The 17th Annual California Broker HMO Survey – Part I
by Leila Morris • Each year California Broker surveys health maintenance organizations in the state with direct questions about their plans. We then present the answers to such questions here for you—the professional agent or broker.
Clearing Disability’s Hurdles
Disability benefits provide financial security for employees in the post health reform world. On these pages, we examine the range of possibilities for high wage earners who have been left short by disability coverage that does not meet their needs.
Guaranteed Issue High-Limit Disability Insurance
by Ryan Petersen • Concern over financial security and the popularity of voluntary benefits are driving the market for voluntary guaranteed issue disability insurance.
New Opportunities in Meeting Physician Disability Needs
by Molly Farrell and Shawn Evans • The world of physicians will continue to change dramatically in the next few years, and disability coverage is one of the key needs they will face.
Benefit Options Present New Opportunities for Brokers
by Eric McDermott • Many employers are wondering what will become of the benefit world amid the uncertainty of health care reform. Employers feel the threat of penalties for non-compliance while benefit brokers feel the threat of commission-cutting pressures in a mature, ever more regulated market.
The Marketplace Eligibility Matrix
by Garrett Viggers • The expertise of insurance agents will be the backbone of a successful open enrollment. We have a new opportunity to provide service and value.
Understanding the Full Value of Life Insurance
by David Hayward CLU, ChFC, FLMI Most consumers don’t object to owning life insurance; they just don’t understand all the benefits it offers.
Whole Life Insurance Offers Critical Coverage Beyond the Working Years
by Debbie Cecil • How to provide affordable, predictable workplace coverage for mid-market and Hispanic employees
ACA – An Unprecedented Voluntary Benefit Opportunity
by Shaun R. Walti • Leveraging voluntary benefits as a key part of your ACA strategy.
Understanding Medicare Advantage Special Needs Plans (SNP)
by Patrick Freeman LUTCF, CDHC, CHCRS, MBA Even agents who are certified to sell MAPD plans may not be as familiar with SNPs because most insurance plan providers require an extra training and certification to sell and enroll these particular plans. Some plans even require a separate agent contract to sell SNPs.
Vision Care Plans: An Essential Health Benefit
by Michael Schell • While health care reform has changed the group and individual plan landscape, specialty ancillary product lines have become more integral to the employee benefit program.
Creative Strategies to Boost Vision Sales and Satisfaction
by Todd Hester • Selling vision is more important as health care reform moves agents into more of a consultative role. Find out how educating clients about vision and offering a quality plan will build loyalty for the long haul.
Fixed Indexed Annuities – A Solution for Boomers’ Battered Retirement Portfolios
by Al DalPorto • A new generation of fixed indexed annuities offers the safety of principal and guaranteed future income.
Welcome to the 17th annual agents’ guide to managed care. Each year California Broker surveys health maintenance organizations (HMOs) in the state with direct questions about their plans. We then present the answers to such questions here for you—the professional agent or broker. We hope that this valuable information will help you serve your savvy healthcare clients better.
Note: Anthem Blue Cross is not participating in the HMO survey this year.
1. Do you guarantee a time limit on getting referral/treatment routine, urgent, emergency? If not, how many days does it take?
Aetna: Our internal policy is five days for routine, two days for urgent pre-certification, and no referral is required for urgent or emergency care.
Blue Shield of California: Our appointment wait time standards are as follows:
• Preventive care (annual physical, annual GYN exam): within 30 calendar days
• Non-acute and routine care with personal physician: within 7 calendar days
• Non-acute or routine care with a specialist: within 14 calendar days
• Urgent care appointment: within 24 hours
• Emergency care (acute, life-threatening): immediately.
Cigna: While we don’t guarantee a time limit on getting appointments or referrals, we do have appointment accessibility standards and we monitor performance against these standards annually. Performance is monitored by analyzing several questions on the annual CAHPS (customer satisfaction) survey and reviewing customer concerns regarding appointment access.
Kaiser Permanente: Emergency care is provided 24 hours a day, seven days a week from any Kaiser Permanente Medical Center or Plan Contracted Hospital. Standards for appointment availability were developed by the California Department of Managed Health Care (DMHC); and we’re committed to offering members a timely appointment when they need care. Our telephone advice nurses are available 24 hours a day.Health Net of CA: For urgent pre-service requests, a decision must be made in a timely fashion appropriate for the member’s condition, not to exceed 72 hours after receipt of the request. The practitioner needs to be notified within 24 hours of the decision, not to exceed 72 hours of receipt of the request (for approvals and denials). For non-urgent, elective or routine pre-service referrals, the decision is made within five days. The member is to be notified within 72 hours of the request (for approval decisions). For standing referrals, a decision must be made in a timely fashion appropriate for the member’s condition, not to exceed three business days from receipt of the request.
UnitedHealthcare: Optimally, the specialist referral process should take less than 30 days from referral to appointment. We monitor this standard annually using the Consumer Assessment of Health Plans Survey (CAHPS) member satisfaction survey. We adjust our goals by market depending upon past performance and national percentile benchmarks. Our standards are as follows: Routine Appointment less than 30 days, specialist appointment less than 30 calendar days, and urgent care less than 24 hours. We also have the Express Referrals program that streamlines the referral process. A primary care physician (PCP) in a participating Express Referrals provider group may refer a member to a specialist in one of many specialties in their group without prior authorization from the group’s utilization review committee. Members pay their normal office visit co-payment for a referral to a specialist.
2. Do you have any conditions/diagnoses/symptoms that are referred automatically?
Blue Shield of California: No; however, Blue Shield requires that our contracted IPAs and medical groups employ a standard referral processing guideline of 24 hours from the time the necessary information is received.
Our Access+ HMO plan has been designed to ensure members have a great deal of flexibility in accessing care inside the HMO network. Each Access+ HMO member chooses a primary care physician from an extensive network of general and family practitioners, internists, pediatricians, and OB/GYNs. We also ask our HMO physicians to refer members to specialists within their IPA or medical group; since we fully capitate all professional services, in-network referrals help control cost and utilization.
Health Net of CA: Health Net delegates medical management activities to participating physician groups (PPGs). Each PPG has its pre-certification requirements and systems, which may include direct access to specialty care. For members who are not delegated to a PPG for management, such as Health Net’s Direct Network HMO membership or other fee-for-service membership, authorization for specialty consultations is not required. Members with a chronic condition or disease that requires continuing specialized medical care are eligible for a standing referral to a specialist. A standing referral allows extended access to a specialist for members who have life-threatening, degenerative or disabling conditions.
Kaiser Permanente: Members identified with specific chronic or high-risk conditions diagnoses, or symptoms are automatically referred for enrollment in whichever care management programs are appropriate. Participation in these programs is completely voluntary and if a member chooses not to participate, they may easily opt-out, though less than 1 percent chose to do so. Members also have direct access to all primary care services and can easily self-refer to specialty care in the Obstetrics/Gynecology, Optometry, Psychiatry, and Chemical Dependency/Addiction Medicine Departments. At some facilities, members may also self-refer for mammograms and Ophthalmology and Dermatology Department services.
3. Can a pregnant member go directly to a gynecologist without waiting for approval?
Blue Shield of California: Yes, female members may self-refer to an OB/GYN in their personal physician’s Medical Group or IPA for an annual routine well-woman examination. Alternatively, if an IPA or medical group contracts with an OB/GYN as a network primary care physician, female members may select the OB/GYN as a primary care physician, as well.
Kaiser Permanente: Yes, members have direct access to all primary care services and may self-refer for many types of specialty care including Obstetrics/Gynecology.
Health Net of CA: Yes.
4. Do you have self-referral to a gynecologist for an annual well-woman exam?
Blue Shield of California: Yes.
Health Net of CA: Yes.
Kaiser Permanente: Yes, Routine Ob/Gyn care often includes basic health maintenance counseling and screening such as recommendations and reminders for immunizations, managing cholesterol, smoking cessation, and mammograms.
5. Can a member with severe back pain get an appointment with an orthopedist immediately?
Aetna: The PCP determines this.
Blue Shield of California: Yes, Blue Shield developed Access+ Specialist for those times when HMO members want direct access to a specialist or physician other than their personal physician. For a slightly higher fixed co-payment, members can go directly to a specialist or primary care physician in the same medical group or IPA as their personal physician without a referral. To use the Access+ Specialist option, members simply call the physician they wish to see to schedule an appointment. Members can also choose to go through their personal physician to request a specialty referral and pay their usual office visit co-payment.
Cigna: Yes, customers should consult their primary care physician who can contact an orthopedist or other specialist (neurosurgeon, neurologist) to arrange for an immediate appointment. At the direction of the physician, a customer can also be enrolled in Cigna’s chronic condition management program for lower back pain. A registered nurse helps coordinate timely care.
Health Net of CA: Yes, as an emergency.
Kaiser Permanente: Most back pain can be managed best by the PCP in while ensuring the treatment does not impact a person’s other medical conditions. When back pain does not follow the expected course, or is unusual in presentation, our orthopedists are available for consultation.
UnitedHealthcare: Yes, with a PCP referral.
6. How long does it take to get an MRI or equivalent test when a lump is found in a member’s breast or uterus?
Aetna: The PCP determines this.
Blue Shield of California: Authorization turnaround time for an urgent request is 72 hours. In special cases, Blue Shield attempts to process the request immediately
Cigna: The customer’s physician determines the exact time frame. But, an appointment can be made immediately if medically necessa
Health Net of CA: Health Net delegates utilization management activities to medical groups. Therefore, if the member belongs to a delegated participating physician group (PPG), the PPG has its own pre-certification requirements, and an MRI may or may not require pre-certification. If the member does not belong to a delegated PPG and Health Net is responsible for conducting utilization management, MRIs require pre-certification. Health Net processes urgent pre-certification requests within 72 hours of receipt of all information. Requests for elective MRIs are processed within five business days.
Kaiser Permanente: Except for very rare exceptions, the discovery of a lump in a woman’s breast would not prompt the use of magnetic resonance imaging (an MRI) as a diagnostic tool but the patient would immediately receive a mammogram to better understand the nature of the lump. Similarly, the discovery of an unusual uterine growth would be investigated with more direct methods.
7. Can the member get a second opinion outside of the IPA or the medical group?
Aetna: When medically appropriate
Blue Shield of California: Yes, per benefit mandate H&S §1374.55, Blue Shield will provide or authorize a second opinion by an appropriately qualified health care professional when requested by an enrollee or participating health professional (PCP or specialist) who is treating the enrollee.
Health Net of CA: Yes, a member, his or her authorized representative or a provider may request a second opinion for medical, surgical or behavioral health conditions. If the member has an HMO or POS plan and requests a second opinion about care from a Primary Care Physician (PCP), the second opinion should be authorized by the delegated participating physician group (PPG) and provided by another qualified health care professional within the PPG. If the member requests a second opinion about care from a specialist, the member may request a second opinion from any provider of the same or equivalent specialty from within the PPG or IPA. Such specialist referrals within the PPG must be authorized by the PPG. However, if the request is for a specialist outside of the PPG, the referral must be authorized by Health Net.
Kaiser Permanente: Yes, our doctors can refer members to non-plan providers for second opinions when medical expertise relevant to their condition is not available through Kaiser Permanente providers. Any non-emergent out of plan care must be authorized by Kaiser Permanente in order to be covered by the member’s health plan benefits.
UnitedHealthcare: Members can get a second opinion in accordance with the specifications of the evidence of coverage (EOC) and disclosure form, as summarized below. A second medical opinion is a reevaluation of your condition or health care treatment by an appropriately qualified provider. This provider must be either a primary care physician or a specialist acting within his or her scope of practice, and must possess the clinical background necessary for examining the illness or condition associated with the request for a second medical opinion. Upon completing the examination, the provider’s opinion is included in a consultation report. Either the patient or the treating participating provider may submit a request for a second medical opinion. For additional information, please refer to “evidence of coverage” brochure.
8. Where are decisions made about specialist referrals, testing, treatment, surgery, and hospitalization?
Aetna: For our delegated groups, the PCP makes decisions with their PMG/IPA. The health plan makes this determination for non-delegated groups.
Blue Shield of California: These types of decisions are made by our contracted IPA/medical groups, and involve Blue Shield if there is a question about appropriateness, or if a member is dissatisfied.
Cigna: Primary and specialty care physicians make decisions about referrals, testing, and treatment. At times, they can coordinate care with their medical groups or IPAs. Hospitalization can require authorization from Cigna.
Health Net of CA: A Health Net member’s participating physician group (PPG) authorizes all treatment, including specialty referrals for testing, treatment, surgery or hospitalization. A member with a chronic condition or disease requiring continuing specialized medical care is eligible for a standing referral to a specialist. A standing referral allows extended access to a specialist for members with life-threatening, degenerative or disabling conditions. The member’s PCP will refer the member to practitioners who have demonstrated expertise in treating a condition or disease involving a complicated treatment regimen requiring ongoing monitoring.
Kaiser Permanente: Typically, the member’s primary care physician (PCP) makes the decisions about specialist referrals, testing, treatment, surgery, and hospitalization and do not need authorization to put these decisions into action.
UnitedHealthcare: Our contracted PCPs act as the single point of contact, resource, and consultation for all health services provided to members, including specialty referrals. We believe this approach promotes familiarity with the member’s medical history and permits a single physician to monitor the member through complete episodes of care. These physicians look at the whole medical picture, as opposed to looking at symptoms from a specialist’s point of view. This method reinforces a strong doctor-patient relationship, provides early detection of medical problems, and ensures that medical referrals are appropriate and necessary.
9. What criteria are used to authorize or deny specialist referrals, treatments, or tests?
Aetna: There are a variety of reference tools, including Milliman and many that the plan has developed and copyrighted. A medical director must make all denials for medical necessity. In addition, the plan has adopted an external review process for all fully insured members.
Blue Shield of California: We use nationally recognized, evidence-based industry sources to identify services subject to precertification or prior authorization, including:
• Milliman Guidelines
• Thompson Length of Stay Criteria
• St. Anthony’s Guidelines to Medicare Coverage
• Guide to Preventive Services: Report of U.S. Preventive Services Task Force
• Medicare Guidelines
• BlueCross BlueShield Association Technology Evaluation Center
• California Technology Assessment Forum
• Third party review agencies
• Blue Shield Medical Policy and Medication Policy
• Internally developed guidelines
Our Utilization Management Committee (UMC) is responsible for developing and maintaining the policies and procedures that define utilization management authority, including prior authorization. Comprised of Blue Shield senior management executives (including physician representation) and functioning as the steering committee for quality activities, the UMC is responsible for reviewing on an annual basis our prior authorization policy and, if necessary, updating our list of services requiring authorization.
For HMO plans, Blue Shield may delegate prior authorization responsibilities to a medical group contracted to Blue Shield for HMO business. Under this arrangement, the group is responsible for processing and monitoring prior authorization requests for providers, except for experimental or investigational procedures, for which Blue Shield provides the authorization. Blue Shield monitors delegated medical groups to ensure that all utilization management activities are timely, effective, and consistent with Blue Shield’s internal program.
When prior authorization is delegated, the personal physician submits a service request to the delegated IPA/medical group. The delegated IPA/medical groups will issue a determination and contact the requesting provider by telephone/fax within 24 hours of the decision to inform the physician of the status of the authorization request.
For non-delegated HMO medical groups, Blue Shield is responsible for processing and monitoring prior authorization requests, and evaluating referrals for specified services, procedures, or drugs that require authorization. Prior authorization determinations are made by licensed review nurses or pharmacists, and decisions are based on medical necessity and appropriateness, reflecting the application of Blue Shield’s approved review criteria and guidelines.
Cigna: Cigna uses Milliman care guidelines. In addition, Cigna continually assesses developing technologies using evidence-based medicine and independent expert opinion to develop coverage positions, which are posted on our website. All medical decisions are based on clinical guidelines. A physician who is knowledgeable in the specialty area makes the decisions.
Health Net of CA: Health Net utilizes established written guidelines, such as InterQual Clinical criteria, along with the Health Net Medical Policy Manual, clinical practice guidelines, and the Schedule of Benefits.
Kaiser Permanente: Our doctors are not required to seek authorization for the vast majority of medical services so long as the medical specialty, treatment, or test is available within our plan.
UnitedHealthcare: We require our provider groups to demonstrate the use of appropriate medical management guidelines. We conduct annual reviews of written procedures and consider the following factors for cases that may not meet criteria: age, co-morbidities and complications, response to treatment, the psychosocial situation, and home environment. We use written criteria based on sound clinical evidence and specific procedures for applying the criteria to make utilization decisions. In addition, we apply objective and evidence based criteria and consider individual circumstances and the local delivery system. We require our delegated providers to do the same.
10. Are you monitoring the length of time for referral authorizations? What are you doing to reduce or eliminate delays?
Aetna: Yes, timeliness of decisions is part of a monthly case assessment audit. Turn-around time is monitored by annual audits and quarterly report submissions. Audits and training are used to address performance gaps.
Blue Shield of California: Blue Shield’s contracted IPA/medical groups are responsible for the timeliness of decisions about referral authorization. They must comply with our standard of two working days to get all necessary information for a non-urgent referral, one calendar day for urgent referral/treatment, and immediately for emergency care. Blue Shield-delegated oversight consultant nurses perform annual audits to ensure that standards for timeliness are met. An IPA/medical group that does not meet timeliness standards for utilization management must take corrective action.
Cigna: Cigna works closely with physicians and medical groups to expedite referrals and measures customer satisfaction with the referral process on a regular basis.
Health Net of CA: Yes, it is done through access audit reports, member satisfaction surveys, HEDIS indicators, physician profiles, medical group comparison reports and member complaints. Delays are remedied through corrective action.
Kaiser Permanente: Our doctors are not required to seek authorization for the vast majority of member’s medical services. Practically every aspect of a member’s encounter with their health care team will later go through our internal utilization review process. If there are any factors found to be slowing the processing of referrals steps are taken to remove or change those factors.
11. What are the criteria and processes for getting a referral to a specialist outside of the MG/IPA or plan?
Aetna: Out-of-plan approval is done if one or more of these criteria are met: required services are not available in the group or network; required non-emergency service is available in the plan option, but is not accessible in reasonable timeframe; or the patient is a new member and was receiving services from an out-of-plan provider (reviewed on case-by-case basis).
Blue Shield of California: Personal physicians can refer patients out of the network with the agreement of the IPA/medical group or authorization from Blue Shield. Blue Shield is involved in referrals only when an IPA/medical group wants to refer out-of-network and not be financially responsible. The IPA/medical group would then contact Blue Shield for authorization and request that Blue Shield be financially liable.
Cigna: A primary care physician can request a referral for service outside the medical group or plan when the service is not available. Customers can also contact Cigna directly to arrange a second opinion.
Health Net of CA: Health Net’s contracted participating physician groups (PPGs) are delegated to provide member care, including all specialty referrals. If the PPG does not have a particular kind of specialist with which it contracts, the PPG is still responsible to find a specialist out of its network for the member. The PPG has the financial responsibility for paying the specialist. The PPG may deny the request if it has a particular kind of specialist within its network and a member requests to see a specialist that is outside the PPG’s network. The member has the option to appeal the denial with Health Net.
Kaiser Permanente: If a member needs specialty care not available within our plan the chief of the appropriate specialty service is required to approve the referral. With a large group of our specialists practicing in more than 75 specialties and subspecialties, Kaiser Permanente is able to minimize outside referrals significantly.
UnitedHealthcare: Our contracted provider network is comprehensive and provides a qualified specialist for every covered benefit. When a service is not available within a member’s provider group, the member receives a referral to a qualified provider or specialist outside the member’s provider group, but contracted with UnitedHealthcare. Either the provider group or we will assess the medical necessity for these requests and authorize care as necessary.
Referrals to non-contracted providers rarely happen, generally only in emergencies or for specialized services not available through a contracted provider; therefore, we do not track this statistic
12. Which complementary medical disciplines are covered or will be covered?
Aetna: Chiro rider. Acupuncture is covered when administered.
Blue Shield of California: Screening for prostate cancer is covered beginning at age 40, if at increased risk. Increased risk factors for prostate cancer include African-American men and men with a family history of prostate cancer.
Cigna: When medically necessary, some customers can access acupuncture and chiropractic services as a component of short-term rehabilitation. Other benefit plans offer homeopathic and naturopathic services as riders. In addition, Cigna’s Healthy Rewards(r) program offers customers discounts on alternative/complementary medicine services and other health-related programs for acupuncture, chiropractic services, fitness club membership, hearing care/instruments, laser vision correction, massage therapy, vitamins, herbal supplements, non-prescription medications, and smoking cessation programs, among other programs. More information on the Cigna Healthy Rewards program is available to customers through their personalized online portal on mycigna.com.
Health Net of CA: Health Net offers chiropractic and acupuncture benefits as supplemental benefit riders to its traditional medical benefit plans. The riders may be purchased with the HMO and POS medical plans. They are designed to complement the benefits plans, rather than replace them. The rider is only available to groups. A variety of benefit plan designs is available, including chiropractic only, acupuncture only, and a combination of chiropractic and acupuncture.
Kaiser Permanente: American Specialty Health Plans of California, Inc. (ASH) helps members with selecting services from a range of wellness disciplines that include acupuncture, chiropractic care, exercise centers, fitness clubs, massage therapy, and naturopathy, available as optional benefits.
UnitedHealthcare: UnitedHealthcare of California does not offer alternative medicine benefits as part of its design. However, all members have access to discounts on alternative medicine benefits through an affinity program. Employer groups can purchase supplemental plans that cover acupuncture and chiropractic benefits.
13. Do you cover blood tests for prostate cancer for non-symptomatic men? If so, at what age?
Aetna: Yes, age 40+.
Blue Shield of California: Screening for prostate cancer is covered beginning at age 40, if at increased risk. Increased risk factors for prostate cancer include African-American men and men with a family history of prostate cancer.
Cigna: Yes, for men over 50 annually or more frequently when medically indicated.
Health Net of CA: Yes, beginning at age 40 as determined by the PCP.
Kaiser Permanente: Yes, prostate cancer screenings are part of our basic coverage regardless of a man’s age, personal medical history, or the medical history of his family. Early detection of prostate cancer can lead to better outcomes. Members do not need a referral to make an appointment for a prostate cancer screening.
UnitedHealthcare: Yes, these blood tests are covered benefits. The member’s primary care physician determines the necessity of this and all other blood tests.
14. Do you cover mammograms for women with no history of breast cancer?
Aetna: Yes, age 40+.
Blue Shield of California: Yes, upon referral by a nurse practitioner, certified nurse midwife, or physician, providing care to the patient and operating within the scope of practice provided under existing law for breast cancer screening or diagnostic purposes.
Cigna: Yes, for women over 40 annually or more frequently as directed by their physician.
Health Net of CA: Yes, typically, every one to two years from ages 40 to 65+, but the PCP may authorize mammograms at his or her discretion.
Kaiser Permanente: Yes, mammograms are part of our basic coverage regardless of a woman’s personal or family history of breast cancer. Members do not need a referral to make an appointment for a mammogram
UnitedHealthcare: Yes, mammograms for women with no history of breast cancer are covered in accordance with U.S. Preventive Services Task Force Guidelines
15. Do you have an open drug formulary?
Blue Shield of California: The Blue Shield Drug Formulary is a list of preferred generic and brand name drugs that have been reviewed for safety, efficacy, and bio-equivalency, and are approved by the Federal Food and Drug Administration (FDA). This formulary is developed and maintained by the Blue Shield Pharmacy and Therapeutics (P&T) Committee, which meets on a quarterly basis. The P&T Committee consists of independently licensed physicians and pharmacists in community practice and who are not employed by Blue Shield. A drug prior authorization program is available for selected drugs on the formulary as well as for non-formulary drugs to promote appropriate first-line therapy or to reserve use of certain medications with specialized uses or significant potential for misuse or overuse.
Blue Shield offers the following types of outpatient prescription drug benefit
• A closed formulary plan provides coverage for generic drugs, formulary brand-name drugs, and specialty drugs. Non-formulary drugs and most specialty drugs are covered only when prior authorization is approved.
• An incentive formulary plan provides coverage for generic drugs, formulary brand-name drugs, and specialty drugs. Non-formulary drugs are also covered for a higher co-payment. Prior authorization may be required to cover some specialty and certain non-formulary drugs. If coverage for a non-formulary drug requiring prior authorization is approved, the member is responsible for the non-formulary co-payment.
Cigna: We typically use a closed drug formulary. However, employers can choose a three-tier or two-tier pharmacy plan if specified and agreed to in the contract.
Health Net of CA: Health Net offers a 3-tier Recommended Drug List, an open formulary that includes most generics on Tier 1, recommended brands on Tier 2 and some generics and brands on Tier 3.
Kaiser Permanente: No, our formulary is maintained and regularly updated by our doctors and pharmacists working in tandem with our Drug Information Services Team. The team independently analyzes data and reports on new drugs while doctors and pharmacists research the effectiveness and safety of each. Whenever therapeutically appropriate, we include the generic medicines in our formulary.
UnitedHealthcare: No, we use several managed formularies at different tier levels, but we do not offer an open formulary.
16. If a closed formulary, what happens if a non-formulary drug is necessary?
Aetna: Not applicable.
Blue Shield of California: For selected formulary, non-formulary and specialty drugs to promote patient safety, appropriate first-line therapy, we have drug prior authorizations for medical necessity in place to promote patient safety, appropriate first-line therapy, to manage use of specialized, high cost or highly addictive or habit forming medications, and to help keep the cost of healthcare affordable.
The P&T Committee is responsible for establishing and overseeing drug prior authorization policies and procedures. Coverage criteria are developed under evidence-based medicine principles and current medical literature. Requests for prior authorization are considered for the following reasons:
• The requested drug, dose, and/or quantity are safe and medically necessary for the specified indication
• Formulary alternative(s) have failed or are inappropriate
• Treatment is stable and a change to an alternative may cause immediate harm
• Step therapy requirements have been met
• Relevant clinical information supports the use of the requested medication over formulary alternatives
Physicians may contact Blue Shield pharmacy services directly through a toll-free phone or fax number to request prior authorization. Some drugs may be limited to a maximum quantity and require prior authorization if a given drug’s limit is exceeded. The P&T Committee may also determine that a certain quantity of a given medication may need prior authorization to review for medical appropriateness.
All prior authorization requests are reviewed by pharmacists and pharmacy technicians to determine if the criteria approved by the P&T Committee for the requested drug meets the criteria for an exception. A coverage determination can be made via telephone within minutes if all required information is provided. Urgent prior authorization requests sent via fax are reviewed within three business days, while non-urgent requests are reviewed in no more than five business days. The member’s clinical information must be received by Blue Shield in order to start the review process. If the physician does not submit the required information, Blue Shield will send a follow-up request to the doctor. Delays sometimes occur if the physician does not provide the required information in a timely manner. If a non-formulary drug requiring prior authorization is approved under the closed formulary plan, the member is responsible for the applicable brand co-payment. If a non-formulary drug requiring prior authorization is approved under the incentive formulary plan, the member is responsible for the applicable non-formulary co-payment.
If a request from a physician for a drug that requires prior authorization for medical necessity is denied, a denial letter is mailed to the member. Included with the denial letter is the reason for denial, alternative covered therapy, if appropriate, and the Blue Shield Appeals and Grievance procedures. The physician also receives notification of the denial along with a list of preferred formulary alternatives.
Cigna: The customer or their physician can ask for an exception to get a non-formulary drug. Cigna’s clinical staff reviews the request.
Health Net of CA: N/A
Kaiser Permanente: It is at the medical discretion of our doctors to prescribe any FDA-approved non-formulary drug if its use is in the best medical interest of the member. In these cases, the member would pay their usual cost-sharing fee as opposed to the full price they would be charged for a non-formulary medicine.
UnitedHealthcare: Medically necessary non-formulary medications can be approved through our preauthorization exceptions process.
17. Do you have an experimental/investigative exclusion? If so, how does it work?
Aetna: Yes. For the welfare of our members, experimental or investigational procedures are excluded from our health plans. However, the exclusion would not apply with respect to services or supplies (other than drugs) received in connection with a disease, if we determine that: the disease can be expected to cause death within one year, in the absence of effective treatment; and the care or treatment is effective for that disease or shows promise of being effective for that disease as demonstrated by scientific data. In making this determination we would take into account the results of a review by a panel of independent medical professionals. They would be selected by Aetna. This panel would include professionals who treat the type of disease involved. Also, this exclusion would not apply with respect to drugs that have been granted a treatment status of an investigational new drug (IND) or Group c/treatment IND; are being studied at the Phase III level in a national clinical trial sponsored by the National Cancer Institute; or if we have determined that available scientific evidence demonstrates that the drug is effective or the drug shows promise of being effective for the disease.
Blue Shield of California: Yes. Blue Shield does not cover experimental procedures, defined as those which are not recognized in accordance with generally accepted professional medical standards as being safe and effective for use in the treatment of the illness, injury, or condition at issue.
Based on the BlueCross BlueShield Association assessment criteria for health outcomes, our drug formulary does not cover drugs that are considered experimental or investigational or that are not recognized in accordance with generally accepted medical standards.
Cigna: Cigna medical directors make decisions about an experimental/investigational request based on medical literature, expert opinion, and the facts of the specific situation. Coverage positions are developed regularly, which assess emerging technologies. They are posted on our website. Physicians can access Cigna’s online health care professional portal to request reviews of technologies for which coverage positions have not yet been developed. Cigna also uses a formal independent expert review process when appropriate.
Health Net of CA: Health Net does not cover experimental or investigational drugs, devices, procedures, or therapies. The member may request an independent medical review of Health Net’s decision from the California Department of Managed Health Care if Health Net denies or delays coverage for a requested treatment on the basis that it is experimental or investigational. The member may request the review if the following criteria are met:
• The member has a life-threatening or seriously debilitating condition
• The member’s physician certifies to Health Net that the member has a life-threatening or seriously debilitating condition for which standard therapies have not been effective or are otherwise medically inappropriate.
• There is no more beneficial therapy covered by Health Net.
• The member’s physician certifies that the proposed experimental or investigational therapy is likely to be more beneficial than available standard therapies. As an alternative, the member may submit a request for a therapy that is likely to be more beneficial than available standard therapies based on documentation presented from the medical and scientific evidence.
Kaiser Permanente: Yes, we do. However, in keeping with our commitment to health care research, we take a systematic, evidence-based approach to evaluating and implementing new technologies and new applications of existing technologies. This helps ensure members have timely access to new safe and effective treatments. Our integrated health care delivery system enables the coordination of national and regional processes and provides the operational support and infrastructure needed to quickly and effectively review the broad array of new technologies being developed. At the local level, we’re able to deploy new technologies in pilot programs at our medical centers to obtain real-world data on outcomes and effectiveness.
UnitedHealthcare: Yes, we have an experimental/investigative exclusion. Experimental and/or investigational procedures, items and treatments are not covered unless required by an external, independent review panel as described in Section Eight of the Combined Evidence of Coverage and Disclosure Form. Unless otherwise required by federal or state law, decisions as to whether a particular treatment is experimental or investigational and therefore not a covered benefit are determined by a UnitedHealthcare medical director, or his or her designee. For the purposes of the Combined Evidence of Coverage and Disclosure Form, procedures, studies, tests, drugs or equipment will be considered Experimental and/or Investigational if any of the following criteria/guidelines is met:
• It cannot lawfully be marketed without the approval of the Food and Drug Administration (FDA) and such approval has not been granted at the time of its use or proposed use.
• It is a subject of a current investigation of new drug or new device (IND) application on file with the FDA.
• It is the subject of an ongoing clinical trial (Phase I, II or the research arm of Phase III) as defined in regulations and other official publications issued by the FDA and Department of Health and Human Services (DHHS).
• It is being provided pursuant to a written protocol that describes among its objectives the determination of safety, efficacy, toxicity, maximum tolerated dose or effectiveness in comparison to conventional treatments.
• Other facilities studying substantially the same drug, device, medical treatment or procedures refer to it as experimental or as a research project, a study, an invention, a test, a trial or other words of similar effect.
• The predominant opinion among experts as expressed in published; authoritative medical literature is that usage should be confined to research settings.
• It is not Experimental or Investigational itself pursuant to the above criteria, but would not be Medically Necessary except for its use in conjunction with a drug, device or treatment that is Experimental or Investigational (such as, lab tests or imaging ordered to evaluate the effectiveness of an Experimental therapy).
The sources of information to be relied upon by UnitedHealthcare in determining whether a particular treatment is Experimental or Investigational, and therefore not a covered benefit under this plan, include but are not limited to the following:
• The Member’s medical records
• The protocol(s) pursuant to which the drug, device, treatment or procedure is to be delivered.
• Any informed consent document the Member, or his or her representative, has executed or will be asked to execute, in order to receive the drug, device, treatment or procedure.
• The published authoritative medical and scientific literature regarding the drug, device, treatment, or procedure.
• Expert medical opinion
• Opinions of other agencies or review organizations, e.g., ECRI Health Technology Assessment Information Services, HAYES New Technology Summaries or MCMC Medical Ombudsman.
• Regulations and other official actions and publications issued by agencies such as the FDA, DHHS and Agency for Health Care Policy and Research AHCPR.
• A Member with a Life Threatening or Seriously Debilitating condition may be entitled to an expedited external, independent review of UnitedHealthcare’s coverage determination regarding Experimental or Investigational therapies as described in Section Eight: Overseeing Your Health Care, Experimental or Investigational Treatment.
18. Which requested procedures are denied most frequently based on experimental investigative or not medically necessary exclusions?
Aetna: This information is not readily available.
Blue Shield of California: The following are the most frequently denied procedures due to the absence of medical necessity or because they are considered experimental/investigational:
• Bariatric surgery – morbid obesity surgery
• Reduction mammoplasty
• Varicose veins
• MRI of the breast
• PET Scan of the breasts
Cigna: This data is not available.
Health Net of CA: The most frequently denied requested procedures are those that are not FDA approved/accepted in the medical community as standard, safe and effective.
Kaiser Permanente: If a plan physician determines that a procedure or service is medically appropriate for a member and its omission would adversely affect the member’s health, then it is considered medically necessary. As a result, we do not consider a medically necessary service or procedure to be an exclusion. Additionally, we do not deny experimental or investigative procedures if they are considered medically necessary and appropriate for the member’s care. All procedures and treatments are reviewed on a case-by-case basis with the determination for care made by the doctor often in consultation with the chiefs of service for their own area of practice and other related areas of practice.
UnitedHealthcare: This information is not available. We do not track the number of most frequently denied investigational/experimental or not medically necessary procedures. We do track appeals and grievances. If a member appealed a denial, and it was due to one of the above reasons, we may be able to provide that procedure; however, it would not apply to our book of business.
19. What is the standard hospitalization for normal and a Caesarean birth?
Aetna: The physician determines it.
Blue Shield of California: The standards are two days for a normal birth and four days for a Caesarean.
Cigna: Typical hospitalization is at least 48 hours for normal vaginal delivery and at least 96 hours for a Caesarean section. But this can be modified based on the physician’s recommendations.
Health Net of CA: Standard hospitalization for normal birth is two days and four days for Caesarean birth.
UnitedHealthcare: The average length of stay is two days for a normal birth and four days for a Caesarean.
20. How many hospital days are utilized in a year for every thousand HMO members?
Blue Shield of California: Our most recently reported utilization rate for inpatient days per 1,000 was 157.79.
Cigna: Data not available
Health Net of CA: 2012: 200.9 days per 1,000 HMO members.
UnitedHealthcare: Our total in-patient utilization in 2009 was 160.92 per 1,000 members.
21. What are your loss ratios, administration/medical?
• Overall loss ratio (Health Care Costs and Current & Future Benefits/Total Premiums) o 2011
• Administrative loss ratio (Total operating expense ratio – GAAP measure) 2011″
• Medical loss ratio (MBR) 2011
Blue Shield of California: For IFP plans regulated by the Department of Insurance (DOI), we spent 78.2% on medical and 21.8% on administrative, and we met or exceeded medical loss ratios for our IFP, small group, and large group plans regulated by the Department of Managed Healthcare (DMHC).
Cigna: This information is publicly available through reports we submit to federal and state regulators.”Health Net of CA: In 2012, the medical care ratio was 87.7% and the administrative loss ratio was 10.3%.
UnitedHealthcare: As of December 31, 2010, our commercial medical loss ratio for UnitedHealthcare of California is 85.3%. The administrative ratio is 7%.
Clearing Disability’s Hurdles
Doing Disability for Docs High Wage Hiccup Cures Benefit Options Present New Opportunities
Disability benefits provide an essential level of financial security to employees in the post health reform world. On these pages, we examine the range of possibilities for high-wage earners who have been left short by disability coverage that does not meet their needs.
Guaranteed Issue High-Limit Disability Insurance
by Ryan Petersen
The popularity of voluntary benefits and the concern over financial security are driving the market for voluntary guaranteed issue disability (GLTD) insurance. In a challenging economy, workers want more control over the spending of their hard-earned participation dollars. Many have also witnessed the tragic consequences of financial insecurity. Herein lies an opportunity for employers to bolster morale, attract talent, and help employees. It is also an opportunity for insurance advisors to expand their business.
Most producers recognize the potential to place a traditional group disability plan, but many are unaware of the opportunity to place supplemental coverage with the same group. Doing some research on a prospect to see if there is the possibility of placing a supplemental multi-life disability plan can lead to a big pay day. The Internet is a handy tool for accomplishing this task.
Say you get a warm lead on a physician who is seeking disability insurance. You find out that this doctor is a partner of a firm with five other doctors. Now you have the chance to approach the firm with a guaranteed issue disability insurance plan that offers premium discounts and no medical underwriting. You could receive six new clients instead of one more commission.
Even if a firm already has group LTD, many employees are probably interested in getting more comprehensive disability coverage. For example, high-income earners will need supplemental disability coverage. Ninety-percent of employees value their ability to earn an income above all other financial resources, according to a 2010 study by the Council for Disability. Seventy-eight percent of wage earners say they would be devastated by a disability, yet only 10% purchased insurance to protect them from the situation, according to a 2009 study by Northwestern Mutual.
Traditional GLTD plans have the following limitations:
• The policies are not typically portable and employees are not in control of the policy.
• The employer or carrier can cancel coverage at any time. Benefit amounts are calculated without considering many types of income, such as bonuses, commissions, and stock options.
• Benefits of employer paid plans are taxable.
• Benefit and participation limits are commonly modest and do not protect employees’ incomes sufficiently.
• Benefits typically coordinate with federal or state disability benefits, and often with worker’s compensation benefits, which are further reductions in the anticipated income replacement for the insured.
GLTD is certainly a fine thing for employees to have, but it is easy to see how a non-traditional high-limit guaranteed issue disability plan would be an incentive for employees.
When the need for money is at its highest because of escalating medical bills and diminishing income, it is sad to learn that what was thought to be an adequate income replacement plan is actually something much, much less. Advisors who recognize these problems have advised clients to seek individual disability insurance coverage to supplement their group LTD plan. But, the following statistics reveal how the limits offered by traditional insurance carriers often leave a person underinsured:
• Traditional disability plans issued on a guaranteed basis to an employment group are likely to have a $5,000 to $10,000 maximum benefit.
• The maximum issue limit for most traditional, fully underwritten, individual disability insurance plans is $15,000 to $20,000 per month and is sometimes less.
The need for a third tier of income protection is clear. High-limit guaranteed standard issue (GSI) disability insurance plans supplement GLTD plans by layering coverage in order to adequately protect a worker’s income. GLTD plans may cover 60% to 66% of income, but that’s up to a certain cap of $5,000, $10,000, or perhaps $20,000 per month. Anyone who earns more than that on a monthly (after tax) basis would be underinsured.
No less than 65% of income replacement coverage is considered adequate by professional standards. Some traditional carriers offer supplemental, individual coverage. But, until 65% of an employee’s income is insured, further sources of insurance are needed. It is important to realize that, if you only place base GLTD coverage without fully explaining the potential pitfalls, you may be doing a great disservice to your client while missing a significant sales opportunity.
When traditional carriers will not offer any coverage, these plans can be used as primary coverage. Unusual income reporting, high net-worth, hazardous employments, sub-standard risks and unique associations are often deal breakers for traditional carriers, but the non-traditional disability insurance market takes them in stride. Benefits can reach as high as $250,000 per month, covering salary and non-salary income to fully insure a wage earner. The essential idea to remember is that the usual roadblocks that traditional plans run into are generally not issues with non-traditional high-limit GSI.
Portability is a concern with GLTD. Conversion options are sometimes included, but the benefit is likely to be sizably decreased and the premium will be increased to the level of being individually rated. It’s important for a worker to be able take their disability policy along with them when they leave an employer. In today’s business world, it’s rare for workers to spend their entire careers with one company.
When it comes to income protection, one disability insurance product can’t do it all. So, when you keep all of the income protection tools in your toolbox you will be able to serve your client better.
Ryan Petersen is a team member in the marketing department at Petersen International Underwriters. The firm is a Lloyd’s Coverholder of 30 years that specializes in High-Limit Disability, Life, International Medical and Contingency Insurance lines. Ryan may be contacted at 800-345-8816 or firstname.lastname@example.org. More information can be obtained at www.piu.org.
New Opportunities in Meeting Physician Disability Needs
by Molly Farrell and Shawn Evans
The world of physicians will continue to change dramatically in the next few years, as will the world of brokers, agents, and insurance companies that serve their needs. Disability coverage is one of the key needs that physicians face. Physicians are aging rapidly — nationally and especially in California. Nearly half of the state’s MDs will be 65 by 2020. In addition, many physicians are working longer because they want to or because they need to in order to build their financial portfolio.
Physicians are risk takers by nature. Some engage in high-risk sports or hobbies. In addition, many physicians are experiencing higher levels of anxiety and stress due to the turmoil in the industry.
All of these influences lead to higher levels of disability than what the average white-collar worker experiences. Brokers have an opportunity to provide expanded services and consulting to meet the needs of a demanding, yet engaged, clientele.
California’s Physician Marketplace
There are about 95,000 working physicians in the state; about one-half are primary care physicians and the other half are specialists. While the majority works for larger medical groups or health systems, many are in solo practice or in small groups. Disability insurance is crucial for this latter category. The office still has to function when the physician experiences an injury or illness. There is payroll to pay and operating expenses to cover. Disability coverage must provide income to the injured physician as well as income to cover the operations, overhead, and personnel costs of the practice.
Many providers purchased disability coverage during their residency. But their income has increased dramatically since that time, especially for those who became specialists. Disability coverage that was fine 15 years ago may not cover their needs today. But physicians don’t often take the time to revisit their disability needs.
So how can brokers help their physician clients and build new business opportunities?
Understand Risk Factors
Over the past 10 years, disability claims for physicians have increased. That trend is expected to continue due to age and other risk factors. Physicians are known for their weekend warrior tendencies. They like to climb mountains, fly airplanes, and engage in other activities that could lead to permanent or partial injuries. As noted, the average age of physicians is also rising.
These risk factors need to be considered, but they shouldn’t preclude coverage. For example, traditional disability programs stop at age 65, but some insurers now have disability programs that cover providers up to age 70 and beyond.
Don’t Cut Costs By Reducing Insurance Coverage
During times of economic uncertainty, it’s tempting to reduce costs wherever possible. And insurance is often a target. But it’s important to keep in mind that physicians are the key revenue producers for the practice or group. When a physician is injured, it affects profitability, productivity, and more. In fact, disability insurance is more important than life insurance when it comes to practice protection. Not having such coverage could prove costly for the group. For example, malpractice insurance still has to be paid while a physician is out on disability. So revenue is going out, but corresponding revenue is not coming in. One option is to purchase business-interruption insurance or other riders to help supplement disability coverage. There are also coverage options that pay malpractice premiums while a physician is out on disability.
Examine new and existing disability contract language carefully. It seems simple enough, but one of the biggest problems with disability insurance is a lack of a clear definition of what constitutes a disability and when the insurance coverage would kick in. This is important for a number of reasons. There are significant differences in job duties and responsibilities among specialists and sub-specialists, such as a urology surgeon and a kidney transplant surgeon. The kidney transplant surgeon may suffer a hand injury and become unable to perform surgeries. But the insurance policy may say that the doctor is still able to practice family or internal medicine, meaning no disability coverage would be forthcoming, which would hurt the physician and the group.
Many disability policies define “occupation” merely as “physician.” But anyone in the industry knows that there are vast areas of differentiation within the profession. Brokers can play an important role in reviewing existing coverage language and providing counsel to their clients as to where and how it should be clarified or revised.
Make sure that coverage includes partial disability. According to industry data, about three-fourths of claims are for partial disability. For example, a surgeon may injure herself while participating in an extreme sport. But, she may still be able to provide valuable medical services while injured, such as primary care or internal medicine services. However, many policies don’t fully cover physicians who want to come back and do something, even if it is a subset of their previous duties. Highly skilled physicians are key revenue producers. Even being partially disabled affects the practice. Look for policies that clearly bridge the gap between pre- and post-disability income for the physician and the practice.
Look at how the carrier defines income. One problem many physicians face after filing a disability claim is that their carrier uses their W2 to define income. But most physicians are paid through incentives and bonuses, which can represent up to 80% of their reimbursement. Clearly, defining income on the narrow parameters of a W2 is not fair to the disabled MD and will not adequately cover their needs.
Don’t be tempted by the lowest cost vendor. Over the past few years, there have been a number of -mergers, acquisitions and business failures among some of the top disability and medical malpractice carriers. Remaining carriers have been seeking new business aggressively by offering highly discounted rates. Brokers need to look carefully at financial strength and stability to ensure that the carrier will be viable and able to handle claims in the long run. No group wants to file a disability claim only to find that their low-cost, low-rated carrier is out of business. That’s not to say don’t shop for good deals and demand the best rates; just look carefully at ratings, experience, and track records.
Remember that physicians may have individual and group disability coverages at very attractive rates. Physicians may have individual policies as well as group coverage through their employer. As more and more physicians join larger groups, brokers need to recognize this reality. The group may allow for group coverage as well as individual disability coverage. With group coverage, there is typically no reduction for individual disability benefits. So a physician who merges with a larger group and already has individual disability coverage can often increase their coverage significantly at a relatively low cost (commonly up to twice their previous limits). This comes as a surprise to many physicians and administrators who are only familiar with individual coverage.
Some groups use the group policy to recruit, retain, and reward top physicians. Another advantage of group coverage is that it’s guarantee-issue. As long as the group meets certain participation levels, most top insurers offer a base level of coverage to all employees who are insured under the policy. Medical underwriting only comes into play for those who want higher amounts of coverage.
As physicians merge or sell practices, there is a greater chance for inequities to arise in disability coverage among physicians in the group. Experienced physicians and specialists who are merging with a new group may lose disability protections. Or a conflict could arise among physicians if some have higher or lower coverage. This is another area where brokers can provide counsel and service. Brokers can provide important guidance by reviewing policies and ensuring that contract language is written in a way that provides complete protection.
Needs Will Continue
The coming months and years will continue to bring turmoil and uncertainty to the physician marketplace. What won’t change is that highly skilled and valued professionals will need disability coverage that protects them, their practices, and their colleagues. Brokers must continue to play a vital role in providing the consultative services and guidance that physicians need when it comes to disability.
Molly Farrell is vice president of Operations, MGIS Underwriting Managers Inc. Shawn Evans is CEO, DC Risk Solutions.
Benefit Options Present New Opportunities for Brokers
by Eric McDermott
Many are wondering what will become of the benefit world amid the uncertainty of health care reform. Employers feel the threat of penalties for non-compliance while benefit brokers feel the threat of commission-cutting pressures in a mature, ever more regulated market.
While many benefit brokers are struggling to keep their margins in the current climate, they may be overlooking ways to grow their margins. Employee benefit coordinators and human resource teams are finding it harder and harder to bring good news to employees, managers, and leadership.
Changing the broker-of-record letter can be the end of a revenue line. So now is the time to secure your position as the broker who brings something new to the table that’s easy for the company to implement, is valuable for employees, and increases good will with the leadership.
Bring Them New Benefits
One of the benefit areas where companies are generally weaker is in executive benefits. Offer opportunities that earn their trust with benefits that protect them as fully as their employees. While it isn’t always noticed, the irony is that many standard benefit programs take care of the needs of employees and managers while the owners and executives are often unable to protect themselves fully with standard group benefits.
Offer the business owners and executive benefits that cover them as fully as their employees are covered. Below are some examples to consider
Executive & Employee Supplemental Disability
When it comes to protecting their income, owners and executives often make more than base group disabilities will cover; offer supplemental coverage that comes alongside the existing group coverage and offers your business clients an opportunity for higher coverage and portability.
Executive & Employee Supplemental Life
From higher incomes to business planning strategies, business owners and executives have protection concerns above and beyond their employees. Typical benefits don’t cover the executives and owners fully, leaving the most important, key people exposed to unnecessary harm and risk. Offer the executives and management coverage that meets their personal and business needs while also expanding opportunities for their employees.
Financial Wellness Online Platform
A plan of action is not the same as action. In addition to a financial wellness education, offer an online, secure financial platform that manages personal and business finance with the power of enterprise-level tools that are easy enough for everyone to use. Each employee gets access to their personal website for aggregating all their information in one dashboard view and sees their financial world from the single transaction level, up to the big-picture assets for their future.
Executive Strategies for Business Owners and Executives
Another way to help your business clients is to bring them optimization strategies. What’s that? At the end of the day, your business owner clients are people who also need to care for their personal wellness. When it comes to financial advantages, unlike employees, business owners have additional instruments and opportunities to leverage their dollars in the corporation to multi-task and produce multiple outcomes with the same dollar. Here are some examples:
• Executive Deferred Comp
• Entity Planning and Optimization
• Qualified and Non-Qualified Plans
• Tax Offset Strategies
• Continuity and Succession Planning
Don’t know these strategies? No problem. Work with an organization that does, one that specializes in -advanced strategies for business owners. You make the introduction, earn the trust that protects your core business with the owners while sharing in the outcomes of new business opportunities.
One of the first places you can start is by helping employees, managers, and leadership fully understand all the benefits they have and the role those benefits play in caring for the financial future and well being. You think they already do? Think you’re already providing all the help they need in that department?
Ask some simple questions and see what the answers are:
• Have you leveraged all the -benefits offered by the company?
• If there were ways to optimize your benefits to protect and support you and your family better, would you like to know about them?
• Are you saving enough to cover all it will cost you to be retired for 25 to 30 years?
• Are you clear about how much retirement will cost you?
• Do you find it hard to imagine where you’d find another $1 to put towards your financial future? Would you like to know about ways to accomplish this?
How can you help them answer these questions? Simply offering benefits is not the same thing as leveraging benefits to their fullest potential. Terrific, they offer benefits. Now help them get the full power out of them. Not just the employees, but also the employers in producing a culture that cares and supports their people and attracts and retains great talent. Build and collaborate with an organization that offers financial wellness programs to help your business clients achieve this. Everyone wins.
Expand What You Know, or Expand Who You Know.
Don’t know how to provide these benefits? It’s O.K. Too many brokers limit themselves and their success by only offering what they already know. It’s impractical to know everything. Aim to bring trustworthy offers like this to your business clients and watch as you build an identity that protects your position with your clients. Trustworthy means working with organizations that have produced these outcomes recurrently and successfully for years across numerous clients. Look for proof of their success as an indication of how they can help you achieve success together.
Competition and pricing pressures are fierce. Offer these added opportunities before your competitor does and displaces you. All the while, earn more income and grow your practice in these lines of business that not only offer a new stream of higher-margin, immediate revenue to your practice, but also offer solid renewal income streams that increase the likelihood of steady, protected growth for you and your clients.
Eric McDermott leads the brokerage operations for CalBrokerage / Pacific Advisors, a Member of the Guardian Network, which serves more than 2,500 brokers, 10 locations and more than 40,000 clients throughout California. As Executive Vice President of Brokerage, he leads the marketing, distribution, production and servicing teams that serve brokers throughout the state with quality Guardian financial and insurance products. Eric is responsible for the strategic direction and broker partner relations for CalBrokerage / Pacific Advisors. For more information, email email@example.com or call 800-775-1970 ext. 1.
Healthcare ReformThe Marketplace Eligibility Matrix
by Garrett Viggers
October 2013 has arrived with a new exchange eligibility matrix for health insurance coverage with the Covered California exchange – also known as a “marketplace.” So the market shift begins with an option for guarantee-issue, subsidized individual coverage under the health exchange. The expertise of insurance agents will be the backbone of a successful open enrollment. We have a new opportunity to provide service and value in the individual and group market.
Eligibility and plan options, under the exchange, are based on the household income percentage of the federal-poverty level (a calculation of modified adjusted gross income [MAGI] and household family size). The eligibility matrix also bases plan options on age as well as eligibility for current employer-sponsored affordable coverage. Let’s take a look at the new exchange eligibility matrix.
First, the federal-poverty level is the main indicator for eligibility. Covered California has a simplified three-pathway approach for health insurance based on federal-poverty level ranges:
• Path one is the expansion of Medi-Cal (Medicaid) for adults up to 138% of the federal-poverty level.
• Path two is premium assistance for households with a federal-poverty level of 139% to 400%. Path two splits between cost-sharing reduction enhanced Silver plans, and non-cost-sharing reduction options. Cost-sharing reduction options are available for households with a federal-poverty level of 139% to 250%. Premium assistance is only available for households from 251% to 400% of the federal-poverty level.
• Path three is for households with incomes over 400% of the federal-poverty level. These consumers don’t qualify for premium assistance, but they can still shop for coverage in the exchange and plans offered outside the exchange.
So how does the MAGI calculation on your tax return affect rates and eligibility? This is a little tricky because MAGI is somewhat difficult to calculate at first glance, and it’s also a projection for 2014.
MAGI is equal to the total income you report that’s subject to income tax, such as earnings from your job, self-employment, alimony income and interest from a bank account – minus specific deductions, or adjustments that you’re eligible to take.
Adjustments to income are deductions that directly reduce your total income to arrive at your AGI. According to TurboTax.com, the types of adjustments that you can deduct are subject to change each year, but a number of them consistently show up on tax returns year after year. Some of these adjustments include half of the self-employment taxes you pay, alimony payments made to a former spouse, contributions to certain retirement accounts (such as a traditional IRA) and the deduction for tuition and fees.
It’s important to note that the MAGI calculation is a main part of the application process that Covered California will be using to determine eligibility and rates after premium assistance.
Silver plan rates, after premium assistance, are based on a percentage of your income, ranging from 2% up to 9.5%. In most cases, eligible applicants will apply the full advance premium tax credit to maximize monthly premium savings. The premium tax credit is calculated from the MAGI. If income goes up, the advance premium tax credit amount goes down, and vice versa. What if the applicant doesn’t communicate income changes until filing taxes after 2014? The consumer may get an extra refund if income was over-projected. If income was under-projected, there may be a capped repayment amount.
The federal-poverty level calculation also includes the household family size combined with MAGI. To be eligible for premium assistance, singles would have an income from $16,000 to $45,000; and a family of four would have an income from $32,000 to $94,000.
Family size is where the federal-poverty level threshold comes in to play. The income range is higher with a bigger household family size. For example, a household of eight making $158,000 a year would qualify for premium assistance. Adults who earn over 138% of the federal-poverty level are eligible for premium assistance, but children have a higher federal-poverty level threshold of 250%.
So what about a family with an income of 180% of the federal-poverty level? They would have split eligibility for adults on an enhanced Silver cost-reduction sharing option with premium assistance. Children under 18 would be eligible for Medi-Cal. This may not be an issue for the current uninsured. However, you should be aware of the family size federal-poverty level threshold for clients who are converting from an individual policy and small employers that are sending employees to the individual market.
There will be more clarity on the 138% Medi-Cal threshold and the 250% split family threshold. We will get more understanding how the under-projection or over-projection of income will change eligible plan options for a single adult applicant, and/or possibly the children.
The applicant’s age is also used to calculate rates, plan options, and eligibility. Age affects eligibility for those under 18 with the split family threshold of 250% of the federal-poverty level. There are also plan options based on age. The exchange will offer a catastrophic plan for those under 30. For those 65 and older, having Medicare would be considered “other coverage” and make them ineligible for premium assistance.
The last piece in the exchange eligibility matrix includes calculations for those who are covered on an employer-sponsored group plan. This piece of the puzzle has begun to be communicated to employees across the country with the Exchange Notification mandate. Under the ACA, employers must notify employees, by October 1, about the existence of the exchange and their eligibility for subsidies. The exchange will begin enrolling residents on October 1 for insurance coverage starting on January 1, 2014.
The notice states that, an employee and their dependents are not eligible for premium assistance in the exchange if the employer is offering them an affordable minimum essential value plan (60% actuarial value) that does not cost more than 9.5% of income. This may be a catch-22 issue for families that can’t afford dependent premiums on a group plan.
In conclusion, this matrix is becoming a bit clearer as the beginning of open enrollment is underway. Certified insurance agents will help bring more clarity. We can educate, sell, and service the new plans being offered in the exchange, and we are aware of the current culture of health plans offered in the individual and group market. Holistically speaking, we have a new opportunity to navigate the exchange eligibility matrix in order to find affordable plan options for our clients and new solutions to integrate in to the full market.
Garrett Viggers has spent 11 years in the insurance industry as a broker, consultant and CDH and ACA expert. He helped launch CDH company, Veritas Health Systems in 2002, and Inovius in 2006, a SaaS company taking static insurance cost and benefits data and making it interactive. He recently launched the cross-platform Affordable Health App (Silver Plan advance premium tax credit Quoting Tool) for brokers across the country. He is the president of Windfall App Technologies, a spin-off company from Inovius focused on app solutions for the Health Insurance Marketplace Exchange. For more information, visit www.windfallapps.com or email firstname.lastname@example.org.
Understanding the Full Value of Life Insurance
by David Hayward CLU, ChFC, FLMI
Several things may come to mind when consumers think of life insurance. Some understand the value of life insurance, and they seek adequate amounts of appropriately planned policies. They appreciate the leverage they can achieve between their assets and the ultimate death benefit. They understand the value of the living benefits in many of the policies currently being sold. They enjoy the tax-deferred nature of the cash value accumulation feature of their permanent life policy. However, these consumers are not the norm.
The more common view is that life insurance is a necessary evil. Many consumers understand that it is important to protect their family against a financial hardship due to an early death, but they often see life insurance as too expensive and not needed at the current time. They assume that they can always purchase it in the future. No healthy person thinks they will die tomorrow. Too many consumers with this viewpoint miss out on one of the best asset classes to help them achieve many of their financial goals.
This article explores the-different types of policies and their associates benefits.
A consumer can choose from two categories of life insurance: term and permanent. Term policies have a level or annually increasing premium structure. They generally last for fixed periods. Permanent insurance, which includes whole life, universal life and variable life, offers death benefit protection along with the potential for cash value accumulation. Depending on the type of insurance, premiums are paid under a level or flexible premium structure. Whole life can be participating or non-participating.
Universal life comes in several varieties: no-lapse, general account, indexed and variable. May of the hundreds of different life insurance companies -offer multiple policy styles in the same product classification. With this many choices, it is easy to understand why the typical consumer is confused about life insurance and is not naturally compelled to take action to get a policy.
Term insurance is different than other types of policies in that there is no cash value in the policy. Premiums are only calculated to cover the policy’s mortality costs and operating expenses. For a given year, term insurance generally comes in with the lowest premium for a new policy, but there are few other benefits other than the death benefit. If a person chooses to not pay their premium or forgets to pay it, the policy lapses and they lose their death benefit protection. If their health status changes, it may be difficult for them to reinstate the old policy or start over with a new policy. Even if they can start over, the premiums may be at a higher cost. The cost of a term policy goes up each year as a person ages or increases dramatically after an initial levelized period ends. The main benefit of term insurance is its lower price, but the premiums paid are generally not recoverable if death does not occur while the policy remains in force.
With some permanent policies, a consumer can pay a premium amount greater than the calculated levelized lifetime premium. They would do this to get full death benefit protection for life with a shortened premium paying period and increase their cash value potential. They can access the cash value through policy loans or withdrawals if the need arises. Note that the government imposes limitations on how much premium one can pay into a policy and still keep the classification of a life insurance policy. The cash value is not reportable for income tax purposes, but policy loans and withdrawals reduce the policy’s cash value and death benefit and may result in a taxable event. Surrender charges may reduce the policy’s cash value in the early years. Depleting all of the cash value prior to death may cause the policy to lapse and may create a taxable event.
Whole life policies offer a guaranteed fixed premium, which is calculated by the insurance company. If the premiums are paid as scheduled, the death benefit and cash value are guaranteed and will never be diminished due to a poor investment structure or changes to interest rates. A participating policy offers a dividend if the insurance company has favorable experience resulting from excess earnings and favorable mortality and expense savings. Dividends are not guaranteed. A non-participating policy may offer a lower premium and does not receive any type of dividend.
Universal life policies have a flexible premium structure with an adjustable death benefit. Depending on the type of UL product, the cash value accumulates based on a fixed, indexed, or variable rate structure. The policy must have enough cash value to cover the monthly cost of deductions in order to be active and offer the death benefit protection,
No-lapse UL policies blend some features of term insurance and whole life. While term insurance has an increasing premium, no-lapse UL premiums have a planned level premium. It’s calculated by the issuing company assuming guaranteed charges like a whole life policy. However, the cash value reserve is very low or may not exist at all. The level premium is often calculated based on the number of years the client wants to pay the premium and how long they want the death benefit to last, but is not required like whole life premiums. If a client misses or is late with a payment, the guaranteed values are diminished, which could cause a policy to lapse before maturity.
All other types of universal life policies shift the investment risk of the reserve from the issuing company to the client. Rather than a guaranteed premium and guaranteed cash value, the premium and cash value is based on a market interest rate. The consumer chooses the premium, often with -assistance from the agent. The current market interest rate is typically known, but future changes to the rate will affect the policy positively or negatively.
In a general account UL policy, the insurance company invests the reserves in a portfolio of bonds, mortgages, and other conservative asset classes. The interest rate that’s credited to the policyholders reserve account is based on the return on the block of investments. The current rate is often guaranteed for one year while subsequent rates depend on the investment experience of the insurance company’s investment team. The policy may be underfunded and may not last the lifetime of the insured if the initial planned rate is higher than the future market rate. On the other hand, the cash value may grow and be greater than planned if the future market rate is greater than the planned rate. This could allow the client to stop premiums early or have their policy grow in value. Adjustments may be made to the premiums in the future as needed to bring the policy back towards the initial expectations.
In an index UL, the potential cash value grows based on the growth of a specified external index. Part of the cash value is set aside to cover the current year’s charges. The remaining value is guaranteed to remain level over the next year, but may earn interest. The insurance company uses part of the reserve to purchase options on the underlying index, which determines the interest rate that will be earned on the cash value.
No interest is earned and the cash value remains unchanged if the change in the index values is negative over the stated holding period.
If the index increases in value, the annual percentage change of the index determines the amount of interest that will be credited to the cash value. The policy’s interest rate will be the percentage change of the index multiplied by a participation rate. The interest rate may be limited to a maximum capped value.
Variable Life insurance policies offer death benefit protection and the potential to build cash value, which is tied to the market performance of the sub-accounts. The cash value and death benefit may fluctuate over time depending on the performance of the underlying sub-account. Variable life contract holders are subject to investment risks, including the possible loss of principal they’ve invested. Investment return and principal value will fluctuate with market conditions so that shares, when redeemed, may be worth more or less than their original cost. Sub accounts are comprised of a group of stocks, bonds or other assets. Variable products are sold through a registered representative of a broker-dealer and may not be suitable for all clients.
Regardless of the type of product chosen, life insurance products have several characteristics that may benefit clients in the future. Cash value accumulates tax deferred. The cash value can be accessed through policy loans and withdrawals. However, loans and withdrawals reduce the policy’s cash value and death benefit and may result is a taxable event. Surrender charges may reduce the policy’s cash value in early years.
At retirement time, many clients have paid off their mortgages; their children have finished school, and they may have experienced other financial changes. Since their death benefit needs may not be as large as it was earlier, some clients choose to reduce the amount of their death benefit and deplete the cash value over their remaining lifetime to supplement their retirement income. Some companies even offer optional riders that can guarantee a level amount of income over the insured’s lifetime. Some consumers choose to take one larger disbursement – leaving enough cash value to cover the anticipated reduced future death benefit costs to their life expectancy. Others keep the full death benefit intact to create a legacy for their heirs. There are lots of options available for the future use of a person’s policy.
Another valuable feature with many types of life policies is having living benefits. A client who suffers a terminal, chronic, or critical illness may be able to accelerate a portion of their death benefit at a discounted value to be used immediately. If one of these unfortunate events occurs, high medical costs and other related costs can burden one’s finances. The policy value received is often the present value of the death benefit accelerated based on the client’s future life expectancy. Since this is considered to be an advance of the death benefit, it is often received income-tax free. Note that the rules may vary depending on the size of the acceleration, the way the money is used and the state the client resides in. Not all companies and products offer living benefits.
In the end, when death occurs, the death benefit payable to the beneficiaries is generally income tax free and can be used for any purpose the beneficiary chooses. It can also be paid into a trust so the insured can structure how the proceeds are to be used and disbursed.
People purchase life insurance for a variety of reasons. Determining the amount of coverage is often the hardest issue. The following are some common desires when it comes to life insurance:
• Have the death benefit pay off the mortgage in the event of an early death.
• Complete the funding of the retirement account for the surviving spouse.
• Cover children’s education.
• Provide an inheritance that does not rely on saving other assets.
• Provide funds to care for a special needs child or pay estate taxes, final expenses, debts, and other items at the time of death.
There are also charitable and many business applications for the death benefit.
Most consumers don’t object to owning life insurance, they just don’t understand all the benefits it offers. The agent’s role is to help clients understand this value and help them structure an appropriate mix of products to meet their needs. Often, more than one policy is needed. A combination of different types may create the desired benefit. Term policies are less expensive and can cover short term needs while permanent policies with a cash-value component can help with long term needs. Since a client’s needs may change, it is always a good idea to have annual reviews and make adjustments as needed.
David Hayward CLU, ChFC, FLMI, is an advanced sales consultant for National Life Group. He specializes in the family protection, retirement planning and wealth transfer markets. Hayward received his BSBA from Drake University with a major in insurance. Prior to joining National Life Group in 2008, he had worked with American General Life and Accident Insurance Company’s Mature Market division and the ING Group’s Educational Services and Advanced Marketing departments.
He is a Registered Representative of Equity Services, Inc., Member FINRA/SIPC, One National Life Drive, Montpelier, VT 05604, Tel: 800-344-7437, a Registered Broker/Dealer affiliate of National Life Insurance Company (NLIC), Montpelier, VT. National Life Group is a trade name of NLIC and its affiliates. Each company of the National Life Group is solely responsible for its own financial condition and contractual obligations. Hayward can be reached at National Life Group. Telephone: 802-229-3801. Email: email@example.com.
Whole Life Insurance Offers Critical Coverage Beyond the Working Years
by Debbie Cecil
Much of today’s emphasis on selling life insurance focuses on making sure people have enough coverage if a breadwinner dies. Employers typically provide employees group term life coverage with a standard benefit of up to $50,000, above which both employer and employee are subject to federal taxes. While this employer-funded coverage provides a solid base of protection, it may leave dependents vulnerable beyond immediate needs. That is why many employees purchase supplemental group or individual term life coverage, generallThe standard formula for coverage – three to five times annual income – is fine during working years. But what about after retirement when income is reduced and retirees live off their savings, investments and Social Security? This is the time life policies are most likely to pay benefits. And this is where whole life insurance can serve a growing need. Whole life – also considered permanent life – offers flexible financial protection for a fixed premium over the life of the policy. While group term insurance can provide good catastrophic coverage to replace lost income during working years, a modest whole life policy can provide a true post-retirement death benefit to pay final expenses for a predictable level premium. That can be a real value, particularly for people with incomes below $75,000 who have accumulated little in savings and expect to rely mostly on Social Security after retirement.
Middle Market Retirement Issues
When people consider life insurance, it’s often as a means to replace lost income when a breadwinner dies. Americans certainly have reason to think that way. In this here-and-now culture, it often takes some prodding to get people to think about their financial future. According to a recent LIMRA study, 34% of households would have trouble meeting everyday living expenses if the primary wage earner died. Another 29% would have trouble keeping up with expenses after several months.
What’s worse is that today’s middle market – households earning between $35,000 and $100,000 per year – represents the largest segment of uninsured households, with half (36 million) admitting they need more life insurance and nearly 30% saying they don’t have life insurance at all. So you can see the challenge of getting Americans to focus on their financial future with all the challenges they face in the present.
But future focus is essential if families are to be properly prepared for post-retirement living. Employer-paid and supplemental term life policies commonly expire when an employee retires, but the need for life insurance coverage doesn’t end there. A recent study reports nearly half of Americans who die without life insurance have less than $10,000 in assets, which is often not enough to pay final expenses. What’s more, 49% of working Americans aren’t saving for retirement at all, reflecting the financial strains of a slowly recovering economy. Considering the unsustainability of Social Security and Medicare at current benefit levels, financial planners are warning younger Americans that they will need to rely more on savings and investments than will current retirees to maintain their standard of living when they reach retirement. With current life expectations, future retirees will need to start financially preparing now to live 20 years or more beyond retirement.
Purchasing Term-Perm Combo In The Workplace
Americans have gotten comfortable purchasing life insurance in the workplace. Nearly 20% of Americans who shopped for life insurance purchased it through work, and 75% of workplace shoppers bought life insurance. Workplace shoppers tend to be younger than those who shop through other channels; they have higher average incomes than other shoppers; and they tend to have more investable assets. These tendencies are well suited to the value whole life insurance provides.
Offering whole life as a voluntary workplace benefit in combination with term life can help, employers upgrade their benefit package at no additional cost while providing employees with lifelong, flexible financial protection. Including whole life in a complementary life benefits plan also reduces the pressure to provide employees with expensive post-retirement life insurance plans. Unlike ERISA group plans, there is no government reporting or involvement. And many whole life plans include valuable options, like eligibility for spouses, children and grandchildren, and riders for long term care, -accidental death and living benefits.
For employees, whole life should be positioned as an important part of their financial portfolio. Whole life premiums are fixed at the time of purchase and are guaranteed for life, with policies building a predictable cash value. This predictability is important for families in an uncertain economy, relieving policyholders from worrying about the fluctuating stock market. Since the policy is employee owned, employees can keep it if they get sick, change jobs, or change employers.
Most workplace offerings are underwritten on a guaranteed issue basis, allowing employees to buy a base amount of coverage and increase their coverage in later years. For example, by purchasing the minimum $10,000 benefit for only a few dollars a month (depending on the age band), employees can increase their coverage all the way up to the guaranteed issue maximum without evidence of insurability.
Many carriers offer a long-term care rider in which a policyholder may use the accumulated value they’ve accrued in the policy towards an LTC policy. Be sure to check your state for availability.
A living benefit rider is another common feature of many plans, allowing the policyholder to request an advance of up to the full benefit amount if diagnosed with a terminal illness.
Some carriers offer an option to pay up the policy at age 65 or 70, adjusting the premium accordingly. This allows retirees not to worry about the additional expense of monthly premiums while providing the full coverage the policy offers.
A typical term-perm life combo plan might look like this:
Whole Life insurance can help provide financial resources for families when they need them most and the flexibility to offer resources while policyholders are alive. For mid-market households, it is a great way to provide a base of protection for a family now while offering a benefit that lasts through retirement. Along the way, policyholders can build cash value at a guaranteed, predictable rate. For younger employees in particular, whole life is a low-risk way to start planning for their financial future.
Enrolling Hispanic Employees
Whole life insurance can be a good option for a large portion of the Hispanic market and for employers with significant Hispanic populations.
Hispanics form a significant and growing subset of the middle market, tending to be more concerned about their family’s financial wellbeing and perceiving life insurance as an important financial need. Hispanic families tend to be larger; it is not unusual to find three generations living under one roof. A greater proportion of Hispanics are concerned about burdening their dependents and others with their funeral expenses if they die prematurely. While tending to not trust banks and financial advisors while saving less, they believe in the value of life insurance as much as the general population. Like other Americans, Hispanics are less likely to own a policy because they perceive life insurance as too expensive.
When approaching Hispanic middle market employees, simplicity and family are important. Whole life is simple to understand. It provides a benefit in the event the policyholder dies while building cash value at a fixed interest rate. It can offer options like an LTC rider that can help families afford to take care of a loved one at home – or the policyholder can decide to leave it for children. Since Hispanics tend to save less, the cash value feature can be particularly attractive.
Promote life insurance as important protection for the entire extended family. A term-perm combo plan can provide the resources family members need to pay burial expenses, repatriate a body to the home country, pay off a mortgage or fund college educations.
Debbie Cecil is director of Product and Market Development at Unum.
Voluntary Benefits–ACA –An Unprecedented Voluntary Benefit Opportunity
by Shaun R. Walti
Well, it’s here. The Affordable Care Act (ACA) has arrived, and tremendous opportunities will come along with it. So, as 2014 planning and implementation continues, you can provide effective education to the rank and file, help employees protect themselves against new exposures in coverage gaps, develop new revenue streams with value-added services, and enhance the value that you bring to the table.
Communication & Education
The benefit industry has been swimming in the minutia of ACA for years now with updates and changes reaching critical mass over the past several months. But the learning curve has just begun for the vast majority of employees who are about to enroll in their 2014 benefits. That’s why it’s very important to collaborate with employers to develop a communication strategy that covers several fronts.
An effective campaign does the following:
• Clearly defines all benefit changes and they fall in line with the new law.
• Explains how selected voluntary products can protect employees against medical coverage gaps.
• Identifies healthcare coverage -alternatives via the new exchanges.
• Details the employers’ and employees’ new responsibilities as outlined in ACA.
In many cases, the new benefits will be much different than what has been offered. An effective communication campaign can help mitigate any adverse effects of these changes. Many studies have shown that the way employees feel about their company’s sponsored benefit program has a big effect on job satisfaction. Employees who give their company’s benefit communications good grades are more than three times as satisfied with their benefits and more than twice as loyal to their employers than employees who don’t award high grades, according to a recent MetLife study. Forty-nine percent of employees awarded good grades when one-on-one meetings were conducted versus when traditional group meetings were held and 38% when health fairs were conducted.
Mobilizing an effective campaign can seem daunting, especially for larger groups that are sprawled out over several locations and states. Taking advantage of the expertise of a benefit communications firm can take a tremendous load off of a benefit firm’s shoulders. There are quite a few to choose from, but the options dwindle as the group sizes dip below 500 lives. That said, there are some good firms out there that cater to the under 500 space. Some carriers have their own enrollment teams as well. The cost of a communication firm’s services is typically an agreed upon split of the commissions of the voluntary products offered during enrollment (usually two products).
Protect Against New Coverage Gaps
Coverage gaps in the new ACA plans present a great opportunity to introduce voluntary products that fill these exposures. Having medical expenses associated with accidental injury and unforeseen diagnoses of dread diseases are some of the main reasons for hitting the health plan’s deductible and out-of-pocket maximums.
A Harvard University study, published in the August 2009 issue of the American Journal of Medicine, evaluated medical contributors to bankruptcy. More than one-quarter of those interviewed cited illness or injury as a reason for bankruptcy. In-depth interviews with medical debtors confirmed that having gaps in coverage is a common problem. The actual medical costs were not the only contributors to medical bankruptcy with the loss of work wages due to the illness or injury compounding the problem. One of the most compelling findings is that 75.7% of these debtors were insured at the onset of the bankrupting illness.
These facts resonate with employees as accident and critical illness products have become the most dynamic and fastest growing segments in the voluntary space. For example, younger, active employees with kids in sports immediately see the value an accident plan offers while older employees tend to find more peace of mind with a critical illness policy. Hospital indemnity products are also gaining momentum as employees of all age groups see their value.
One successful strategy is for the employer to sponsor accident and/or critical illness coverage for employees who switch to a high-deductible health plan. The idea is to give people incentives to make the change while allaying their concerns over the health coverage deductible. Even though the employer picks up the cost of the voluntary product, they can still save some money versus paying the rates if the employees had stayed on their old plan. Accident plans tend to be offered via a composite rate, and some carriers that can offer composite rates for critical illness. This makes for much easier administration.
Disability and permanent life insurance should also be considered. As employers run out of benefit budget dollars, ancillary lines, such as group life and disability, sometimes land on the chopping block. Voluntary disability or permanent life products allow employees to continue to protect themselves when other coverage falls out of the employer sponsored benefit program.
Take Advantage of Value Added Services
One of the many challenges that ACA presents is complying with the new IRS reporting requirements. Employers will need to implement a solution or service to meet these requirements if they haven’t done so already. Many benefit firms are considering ways to support these solutions along with the other value-added services they already provide, such as Cobra administration or a benefit administration platform, for example. Whatever the case, there are costs associated with most services, and the commissions from a successful voluntary enrollment can be used to support the expenses of these value-adds.
Traditionally, the bulk of producers’ commissions have been paid on the first year, which can be challenging from an accounting perspective. Some carriers are able to pay commissions on a levelized basis, which can really help in forecasting a steady revenue stream to support value-added costs. A few carriers also provide 100% vesting of commissions from dollar one, which brings peace of mind that revenues will come in over the long term. It is important to identify carrier partnerships with the greatest capability and flexibility to support a value-add strategy.
Leverage this Opportunity
Some years back, some feared that the ACA would cut out the middleman – the broker. But it’s now clear that, as a result of the ACA, consultants/brokers have never been more relied upon by their clients. Benefit professionals who understand the law and its implications have an opportunity to showcase their expertise to clients and prospects by providing informed guidance and sound solutions. To enhance these efforts, consider leveraging a voluntary benefit program as a key part of the ACA strategy. q
Shaun R. Walti is regional director, California, Allstate Benefits, a provider of voluntary benefit solutions with a vast product portfolio and serves more than 31,000 companies. All products are underwritten by American Heritage Life, a subsidiary of The Allstate Corporation. For more information, visit www.allstatebenefits.com.
Medicare Supplements–Understanding Medicare Advantage Special Needs Plans (SNP)
by Patrick Freeman
LUTCF, CDHC, CHCRS, MBA
You may have heard some of these trigger words when speaking to a client or just engaging in polite everyday conversation: “Diabetes, type 1 and type 2,” “pacemaker,” “Asthma,” “COPD,” “kidney failure” (ESRD), or “cardiac arrhythmias.” These words can provide an opening for you to help someone get better and more focused medical care for a chronic condition or disease.
Even if you have no interest in Medicare Advantage plans, you can really do someone (a client?) a huge favor by pointing them in the right direction and referring them to a specialized broker who is knowledgeable in this murky part of the insurance market.
Medicare Advantage special needs plans (SNPs) are Medicare Advantage HMO plans that limit membership to people with specific diseases, chronic conditions, and characteristics. These plans are sold by private companies in very specific markets. Not all types of SNPs are available in all areas, especially chronic-condition SNPs. The benefits are usually much richer than with non-special needs Medicare Advantage prescription drug plans (MAPDs) because they are capitated at a significantly higher rate compared to a regular MAPD. The insurance plan puts together benefits and provider networks for a specific geographic area, usually a county.
Even agents who are certified to sell MAPD plans may not be as familiar with SNPs because most insurance plan providers require an extra training and certification to sell and enroll these particular plans. Some plans even require a separate agent contract to sell SNPs.
Even if your plate is too full to sell Medicare Advantage plans, it is a good idea to at least be familiar with the concept of SNPs so you can advise your clients to talk to an agent with expertise in this area. I would really recommend referring your client to a broker who knows this market and class of products because there can be wide disparity in benefits and networks, even in the same geographic area. This is because the product and market focus can be slightly different each medical plan. SNPs are not uniformly available in all California counties, and not all insurance plans provide SNPs.
There are three types of SNP plans:
The Chronic Condition SNP
The client with one or more of the following severe or disabling chronic conditions would qualify:
• End Stage Renal Disease
• Diabetes Type 1 and Type 2
• Heart conditions (Congestive Heart Failure, Cardiovascular disorders, Coronary Artery Disease, and Cardiac Arrhythmias, etc.)
• Breathing conditions (Chronic Bronchitis, Emphysema, Asthma, Pulmonary Fibrosis, and Pulmonary Hypertension)
These are the chronic plans available in California. There are SNPs in other parts of the country for additional conditions.
The Dual Eligible SNP
The client would have both Medicare and MediCal (Medicaid). The provider has the option of billing Medi-Cal or the insurance plan for some services. In early 2014, California is implementing a program to move dual-eligible recipients to Medicare managed care (HMO) plans. Cal MediConnect would move 456,000 dual eligible Medicare and Medi-Cal enrollees living in Alameda, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo and Santa Clara counties into managed care programs. Los Angeles County would cap enrollment at 200,000. Although dual eligibles have the option of not being enrolled in managed care, residents in those counties would be automatically enrolled unless they object, according to California Healthline. The project, which is intended to run through 2016, was scaled back considerably from its original proposal, which would have enrolled dual-eligibles into managed care programs in all 58 California counties.
The cost of using the fee-for-service model has been enormous and the governor and legislature are attempting to move a medical population that is used to going to whichever provider they want to an HMO model with a primary care physician gatekeeper. Since the first phase of this conversion is basically voluntary, it remains to be seen whether this program will be effective. The Centers for Medicare and Medicaid Services (CMS) has ruled that the state of California cannot make the move to managed care plans mandatory for the MediCal population.
The Institutional SNP
This SNP is for institutionalized individuals. These are patients who reside for at least 90 days or longer in a long-term care facility (defined as a skilled nursing facility, nursing facility, intermediate care facility, or inpatient psychiatric facility.)
SNPs have richer benefits than do non-SNPs. For example, one Diabetes plan has a zero copay for insulin, which can be a huge expense to diabetic patients. Most of these plans also have generous medical transportation benefits. The patient can order one-way local transportation for doctor visits and therapy appointments. Most of these plans also include a comprehensive HMO dental plan at no extra charge.
A patient applies for a chronic SNP by completing a questionnaire and identifying a physician who has treated them for a particular condition. The patient is enrolled in the plan assuming that the physician agrees, in writing. The patient will be terminated from the SNP plans if, within 60 days of enrollment, the physician does not confirm, in writing, that the patient has the particular chronic condition. If the patient is turned down, a special-enrollment period is granted and the patient can enroll in another non-SNP MAPD plan.
Dual eligible plans require proof of current participation in Medicare and MediCal (Medicaid). The providers have a choice of accessing the dual eligible SNP benefits or the MediCal benefits so the patient should present both cards at each visit. As a practical matter, many patients have a hard time finding MediCal providers for many of their needed services.
MediCal members need to have a $0 share of cost to qualify for most dual eligible plans. This means that they pay no premiums and no copays for most services and they pay minimal drug copays. MediCal monitors the patient’s income so it possible for them to become ineligible for the dual eligible plan. If this occurs, a special-enrollment period is generated so they can enroll in another MAPD plan. This very special population needs extra servicing. Many dual eligibles also can qualify for a chronic SNP. If their income is fluctuating, it may be more practical for them to enroll in a chronic SNP because the difference in benefits between the plans is sometimes not that great for a particular patient.
Perhaps the biggest feature of the SNP plans is that they can enroll any time of the year unlike regular MAPD plans and Part D, which the client can only enroll during the annual election period.
Vision Care Plans: An Essential Health Benefit
by Michael Schell
We’ve all heard of the benefits of including a comprehensive vision plan in the benefit portfolio. While health care reform has definitely changed the group and individual plan landscape, specialty ancillary product lines have become more integral to the employee benefit program.
Health care reform has defined certain benefits, including vision coverage, as being “Essential Health Benefits.” A vision plan company would agree that its benefit offerings are indeed essential. But how do the broker/producers; benefit administrators; covered employees and dependents; and now individuals, really perceive a vision plan? Do your clients really need a vision plan? Does it make sense to offer a vision plan when so much time is spent on taking your group to market for their health plan benefits?
Fifty percent of the entire population needs corrective eyewear, as do 80% of those over 45. A vision plan helps support general health with convenient access to services, generally through a network of credentialed providers. Employer-based vision plans have been around for decades. But individual vision care plans have become much more popular over the past several years. With state exchanges and the requirements of Essential Health Benefits, vision care plans are being accepted as an integral part of an overall wellness benefit program.
Optical technology offers new plan options including spectacle lens enhancements, numerous contact lens selections, custom tints, and significant improvements of lifestyle choices in optical materials for the plan participants. The latest eyewear materials are becoming a part of the consumer’s fashion statement. There is no doubt that the eyewear material industry will continue to grow as a multi-billion dollar business.
A Real Look At Vision Plan Offerings
You won’t read too much here about eyewear materials. However, vision plans can provide coverage for really cool spectacle frames when the plan provides real choices of in-network provider types. The true value of a vision care plan is in the comprehensive eye exam. A vision plan should not just focus on eyewear materials, free-form lenses, lens options, really cool spectacle frames, and new contact lenses. It should focus on what we use to focus, our eyes – why we need to take care of our eyes; how our eyes take care of us; and how ophthalmologists, optometrists, and opticians trigger early intervention in eye diseases and full body pathologies.
Most only visit an eyecare specialist when their vision is blurry, their eyes are red, or they are having a hard time reading small print. But everyone needs regular eye exams as a key part of an overall wellness program.
Regular eye exams provide opportunities for early detection of optical diseases for early intervention and indicated medical treatments. Most eye diseases that cause blindness have few or no warning signs. Glaucoma is the second most common cause of blindness. When loss of vision goes undetected, the disease can advance to irreversible vision loss.
A less publicized optical system disease is eye cancer. Ocular melanoma, which is the most common type of eye cancer affecting adults, can also occur in children. Early signs of ocular melanoma are most often detected during a routine eye exam.
Age related macular degeneration is the most common cause of blindness among Americans over 50. Early detection from a comprehensive eye exam and prompt intervention can lessen the progression and improve outcomes.
Cataracts are the most common cause of blindness worldwide. This condition can be reversed with early detection and intervention.
A comprehensive eye exam can detect ocular manifestations of systemic diseases. An ocular manifestation is an eye condition that directly or indirectly results from a disease from another part of the body. Many diseases are known to cause ocular or visual changes, which can be detected from a comprehensive eye exam. As mentioned earlier, diabetes has a direct correlation to ocular manifestations. Other diseases, such as hypertension, high cholesterol, and certain forms of cancer, tumors and AIDS, can cause ocular and visual changes. These are the more commonly discussed disease states related to visual changes that can be detected from an eye exam.
Numerous other systemic diseases can also cause ocular manifestations, which the eyecare professional can detect during a comprehensive eye exam. Some of these conditions affect virtually everyone at some time in their lives. These conditions are typically treated with prescription and over-the-counter medications. While the condition itself can cause visual changes, the medications taken to treat these diseases and their symptoms can also cause ocular changes. Diabetes is the leading cause of blindness for adults in the United States. Diabetic eye disease may have no symptoms in the early stages.
The following is just a sampling of disease states that can cause visual changes that an Ophthalmologist or Optometrist can detect during a comprehensive eye exam:
• Systemic allergic diseases: Asthma, Eczema, Dermatitis, Hay fever, Urticaria.
• Skin and mucous membrane diseases: Acne rosacea, albinism, Atopic dermatitis, Behcets disease, Psoriasis.
• Collagen diseases: Ankylosing spondylitis, Scleroderma, Systemic lupus erythematous, Temporal arteritis, Rheumatoid arthritis.
• Systemic viral infections: Rubeola (measles), Rubella (German measles), Herpes simplex, Mumps, Variola (smallpox), Influenza, AIDS.
• Systemic bacterial infections: Gonorrhea, Diphtheria, Lyme disease, Leprosy, Syphilis, Tuberculosis.
• Cardiovascular diseases: Arteriosclerosis, Hypertension, Pre-eclampsia, Occlusive vascular diseases, Venous occlusive disease, Aortic arch syndrome, Endocarditis.
• Gastrointestinal and nutritional disorders: Alcoholism, Crohn’s disease, Liver disease, Malnutrition, Peptic ulcer disease, Pancreatic disease, Vitamin A deficiency, Vitamin B deficiency, Vitamin C deficiency, Hypervitaminosis A, B, and D.
• Pulmonary diseases: Cystic fibrosis of the pancreas, Emphysema, Pneumonias, Tuberculosis.
• Renal disease: Alport’s syndrome, Lowe’s syndrome, Renal transplantation, Medullary cystic disease, Wilm’s tumor.
A comprehensive eye exam consists of an external exam and tests for visual acuity, pupil function, extraocular muscle motility, visual fields, intraocular pressure and ophthalmoscopy through a dilated pupil. These exams and tests help the eyecare professional identify early markers or indicators of several disease states. When these states are suspected, the eyecare professional refers the patient to their primary care provider for further testing and medical treatments when indicated.
A vision plan is not just about the eyeware. Of all of the human senses, vision is typically regarded as the one with the most value to quality of life. We even call it “precious gift of sight.” Losing our sight would have a devastating effect on all of us – affecting our entire lives. It’s about preserving the precious gift of sight and enhancing overall health and wellbeing.
Head of the Class–Creative Strategies to Boost Vision Sales and Satisfaction
by Todd Hester
Most people are surprised to learn that I was a teacher for five years before becoming a benefit broker. But, for me, it was a natural progression. After all, the best salesmen are excellent educators, and the best teachers have a bit of salesmanship.
We all look for creative ways to capture our audience’s attention and get through to them. This can be especially important when you are selling something to clients that they do not always prioritize as they should, such as vision benefits.
I am a firm believer that offering a quality vision plan is a critical part of an employer’s benefit package. Vision is fundamental to workers being able to do their jobs, and regular eye exams are key to avoiding so many preventable diseases. Taking care of the eyes can cut down on worker’s comp, disability claims, and the time out of office. Vision benefits are low-cost and have a high return.
Nevertheless, vision benefits are often an after-thought, since employers must spend most of their time and energy on higher-priced medical benefits. It’s up to the broker to find creative ways to communicate the importance of the vision benefit.
Every single one of my clients offers the vision benefit, and each has an enrollment rate of at least 75%. The high re-enrollment and utilization shows lasting satisfaction. Achieving these results isn’t as hard as you may think. Granted, I’ve pulled out a few fairly creative educational techniques from time to time, but the basics are a breeze.
Choose Your Material Wisely. It’s always easier to sell something that you believe in. While medical benefits become watered down as a cost-cutting measure, the vision benefit usually remains high quality. Look for a partner that understands that quality matters. Plans should have a great network as well as good plan designs and stability. Many offer coverage of well-known lens brands as well as extra coverage for groups at risk, like kids. Higher frame allowances (even just a little higher) make a big difference with customers. These extras help differentiate the plan you present and give your clients something unique to offer employees, so they are more impressed and satisfied with the coverage.
Create a Health Insurance Team. Most of the time our direct contact is the HR manager or CFO, but if the final benefit package doesn’t resonate with employees, it’s not enough to just talk to HR. That’s why we put together health insurance teams with representatives from multiple departments to help represent workers’ needs and evaluate benefit options. You gain tremendous buy-in by encouraging them to go back to their department and start a dialogue about employee needs. Creating a team of advocates is also helpful from a business perspective in case your primary contact changes at the company.
Get A Survey On Your Side. In rare cases when a client pushes back on the importance of vision benefits, we recommend surveying employees to see whether they think it’s important. In every case, we’ve found that they do find it important, and when our client sees the results, they choose to offer the benefit. Employees see value even when employers don’t underwrite the cost. Offering voluntary benefits is a strong option; most employers can find a way to offer the vision benefit.
Match Your Message to Your Pupils. Since each client is unique, it’s important to explain why vision is important for the client’s industry. For example, protective eyewear is vital to our many clients in the automotive manufacturing industry. Those with a lot of computer work need lenses that reduce glare.
Do Your Homework. Everyone likes to learn something new and hear a tidbit related to a hot topic. I do my own research to stay up-to-date on vision-related concerns. I recently read about the incredible amount of time that all of us, and especially kids, spend on our computers, our Facebook accounts, and our Xboxes. This is in addition to all the time we spend on the computer at work, which has been linked to eyestrain and fatigue. In fact, 90% of those who use a computer for more than three hours a day suffer from symptoms of Computer Vision Syndrome, according to the American Optometric Association. There is even concern over increasing exposure to blue light (along with UV light), which is suspected of contributing to macular degeneration. The Transitions Healthy Sight Working for You website offers papers and presentations sharing some of the latest research, including some surprising links between vision and sleep, and vision and mental disorders.
Push Safety First. It’s hard to argue against safety equipment. I bicycle 10 miles a day and always wear a helmet. But my eyes need protection just as my head does. Cumulative exposure to UV rays contributes to cataracts and macular degeneration, and can worsen diabetic retinopathy. I put on my trusty sunglasses with as much respect for safety as I wear my helmet, and I make this point during client meetings. Even if a workforce operates primarily indoors, chances are that employees spend time outdoors after hours. It doesn’t matter where the sun exposure happens; the results of not protecting the eyes are the same.
Be A Good Example. For all my passion for vision benefits, I hadn’t seen an eye doctor in 10 years until I attended the Transitions Academy event earlier this year, which featured the latest research on importance of preventative care. And now, guess what? I wear prescription glasses, I see better. I can speak first-hand to the importance of education on the importance of regular vision care so that poor vision – or worse eye disease – doesn’t sneak up on you like it did with me.
Buddy Up With A Celebrity. I know this may be a stretch, but it worked for me. I’m a very lucky man to have a good friend in my former Sunday school teacher and now professional golfer, Kenny Perry. I also happen to know that Kenny is very passionate about the importance of his vision and wearing the right eyewear to enhance his golf game. I asked Kenny to write a letter sharing his story, which I could share with my clients. I’ve used this letter as a door opener several times. This is just to say that you can think outside the box and leverage your connections and creativity to find an angle that works for you!
Selling vision is more important to brokers than ever before as health care reform moves us into more of a consultative role, but I’ve always thought of myself as an extension of the HR department as it is. Still, with this new shift, there will be a much greater focus on education, so I suppose it will be more obvious how my teaching background will come in handy after all.
In the end, education is about helping; and I can’t think of a more important way for use to bring value to our clients than by informing them about how proper vision care and eyewear can affect for their employees. Providing this education and offering a quality plan will build loyalty to maintain clients for the long haul, which an important selling lesson for us all.
Todd Hester is an employee benefit specialist for Neace Lukens in Bowling Green, Kentucky, which specializes in insurance, risk management and financial protection strategies for today’s complex financial environment. He was a finalist for the 2012 Transitions Vision Benefits Broker of the Year award.
Fixed Indexed Annuities –A Solution for Boomers’ Battered Retirement Portfolios
by Al DalPorto
Five years after the financial crisis, the major domestic stock indices have ventured into record territory, and the bull market in bonds appears to be waning. Yet many investors, particularly those 50 and older, are still wary of the markets. Who can blame them? Many have come to distrust the equity markets after a decade of lost equity values and exceptional volatility.
At the same time, Baby Boomers fear outliving their retirement savings as they shift their focus from achieving long-term growth to protecting principal and maximizing income, often via bonds and yield-oriented alternatives.
The increased use of bonds among Baby Boomers is consistent with the tradition of reducing overall portfolio risk before retirement as well having a heightened aversion to risk. But this strategy may involve risks they do not perceive. Events in May and June made have made it very evident that shunning equities bodes poorly for Baby Boomers who want to build their asset base to meet or exceed retirement income goals. Also, the U.S. bond market could be an asset bubble that’s ready to burst.
Advisors can offer a solution that involves no downside risk in the equity market and no exposure to bond-market deflation. A new generation of fixed indexed annuities (FIAs) offers the safety of principal and the guaranteed future income that clients want and the growth potential they need.
A Lower-Risk Approach to Retirement Income
New-generation fixed indexed annuities (FIAs) are worth exploring for your moderately conservative clients who are concerned about equity and bond market exposure. Many advisors who were hesitant to offer FIAs find it compelling that surrender charges, compensation, premium bonus structures, and product complexity have been re-engineered to provide a more transparent and less complex product. Surrender charge periods are shorter, and new-generation FIAs offer guaranteed living benefits, providing a stream of guaranteed income that a contract holder can’t outlive.
Just as importantly for risk-wary clients, FIAs can offer market-related upside potential. But, unlike stock and bond investments, they present no downside risk. FIAs generate accumulation via crediting options linked to performance of an index — usually a stock or bond market index. When performance of the chosen index is positive from one contract anniversary to the next, the indexed interest (subject to a cap or spread) is credited to the contract holder’s account and locked in. A negative annual return in the index will result in no indexed interest for the year, but the annuity’s value will not decline either.
Today’s widely available crediting methods include annual point-to-point, monthly sum, and annual average (sometimes referred to as “monthly average.”) Each measures the index performance at two or more points during the contract year and applies a formula to determine the percentage of market gains to be credited to the policyholder’s account value. Whichever crediting method is used, a FIA captures a portion of the index’s upside while shielding a policyholder from the damaging effects of index declines. The more consistent index return pattern is key for a risk-sensitive purchaser.
A Lifetime Income Stream
FIAs address another primary concern of pre-retirees and retirees: achieving a stream of lifetime income. Many contemporary FIAs allow contract holders to receive guaranteed income for life via optional guaranteed lifetime withdrawal benefit (GLWB) riders.
A key feature of GLWBs is a guaranteed annual increase in the base amount. Lifetime withdrawals are calculated on this base amount (the benefit base) for each year the contract holder waits to take income, up to a certain age or number of years. The annual benefit base increase is separate from any interest additions to the contract value. The contract holder can choose when to begin taking lifetime withdrawals (though most contracts set a maximum age for initiating these payments). Generally, the longer a contract holder postpones taking income, the larger the base amount and income become.
Unlike a variable annuity, the bulk of a contract holder’s premiums are invested in the general account (GA), giving the insurer control over the assets. This makes account values less volatile compared to assets that are invested directly in the markets. The insurer’s hedging efforts for the general account are centered more on longevity risk and less on the highly unpredictable market risk that contract holders fear. The insurer benefits because longevity risk is easier for actuaries to estimate and it’s less costly to manage than market risk. The cost savings can be passed along to contract holders in the form of more attractive or lower cost benefits, including guaranteed future income.
Getting Clients Back on Track
Clients are likely to find the appeal of a next-generation FIAs to be in the guarantee of principal, the lack of market-related downside, the modest growth potential, and the ability to generate guaranteed retirement income without surrendering liquidity or control of their assets. FIAs may serve another valuable function from an advisor’s standpoint. They can help clients overcome their fear of the markets while adding a modest growth element to their portfolios and reducing their exposure to a highly priced bond market. That may make it easier to get clients back on track with their retirement income goals.
Al DalPorto is vice president, Product Development and Market Research, Security Benefit Life Insurance Company.