan designs for employers. These managed dental products offer a cost-effective solution for providing employees a valued benefit that can aid in addressing loyalty and retention goals while also addressing the oral health needs of employees and their families.

• High Annual Maximum Plans are designed to offer more benefits ($5,000 annual plan maximum) while maintaining or even lowering the plan’s premium. With MetLife’s approach to recommending appropriate, researched based plan design changes, employers can offer a high annual maximum with little to no impact to their premium

Principal Financial Group: Our newest feature to our dental plans is the option of Preventive Passport. This feature excludes preventive services/charges from counting towards the annual maximum

Securian Dental: Enhanced benefit plans. Escalating annual maximum and lifetime deductible options where available.

United Concordia: Along with our parent company and the University of Pennsylvania, United Concordia recently completed a study to determine whether dental cleanings reduce the cost of medical care in patients who have certain diseases or conditions.

As a result, we now offer our UCWellness Oral Health Rider, delivering enhanced coverage for members with diabetes and other diseases. By providing greater benefits for the full coverage of services – including surgery – that eligible members may need to treat and control their gum disease, UCWellness clears away any concerns members may have on the cost of getting treatment.

UCWellness makes it easy for employees to start saving employers money. An integrated communication and registration process is easily implemented. UCWellness – My Oral Health delivers:

• Oral health education and program details for all employees

• Targeted messaging to motivate those eligible for UCWellness benefits

Western Dental: Our Series 7 plans cover more procedures and now include Implants, veneers and external bleaching.

5. Can an insured use their own dentist even if they are not on your participation list?

Aetna: PPO — We offer a national network of dentists. Each covered family member can visit any licensed dentist for covered services. When members visit dentists who participate in our network, their out-of-pocket costs are generally lower. Indemnity – Members can visit any licensed dentist. Aetna: DMO – Members must seek care from a participating DMO provider unless a state allows a member to seek out of network care. We make this easy by consistently offering the largest DMO network in the industry.

Anthem Blue Cross: Members of our Dental PPO plans, including Dental Prime and Dental Complete, can see any dentist they want. However, members who choose a network provider generally experience lower out-of-pocket costs.  Plus, members never need to file a claim when they see one of our in-network providers – the dentist files the claim for them. The DHMO plans are in-network only.

Aflac: Policyholders may use any dentist they choose since Aflac Dental does not have network requirements.

Ameritas: Insureds can use any provider, but they may incur additional out-of-pocket expenses.

Anthem Blue Cross: Yes, they can with all of our PPO plans. Members who choose a provider, within the Dental Blue network, get the most savings in their dental costs. However, members can choose a non-Dental Blue dentist, but their out-of-pocket costs may be higher. The same is true for our traditional Prudent Buyer PPO dental plans. The DHMO plans are in-network only.

BEN-E-LECT: Yes, BEN-E-LECT’s plans offer both in and out-of-network coverage with multiple options for coverage and benefits. The members maintain complete control over the dentist they choose to utilize.

BEST Life: Yes, both PPO and IndemnityPlus plans allow members to visit any dentist of their choice and receive coverage for services.

Blue Shield: Yes, dental PPO plan members can choose to go to any  dentist, although their benefits will be covered at a higher percentage when choosing a network dentist, with less out-of-pocket expense.

CIGNA: Insureds can use their own dentist in the DPPO and dental indemnity plans. However, there are no out-of-network benefits with DHMO, CignaPlus Savings dental discount plans (not insurance) or with DEPO. Individuals can nominate their dentist to join our plan and if the dentist wants to participate and meets our criteria, he/she will be credentialed and added to the network. Additionally, DPPO and DEPO plans may include savings on most non-covered services (in states where allowed by law). Most of our DPPO network dentists offer their negotiated contracted fees to customers and their covered dependents for most non-covered services (in states where allowed by law). And the savings also apply to covered services when an individual exceeds his or her annual maximum or other plan limitations, such as frequency, age or missing tooth.

Delta Dental: Delta Dental Premier enrollees can visit any licensed dentist for care, although there are advantages to visiting one of more than 43,000 access points for Delta Dental Premier dentists in California. Enrollees can go to any dentist, but they are only guaranteed to get in-network benefits and avoid balance billing when visiting a Delta Dental dentist. Delta Dental PPO enrollees also have freedom of choice, but can benefit from the protections associated with selecting one of more than 27,400 access points for Delta Dental PPO dentists in California. PPO enrollees have access to both Delta Dental PPO and Premier dentist networks with different levels of savings.

DHMO enrollees must use a participating general dentist or approved specialist, except for emergency care. There are nearly 5,000 dentist facilities for DeltaCare USA in California.

Dental Health Services: Our PPO and reimbursement plans allow members to get treatment from any dentist. Members of Dental Health Services’ prepaid and EPO plans choose their dentist from our extensive network of participating dentists.

Guardian: Members covered under our PPO plans can visit any dentist; however, benefits may be paid at a lower coinsurance rate for non-participating dentists. DHMO members must choose a participating primary care dentist.

Health Net Dental: Our dental PPO plans offer members freedom of choice; members may receive services from any licensed dentist, but we will reduce their out-of-pocket costs by receiving services from a participating PPO dentist. Under Health Net Dental DHMO plan, members must use a participating dentist to receive benefits.

Humana: PPO members can visit the dentists of their choice. Out-of-pocket savings are great when members visit participating network dentists

MetLife: For Dental PPO plans, plan participants can visit any dentist and receive benefits. Participants may realize additional expense savings by receiving services from a participating dentist. For Dental HMO/Managed Care plans, members must use a participating dentist to utilize their benefits.

Principal Financial Group: Yes, our members can see any dentist even if the dentist is not on the “participation” list if they are enrolled in either our PPO or POS design. If a member is enrolled in our EPO design, however, network dentists must be seen for services in order to receive coverage.

Securian Dental: Yes.

United Concordia: Our FFS and PPO plans allow members to visit any dentist. However, out-of-pocket costs will be lower when visiting a participating network provider. DHMO members must use network dentists.

Western Dental: Through the DMO plans, the member must use a  dentist who participates in our network in order to have coverage.

6. If the dentist bill exceeds UCR, can the dentist bill the patient for the difference?

Aetna: For covered services, network dentists are contractually prevented from balance billing above the negotiated rate. Non-covered services are also available for a discount in most states. Dentists who are not in our networks may balance bill members.

Aflac: Aflac Dental pays benefits based on a Table of Allowances and not on UCR. If the dentist’s charge exceeds the benefit amount paid, the dentist may bill the patient for the remaining balance.

Ameritas PPO/First Dental Health (FDH) Networks: Ameritas PPO  dentists and FDH PPO dentists are bound by contract not to balance bill the difference between their normal charge and PPO maximum allowable charges.

Anthem Blue Cross: No, not when visiting an in-network dentist with our PPO plans. Anthem Blue Cross participating provider contracts include negotiated fee agreements that prohibit balance billing. A participating dentist may not balance-bill members for amounts that exceed the negotiated and contractually agreed on fee. Members are not responsible for amounts in excess of negotiated rates. However, if a member visits an out-of-network provider, there is no contract and the provider can bill the patient for the difference. With our DHMO plans, the patient is only responsible for co-payments and non-covered services when accessing services through their participating dental provider

BEN-E-LECT: The member does have the option to choose this method upon enrollment.

BEST Life: Members will not be balanced billed if they receive treatment from a contracted PPO provider. All our dental PPO plans offer a regional and national PPO network. On a BEST Life PPO plan, members can access their in-network benefits anywhere in the country and will not be balanced billed. Those who choose to visit a non-participating dentist may be balanced billed. Our 90th percentile UCR choice is a great cost-effective option for groups that have limited network access.

Blue Shield: No, in-network providers cannot bill members for fees that exceed the negotiated rate. Non-network providers, however, may bill for charges that exceed the plan’s allowed amount.

Cigna: DHMO — Network general dentist and specialist contracts contain clauses that prohibit dentists from charging members any additional fee, surcharge, or other cost for services, other than applicable patient charges as defined in the patient charge schedule or contract payment schedule for covered procedures. A network dentist will be counseled if they balance bill a member. Failure to comply with corrective action may result in the network dentist’s file being referred to our credentialing committee for review of future participation in the network.

For coverage we do not cover, dentists may charge their usual fees. For certain orthodontic procedures, network dentists may charge incremental costs associated with optional/elective materials, including but not limited to ceramic, clear, lingual brackets, or other cosmetic appliances.

DPPO – Balance billing beyond the contract fee is not permitted for any service provided to the member.

In the case of Cigna owned networks, balance billing for covered procedures is strictly prohibited. We will counsel network dentists who do not comply, and continued balance billing may cause the network dentist’s file to be referred to our credentialing committee for review of future participation in the network.

Cigna’s network dentists’ contracts include language to assure that members are only charged in accordance with the contracted fee schedule amounts. They are prohibited from balance billing patients. Network fee schedules apply for covered services even after members have reached their annual maximums or exceeded frequency limitations, or if missing tooth limitations or other similar limitations are imposed by the applicable dental plan. For non-covered services, members are responsible for payment of the dentist’s usual fee or contracted fee for that procedure.

For leased networks, Cigna would address any balance billing with the dentist or our affiliated network partner(s). In the case of dentist contracted with an affiliated network, the affiliated network contract would apply.

Out-of-network dentists may balance bill the difference between the DPPO plan’s payment and their usual charges.

Since out-of-network services are not covered with the DEPO plan, members are responsible for the non-network dentist’s usual fees for any treatment received out-of-network.

Indemnity — We do not prohibit balance billing for our Traditional indemnity plan coverage; dentists may balance bill the difference between the plan’s payment and their usual charges. Members pay dentists at the time services are rendered and then submit claim forms to us, or dentists submit the claim forms directly to us for payment.

Delta Dental: Contracted dentists agree not to balance bill patients for services covered under the program for which he or she has contracted service fees. Delta Dental holds its Delta Dental PPO and Premier dentists to their contracted fees when providing services to eligible enrollees.

DHMO enrollees do not pay more than their set copayment for benefits under the DeltaCare USA plan. Specialists are paid the difference for charges exceeding the enrollee’s copayment for all preauthorized services. When an enrollee chooses a more costly procedure not covered under the plan, the enrollee is responsible for the difference in cost between the network dentist’s usual fees for the covered procedure and the optional treatment, plus applicable copayment for the covered procedure.

Dental Health Services: No, members utilizing in-network benefits on our prepaid and PPO plans are protected from paying unexpected, additional fees from their dentist.

Guardian: Guardian’s PPO dentists are prohibited from billing members for any difference between the billed fee and the contracted fee schedule amount, less applicable deductibles and coinsurance.

Health Net Dental: When receiving services from a participating PPO dentist, members cannot be billed any charge in excess of the maximum allowable charge established by the plan. If the member goes to a non-participating dentist, the dentist can bill the patient for the difference between the allowed amount for the plan benefit and the dentist’s submitted charge.

Humana: Humana pays out-of-network dentists generally at the 90th percentile of UCR.

MetLife: When receiving services from a participating Dental PPO dentist, eligible employees and dependents cannot be billed any charge in excess of our maximum allowable fee (minus any plan benefits). If the patient goes to a non-network dentist, the dentist can bill the patient for the difference between the plan benefit and the dentist’s submitted charge.

When receiving services from a participating Dental HMO/Managed Care dentist, members cannot be billed any charge in excess of the specified plan co-payments listed in the Schedule of Benefits for their plan.*

* Members are responsible for the participating dentistís full fee for procedures specifically excluded from coverage.

Principal Financial Group: Dentists cannot bill over the UCR/fee schedule allowance amount if they are part of our PPO or EPO networks. If the dentist is not a part of one of our networks, he/she can bill the amount over UCR.

Securian Dental: If the dentist is part of our network – no. If the dentist is not part of our network – yes.

United Concordia: Contractually, United Concordia participating dentists agree to accept our allowances as payment in full for covered services (less any deductibles and coinsurances or co-payments).

Western Dental: Since this is a managed care plan, members pay only the applicable co-payment listed on their benefit schedule. Members are financially responsible for non-covered procedures at a discount.

7. How does the dental plan protect against over billing or waiver of co-payments?

Aetna: Our explanation of benefits shows the member’s out of-pocket responsibility. A copy is sent to both member and provider. If necessary, the provider relations area helps to resolve any issues whether related to over billing, waiver of co-payments, or other issues.

Aflac: Aflac Dental does not have network requirements. If the dentist’s charge exceeds the benefit amount paid, the dentist may bill the patient for the remaining balance.

Ameritas: The explanation of benefits automatically calculates the insured’s portion of the bill to prevent these kinds of problems.

Anthem Blue Cross: With our Dental Prime and Dental Complete plans, we protect members against inappropriate billing through our provider contracts, claim review, and our continuous analytic monitoring of the treatment and claim submission patterns of each dentist that submits claims to us.  For our DHMO programs, our quality assurance teams assess claims and providers regularly to ensure our DHMO members are getting the highest level of service and satisfaction.

BENELECT: Provider network discounts are automatically applied at the time a claim is submitted. We also make pre-determination services available to inform members what their charges will be prior to receiving service. The members also receive an explanation of benefits, which clearly illustrates network savings and patient responsibility.

BEST Life: We do this in several ways: 1) Provider network discounts are applied at the time a claim is processed; 2) Predetermination services are available to inform members what their charges will be prior to receiving service, 3) We provide easy-to-understand EOBs that clearly illustrate network savings. 4) We have educational flyers that inform members on how their dental plan works and why they should go to a network provider.

Blue Shield: Our contract with our in-network providers stipulates that they cannot bill members for fees that exceed the negotiated rate. Any complaints from members regarding balance billing by providers are forwarded to our Provider Relations Department for review and resolution. who do not comply. Continued balance billing may be referred to our Credentialing Committee for review of future participation in the network. Cigna monitors allegations of overcharging through enrollee feedback, surveys, and the dental network management staff.

For DHMO plans, the collection of copays is between the patient and the dentist. We encourage dentists to collect copays at the time treatment is rendered. For DPPO/Indemnity plans, it is illegal in some states for dentists to routinely waive deductibles. Since our group contracts indicate that Cigna is not responsible for any charge the patient is not required to pay, we may reduce our claim payment by the copay amount waived by the dentist. Our Investigations Unit may also contact the dentist and the patient for further information and has the ability to review claims on an ongoing basis.

Delta Dental: Delta Dental Premier and PPO dentists contract with us to establish acceptable fees as well as formally agree to certain protections for Delta Dental enrollees. Protections include: no balance billing – contracted dentists cannot charge enrollees for the difference between their contracted Delta Dental fee and their submitted charge for a service; they may only collect the patient portion (copayment plus any deductible and/or amount over the annual maximum) at the time of service. Delta Dental dentists also agree not to unbundle a procedure that is on file with Delta Dental as one procedure.

Waiver of plan copayments and deductibles is considered fraudulent and is handled by notifying the dentist of the violation and possible network termination.

DHMO network dentists agree to be paid by Delta Dental on a guaranteed capitation basis. They also contractually agree to accept enrollee copayments as payment in full for covered dental procedures and not to seek additional fees. If a dentist consistently demonstrates a disregard for their contractual obligations with Delta Dental their participation may be restricted or terminated.

Dental Health Services: Participating dentists’ charts are audited on-site on an ongoing basis to ensure treatment is rendered in accordance with Dental Health Services’ policies. In addition, plan members get extensive patient education and tools to help them understand their plan benefits so they can question charges that may not be in compliance with plan benefits. Members are encouraged to contact the plan for assistance if they feel they are being overcharged.

Guardian: Guardian’s PPO dentists may only charge members for any covered charges other than the deductible or coinsurance that may apply to the discounted fee schedule amount. Explanation of benefits statements sent to members specifically identify the discounts taken and the member’s responsibility.

Health Net Dental: Under our DPPO and DHMO plans, participating dentists are contractually prohibited from balance billing a member more than the maximum allowable charge or the contracted copayment amount. Practices are in place to discipline network dentists who attempt to bill members more than these contracted amounts.

If it is determined that a participating dentist has overcharged a member, our Customer Service team will contact the provider on behalf of the member to confirm benefits and re-educate the office about proper plan collection from a member. If the provider refuses to comply with the plan design, the issue is escalated to the Professional Relations Department for follow-up with the provider. Depending on the circumstances, the issue could be escalated to our Quality Management Team, which follows state mandates for a full investigation, including the request for patient records from the office and a review by a dental professional. These investigations must be completed within 30 days and written communications are sent to both the member and provider. If the provider still refuses to comply, our Legal Department would be contacted and steps may be taken to terminate our relationship with the provider. In these rare instances, it might become necessary for the plan to reimburse the member or provider depending on the circumstances and to ensure a positive member experience.

Humana: Humana’s dental PPO network is in the top 3 nationally with more than 175,000 dentist locations, and growing daily.  Our dental PPO network is one of the largest in California, with more than 27,000 dentist locations. Nearly 99% of the dentists who join our network stay in our network.

MetLife: For Dental PPO, our first protection for the patient against over-billing is our explanation-of-benefits, which clearly identifies the charges for services that the patient has a responsibility to pay. In addition, our customer service area is responsive to patient inquiries about questionable billing items. This area gathers information from the patient and investigates the issue fully. A response with our findings is provided to the patient. Waiver of co-payments can also be identified from calls to our customer service center and our auditing unit, which looks for atypical billing patterns.

For Dental HMO/Managed Care, the dentist’s agreement prohibits billing a member above the specified co-payment. The plan conducts a thorough orientation with each dental office. The Quality Management department reviews member complaints that relate to charges. The Office Quality Assessment reviewer notes any apparent overcharges during the patient-record audit and works with the dentist’s office to correct the issues.

Principal Financial Group: Provider utilization patterns are studied and issues are addressed as uncovered.

Securian Dental: We systematically check every submitted claim.

United Concordia: United Concordia participating dentists contractually agree to only bill members for applicable deductibles, coinsurance, or amounts exceeding the plan maximums. In addition, members receive explanations of benefits that clearly describe the services received and their financial responsibility.

Western Dental: Providers are bound by contract to accept the member’s schedule of benefits. Members can also access the My Dental Benefits tool on our website (www.UnitedConcordia.com) to view their benefits and eligibility information, claim details, procedure history, maximum and deductible accumulations, and more. Plus, United Concordia’s responsive customer service representatives are available to assist members with questions regarding their benefits. Our Utilization Review area also analyzes thousands of claims each year to ensure the acceptability of treatment and quality of services. Our Dental Advisors and consultants also continuously review dentists’ fees and practice patterns for statistical variation from their peers. Dentists who fall outside of the norm are targeted for education and additional monitoring.

8. How many provider locations do you have?

Aetna: As of 6/1/12: DMO – 11,504 dentist locations nationally and 2,841 in California, PPO: 51,022 dentist locations nationally and 9,938 in California.

Aflac: Aflac Dental does not have network requirements. Policyholders may visit any provider they choose.

Ameritas/FDH Network: 40,354 California provider access points, (25,980 Ameritas; 14,374 FDH); 16,942 California locations, (11,042 Ameritas; 5,900 FDH)

Anthem Blue Cross: Our Dental Complete network, powered by the national Dental GRID for Blue plans, includes more than 14,700 unique dentists in California alone.  It is one of the largest dentist networks in the state and nationwide. Dental Complete has more than 29, 410 access points in California. Our Dental Net DHMO network includes more than 7,300 provider locations in California to choose from

BEN-E-LECT: BEN-E-LECT’s dental plans utilize the Health Smart (Interplan), First Dental Health, Dentemax, PPO USA and Western Dental networks which contain thousands of offices statewide.

BEST Life: We offer access to a regional and a national PPO network. Our California network has over 22,000 access points and an additional 28,680 provider locations throughout the state of California. Our national network has 141,546 provider locations, which offers our members network access when they are outside of California.

Blue Shield: Members have network access to more than 12,000 dental HMO and almost 27,000 dental PPO providers in California, and more than 172,000 providers nationwide. These are two of the largest statewide provider networks in the industry.

Cigna: Nationally we have more than 62,742 DHMO contracted access points and more than 253,285 DPPO Radius Network contracted access points and 198,425 Core Network contracted access points. In California we have more than 16,981 DHMO contracted access points and more than 45,540 DPPO Radius Network contracted access points and 34,643 Core Network contract access points nationwide. CignaPlus Savings (dental discount card, not insurance) includes more than 121,500 of our DPPO contracted access points.

Dental Health Services: Our network of participating dentists consists of 861 general practice offices with 3,274 participating dentists, and an additional 1,826 specialists. Our PPO network carries more than 16,000 dentists.

Delta Dental: In California, Delta Dental Premier, 43,383 access points; Delta Dental PPO, 27,415 access points; and DeltaCare USA (DHMO), 4,957 facilities. We also give our enrollees access to the national Delta Dental networks.

Guardian: There are over 171,000 PPO dentist-locations across the country and more than 27,400 in California. We are one of the largest PPO networks in the state based on unique dentists. The DentalGuard Alliance PPO network has over 2,982 dentist-locations in Southern California. For the DHMO, there are 13,055 locations across the country and 6,408 in California.

Health Net Dental: As of May 2012, our California PPO network includes 31,354 access points in 375 locations. Our California DHMO network includes 9,789 locations.

Humana:  Humana’s dental PPO network is in the top 3 nationally with more than 175,000 dentist locations, and growing daily.  Our dental PPO network is one of the largest in California, with more than 27,000 dentist locations. Nearly 99% of the dentists who join our network stay in our network. 

MetLife: As of May 2012, our Dental PPO network includes over 180,000 participating dentist access points nationwide (22% growth from 2011), including over 28,000 in California. The Dental HMO/Managed Care network includes more than 19,763 participating dentist access points in California, Florida, New Jersey, New York and Texas (34% growth from 2011), including over 8,952 in California.

Principal Financial Group: We have approximately 36,800 PPO provider locations and 17,900 EPO provider locations.

Securian Dental: 143,000 dentist access points.

United Concordia: We have 76,830 dentists at 164,011 access points nationwide in our Advantage Plus PPO network. In Calif. alone, we have 13,739 dentists at 28,433 access points. Our DHMO network includes more than 2,600 primary dental offices and 1,720 specialists nationwide, with over 1,635 primary dental offices and 799 specialists in Calif.

Western Dental: Our Provider network is unique among DMO carries because it has over 240 Western Dental Centers (staff model) in addition to more than 2, 500 provider locations.

9. Can Insureds change providers easily if they are unhappy?

Aetna: Yes, members in our PPO/indemnity plan can change any time and do not need to notify us. Members in our DMO plan can choose a new provider as often as once per month through Navigator, our online web tool for members, or by calling the toll-free telephone number on the back of their ID card.

Aflac: Yes. Policyholders can change providers at any time.

Ameritas PPO and the FDH Networks: Insureds can choose any provider at any time for procedures.

Anthem Blue Cross: Yes.  Our PPO networks, including Dental Prime and Dental Complete, are open-access models:  The member does not have to pre-select a dentist and can always see the dentist of his/her choice. DHMO members can change providers once a month.

BEN-E-LECT: Yes. Members may change providers at any time by selecting to use another provider. No further documentation or process is necessary. Freedom Pre-Paid Dental is the only plan in which a member must select a specific provider.

BEST Life: Members may choose any dentist they desire without calling BEST Life to switch providers. We also provide immediate access to Customer Service, who can assist members with selecting a provider.

Blue Shield: Yes. Dental PPO/INO plan members may change providers at any time without notice; dental PPO plan members have the flexibility to see in-network or non-network providers and dental INO members can only see network providers. Dental HMO plan members may change their primary care dentist as needed; changes will be effective the first of the following month.

Cigna: Yes. DHMO — Members may transfer to a new dental office once a month and for any reason, as long as accounts with the current office are paid in full. Members can call our customer service department to speak with a representative, or the transfer can be processed 24 hours a day through our automated transfer option. All transfers are effective the first of the following month. We suggest that members complete any dental treatment-in-progress before transferring to another dental office.

DEPO — Cigna Dental EPO members may seek care from any network dentist; however, we do recommend that any treatment-in-progress be completed and outstanding balances paid in full before changing dentists.

DPPO – Cigna Dental PPO members have the freedom to visit either a network dentist or any licensed dentist at any time. However, we do recommend that any treatment-in-progress be completed and outstanding balances paid in full before changing dentists.

Indemnity — Cigna Traditional indemnity members have the freedom to visit any licensed dentist at any time.

Delta Dental: Fee-for-service enrollees can change dentists any time without notifying us. DHMO enrollees can change their contract dentist by contacting customer service or online at deltadentalins.com. Requests submitted prior to the 21st of each month are effective the first of the following month.

Dental Health Services: Members can change their dentist at any time by contacting their Member Service Specialist by calling 800-637-6453 or online at www.dentalhealthservices.com.

Guardian: Members covered under Guardian’s PPO plans can change dentists at will, regardless of whether the dentists are participating or non-participating. Members covered under our DHMO plan may change dentists by using our online Web tool, GuardianAnytime.com or by calling our toll-fee number. Requests made by the 20th of the month are effective the first of the following month. We also offer a dual choice monthly switch plan, which enables members to switch between the DHMO and PPO as often as desired on a monthly basis.

Health Net Dental: With our PPO plan design, there is no need to select a primary care dentist or to obtain referrals for specialty care. Under our DHMO plans, members may change their primary care dentists once a month by calling Health Net Dental Member Services or via our online Web portal. The change is effective the first of the month, provided that the request is made by the 20th of the previous month.

Humana: With the PPO plan design, the member can change dentists without notifying the dental plan.

MetLife: With our Dental PPO benefit plans, there is no need to select a primary care dentist or get referrals for specialty care. For the Dental HMO/Managed Care, a member can easily change their selected dentist online or by calling customer service.

Principal Financial Group: Yes

Securian Dental: Yes.

United Concordia: Yes, members can change PPO providers at any time without notice. DHMO participants may change dentists by writing or calling our customer service department and requesting a new DHMO provider, as long as there is no existing balance due to the current dentist or treatment in progress.

Western Dental: Our membership can change providers, on a monthly basis, by phone or in writing.

Life Insurance – Looking Beyond the Price of Life Policy Guarantees
Assess the Strength of the Company That Backs Them

by Alan (Al) Lurty

Many brokers who sell life insurance are getting puzzling and conflicting signals from insurers about a range of guarantee-driven product offerings. In the current environment, many carriers are adjusting pricing, indicating a reduced appetite for taking on new business or shying away from selling certain guarantees altogether. What’s driving this behavior? In short, it’s interest rates.

The historically low interest rates of recent years and the Federal Reserve’s persistence in keeping them low for the foreseeable future has put many carriers under great pressure. Carriers are finding it difficult to support the guaranteed premiums of certain life products they’ve sold while keeping appropriate reserves to cover obligations and meeting the expectations of shareholders.

The term for this kind of pressure is “capital strain.” Although most life insurance consumers will never need to know what that term means, every broker should have a thorough understanding of it. By being attuned to the financial realities that life carriers are facing, brokers can run their businesses more efficiently; enhance client service; and ensure that clients’ death benefits are in the hands of a well-capitalized carrier when the benefits may be needed 10 years, 15 years, or 30 years down the road.

Great Guarantees, Great Pressure

Many of today’s most popular life insurance products have relatively long premium guarantees. One example is the guaranteed level term policy, which typically comes in 10-, 15-, 20- and 30-year plans. Another example is the secondary guarantee universal life policy (SGUL), in which premiums are guaranteed to remain level the insured’s lifetime. To achieve this latter guarantee, the insurer uses a “shadow” account or cumulative premium test to ensure that coverage will stay in force even if the policy’s account value runs out.

These very flexible SGUL plans can be based on a traditional universal life chassis, an indexed chassis, or a variable universal life chassis. This flexibility and the attractive nature of the guarantees, has made such policies very appealing to consumers and, of course, to the brokers who serve them.

The problem is that, for the issuing carriers, these products tend to create the capital strain that drives behaviors that can affect both brokers and consumers. How does capital strain occur? Insurers incur a first-year loss under statutory accounting rules (as opposed to GAAP accounting). This is because the acquisition costs, commissions, initial reserves, and other expenses associated with issuing the policy typically exceed the first-year premium.

This loss can be significant. Coupled with the increase in risk-based capital the carrier must hold to cover the writing of these products, it’s often several multiples of the premium. This is primarily because the insurer has set up redundant reserves under state laws, which are far greater than those projected to be needed on a purely economic basis. These reserves can grow over time to be as much as seven or eight times the initial premium before reducing as the product ages.

To cover the initial loss, the carrier has to draw from its profits on in-force business or go to its corporate parent or other source for capital infusions. As a result, the insurer must limit the earnings that can be paid out as dividends to shareholders or the parent. Not surprisingly, those who manage the guaranteed products that cause this capital strain are always adjusting their product offering, capacity, and pricing to walk a fine line between offering competitive products and managing available capital to support them.

The Interest Rate Conundrum

In some cases, carriers have sought to mitigate capital strain by using capital methods to finance those sky-high reserves – sometimes through bank letters of credit. But, here’s the catch: Premiums on the carrier’s products have often been based on the assumption that mid- and long-term interest rates would be higher over time. But, we have a very low interest rate environment today – an environment that’s unlikely to change until late 2014 at the earliest. So, carriers must set up economic reserves to reflect the low interest rate environment and how it affects their ability to invest premiums at a satisfactory return.

On top of the cost of financing the redundant reserves we just discussed, these economic reserves create even more capital strain. This is why, in recent months, many brokers have seen carriers implement significant price increases on guaranteed life products, particularly with respect to SGUL products. Some companies are shifting their product mix, trying to emphasize products like indexed universal life and other accumulation-oriented products that have much lower capital strain than products with long-term guarantees.

For the same reason, brokers may soon be experiencing rising term insurance life rates, particularly for the longest-term plans.

The Effect on Brokers

Such shifting of priorities and pricing among carriers puts brokers in a tough position. Because consumers have shown a strong preference for guarantees in recent years, brokers established relationships with carriers to provide a reliable market for that business. Now that such markets and pricing are no longer a given, brokers are forced to spend more time finding the best rates for clients. And they’re always wondering whether a carrier’s appetite for issuing a policy has suddenly been diminished.

Even more challenging for a broker is to learn that a carrier is discontinuing certain popular guarantees due to capital constraints. This forces the broker to shop for similar products at other carriers; build new relationships with the marketing teams of these carriers; and learn new policy details. Many policies may look the same on the surface with similar machinery behind their guarantees. However, within the policies, insurers may have slightly different provisions, conversion rules, calculations, and other factors. And in the end, brokers just don’t have the time: They just want the product they and their customers rely on to be there next year so they can keep on selling it.

What Brokers Can Do

Brokers who understand the connection between interest rates and guarantees will be in a better position to assess the product landscape and offer clients educated guidance on current products in the market. Brokers may want to look to a carrier’s risk-based capital (RBC) ratio to gauge a carrier’s capital strength. The RBC ratio is the total capital for a company divided by its risk-based capital, which takes into account investment risks and operations. This ratio can be derived from insurers’ annual statutory financial reports, which are typically available at their websites. Brokers who complete this important due diligence will be in a better position to assess their product options across carriers.

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Al Lurty is head of Business Development for ING U.S. Insurance, where he leads the overall market direction and product agenda for the business segment. He also manages end-to-end product development, implementation, and new business initiatives. Lurty led the Specialty Markets distribution channel, which focuses on term quote services, and led the development of ING U.S.’s term life insurance strategy.