LTCI News Update
In this edition of our long-term care insurance news update, we track legislation that is progressing in the Legislature; demographic sales trends; a new product that’s available in California; and more.
Tuning In To Our Annual Dental Survey 
Welcome to Part II of California Broker’s 2012 Dental Survey. We’ve asked the top dental providers in California to answer 28 crucial questions to better help you, the agent, understand their benefits, features, and services. Look for Part III in the September issue. Read the responses and sell accordingly.
Voluntary Benefits View From The Top – Addendum
Verdict Vertigo: Helping Brokers Get Their Balance After the Supreme Court Ruling on Healthcare Reform
In a landmark decision, the Supreme Court has upheld the health care reform law’s individual coverage mandate and left virtually all other provisions of the law intact. Industry experts give their take on how the Supreme Court’s Ruling will Affect brokers, carriers, and employers.
Strategies For Success With Voluntary Benefits
by Karen Gustin, LLIF • Strong interest in voluntary plans gives producers an excellent opportunity to build and strengthen relationships with employers by recommending the right dental insurance coverage.
Voluntary Benefits–Group Plans Are in Demand – the Advantages for Employers and Employees
by Chris Covill • Many organizations recognize that by offering group voluntary insurance plans, they can benefit from lower premium costs while enhancing their core plan offerings.
Life Insurance–View from the Top
by Leila Morris • Top executives give their take on today’s life insurance market
Ancillary Benefits/Vision
Ancillary Benefits See a Surge of Growth in the Personal Plan Market
by Phillip M. Needleman • If you have not yet begun to offer individual coverage to your clients who downgrade or eliminate their ancillary benefits, you are missing exceptional pass though opportunities.
Deconstructing a Life Settlement Offer, a Behind-the-Scenes Look at Creation of a Settlement
by Stephen E. Terrell • The discount of the face value of a policy reflects the costs and real risks involved in a life settlement, but the important take-away here is that those costs and risks fall on the provider, not the policyholder or the agent.
SB 1431 & Self-funding for small Employers: What’s the Fuss all about?
by Mark Reynolds, RHU • SB 1431 presents the most significant restriction on small employer health plans since the early 1990s. As an industry we can lead small employers and, their employees in understanding SB 1431 and the affects it will have on our economy, on employers, and most importantly on the hundreds of thousands of employees covered or who will be covered by self-funded plans.

LTC News

LTC Legislation Progresses In California Legislature

A long-term care insurance bill, AB 999, passed the Senate Insurance Committee and now moves to the Senate Appropriations Committee. The bill, sponsored by California Commissioner Dave Jones and the California Department of Insurance, is intended to protect consumers from excessive premium rate volatility by modifying the long-term care insurance premium rate development process. AB 999 would do the following:

•Prevent insurers from passing poor investment returns through to taxpayers;
•Eliminate the practice of insurers cherry-picking a small group of policies to justify large rate increases;
•Prohibit insurers from using a loss ratio that is a moving target to justify raising rates merely to make a profit, and;
•Require insurers to allow consumers to view policy language prior to purchasing the policy.

The bill grants the Insurance Commissioner and the Department of Insurance regulatory tools to protect long-term care insurance policyholders from unmanageable rate increases. Additionally, the bill requires insurers to provide better information to the public about the suitability of long-term care insurance products.

“Perhaps the most urgent issue currently facing seniors and their families is the rising cost of long-term care insurance. This bill will curb a troubling trend in the number and size of long-term care rate increases. Without this legislation, consumers, many on fixed incomes, will continue to face uncertainty, never knowing what rates to expect from year to year,” said Jones.

LTC insurance was first sold in California in the early 1980s. Since it was a new product, insurers had no historical experience upon which to rely when setting initial premium rates. As a result, pricing of LTC policies was often based upon what were later found to be inaccurate assumptions. As insurers gained more experience in the market, premium rates increased to compensate for those initial inaccuracies. In 2000, the Legislature passed SB 898 to stabilize what became escalating rates. However, the rate stabilization features passed years before aren’t completely restoring predictability as intended to the long-term care insurance market today.

More LTC Insurance Are Sales From Younger Buyers 

More than three-fourths of new long-term care insurance policies were purchased last year by people age 45 to 64, according to a report from the American Association for Long-Term Care Insurance. Half of all new purchasers of individual policies were 55 to 64 and 22% 45 to 54. “The sweet spot for considering and buying long term care insurance is between 52 and 64. That is the age when costs are more affordable and the individual is still more likely to health qualify for insurance protection, explains Jesse Slome, executive director of the Association.

The age of new buyers has been dropping slowly, according to Slome. “A decade or so ago that age of the average buyer was 66 or 67; today it is much younger as more people understand the importance of protecting against the likely and cost risk of needing long term care. Less than 5% of individual buyers were under the age of 45. Those who buy protection offered in the worksite tend to be younger, but the age gap is narrowing.”

The complete findings of the Association’s research will be published in the Association’s 2012-2013 Long Term Care Insurance Sourcebook provided free to the members. For more information, visit

LTCI Video Training

The American Association for Long-Term Care Insurance has added new videos to its Consumer Learning Center. One focuses on the best age to apply for coverage with statistics from the organization’s 2012 Long Term care Insurance Sourcebook. A second video focuses on tips to get the best long-term care insurance coverage for the most affordable premium. The two videos can be viewed online. For more information, visit

Death of the Long Term Care Insurance Industry?

Summer Article Series Focuses on Why That’s Not the Case.

Three major insurance giants have exited the individual Long Term Care Insurance LTCI market in the past 24 months and many in the media have begun to speculate that the industry is on life support. LTC Tree is offering a summer series of articles that explains why the industry is here to stay. LTC Tree’s research department did an in depth study of various other industries and products over the past 50 years and found compelling information on the viability of the Long Term Care Insurance market that they will share in the LTC Summer Series. For more information, visit

New Long Term Care Insurance Products Available in California

LifeSecure Insurance Company is now offering its individual long-term care insurance (LTCI) and its multi-life worksite LTCI program in California. Policyholders can get care in multiple settings including their home, a residential care facility, or a nursing facility. The program also offers the following:
• Flexible coverage that provides for informal caregivers, caregiver training, home modifications, and other options.
• Personalized care coordination and support.
• Shared care, which allows a spouse or domestic partner to use their partner’s benefits if their policy is exhausted and care is still needed.
• A quote calculator that allows policyholders to match their insurance needs to their budget.
• A simple application with an expedited approval process.

For more information, visit

Tuning In To Our Annual Dental Survey–Part II

Welcome to Part II of California Broker’s 2012 Dental Survey. We’ve asked the top dental providers in California to answer 28 crucial questions to better help you, the agent, understand their benefits, features, and services. Look for Part III in the September issue.

10. How do you ensure that your dentists are aware of the benefits of your plan(s)? Do you have a way of knowing if the dentists are soliciting or recommending services that are not compensated for by your plan?

Aetna: Participating dental offices receive our helpful Dental Office Guide, which provides clear information about plan designs, policies, and procedures. We also offer a Website specifically designed for dentists. The site includes real-time eligibility and benefits information, a 24/7speech recognition system called “Aetna Voice Advantage.” Also, our dental solutions team is trained to know what is important for provider service. Unusual treatment patterns may be discovered during our review of utilization reports. This usually results in an office audit that includes a review of patient files and general office practices. We talk with the dentist about the findings and develop recommendations for improvement where needed.

Aflac: Aflac has materials that may be provided to dentists with information on how to file claims and access online materials. A dedicated section on provides dentists with claim forms and instructions as well as online access to verify policy benefit amounts. A dentist who has any additional questions may call Aflac’s Customer Service Center toll-free -1-800-99-AFLAC.

Ameritas: Providers can access individual plan information using the toll-free voice response system, the fax-back system, or our online benefit Website. We hope this educates both the provider and insured of covered benefits. If not, periodic surveys and automated utilization review mechanisms help provide a way to monitor issues regarding plan coverage misunderstandings.

Anthem Blue Cross: We inform participating dentists of plan benefits through a variety of communication vehicles. Dentists can access updated information on our Website, through our interactive voice response system, directly from our provider relations and customer service representatives, and through our provider mailings. Practice patterns of participating providers are monitored continuously and reported through monthly utilization reports and claims experience. We involve our dental director when we suspect over- or under-utilization patterns. In such cases, our dental director contacts the dentist to discuss findings along with a plan of action to help bring the practice within the standard.

BEN-E-LECT: The members are given material specific to the dentist to ensure that benefits are understood. BEN-E-LECT also offers extended customer service hours with a department dedicated to assisting dentists with benefits information. BEN-E-LECT also has regular outside auditors review claims for this information in addition to scrub during time of payment.

BEST Life: Dentists may contact BEST Life for information about member benefits by calling 800-433-0088. We also have a fax back line dentists can use to obtain benefit information.

Blue Shield: Each provider receives a provider manual upon acceptance into the plan, which outlines requirements of participation and details on plan administration. Providers may receive in-person training with their staff, if requested

Cigna: A large staff of dental network managers, based in specific field locations and in operational offices, meets continuously with dental care professionals on our administrative and quality policies. Our network teams counsel any offices found to not be in compliance and remediation plans are put into place to ensure compliance. DHMO – The Cigna Dental Care Reference Guide and Patient Charge Schedules at a Glance, and Specialty Referral Guidelines are provided to each network dental office on the plan. DEPO/DPPO – The Cigna Dental Office Reference Guide and fee schedules are provided to each network dental office on the plan. DHMO – When a dentist submits an encounter form, the information is entered and stored in our database. A statistical report is generated monthly for each network dental office. DPPO/DEPO – Cigna Dental uses its provider profiling application as part of its utilization review program. It uses claims data to generate a report showing the practice profile for a given provider that can be compared with the average practice profile of their peers.

Delta Dental: Detailed program information for all enrollees is available through a secure area of our Website and through a toll-free telephone number including maximums, deductible and benefit levels. Additionally, Delta Dental issues a bimonthly newsletter to network dental offices, which covers Delta Dental policy, industry news, seminars, new Delta Dental clients, tips on submitting claims and other useful information. Delta Dental also issues a quarterly quality-related newsletter to participating dentists that provides useful information to help improve the quality and efficiency of the care they provide. Delta Dental also holds regular seminars to keep dentists up to date. Regular enrollee surveys seek information on various quality issues, such as services rendered that are not covered by the program; services delivered as claimed; office cleanliness and appearance; and customer service.

Dental Health Services: We regularly provide on-site training, auditing, and service visits for our participating prepaid dentists. Additionally, each office gets a comprehensive manual and we monitor all services and treatments received by our members through monthly utilization reports.

Guardian: Dentists can access plan benefits using our online Web tool, or by phone. All PPO dentists receive information about Guardian’s plans through local network recruiters as well as mailings of pertinent information. Our claim system tracks and monitors each dentist’s practice patterns for bundling, over-utilization, etc. We consult with dentists who are not meeting our expectations, and if they are unable to do so, we may discontinue their network participation. We recommend that members obtain a voluntary pre-determination of benefits before proceeding with any treatment that will cost $300 or more, but we do not reduce or deny benefits if the member does not submit the treatment plan for predetermination. The member will be advised if the treatment plan includes services that are not covered under their plan. All offices that join our DHMO network receive an orientation that fully explains the plan. Additionally, our DHMO Regional Network Managers visit the offices periodically to review the plan. Dental Offices submit encounter data of services provided to DHMO members, which is reviewed quarterly by our Quality Assurance Committee.

Health Net Dental: We educate our providers about our administrative policies, including guidelines on appropriate care. Providers are encouraged to submit pre-treatment plans for review in order to learn what procedures would be covered under the member’s benefit plan and the level of reimbursement. In the process of reviewing pre-treatment estimates and in completed claims, we track and monitor each provider’s practice patterns. Providers with aberrant patterns get a focused review, including statistical analysis and record audits, which may result in appropriate corrective action plans. Our Professional Network Relations reps meet with providers to counsel them and to answer any questions about planning care for members. Our Internet portals provide real-time information to providers and members on their benefits.

MetLife: For our dental PPO, MetLife has developed a multi-channel technology platform for employers, participants, and dental offices, providing access to information via Internet, fax, or phone. At the time of service, dental offices can access eligibility, plan and other information through dedicated real-time channels. Once selected to participate in MetLife’s Dental PPO network, dentists’ treatment patterns are monitored to help ensure maintenance of appropriate practice patterns and not plan design since they may not address the unique needs of individuals. If a dentist’s treatment patterns become unacceptable, the dentist is educated and monitored via MetLife claim review processes, and, if warranted, removed from the network.

If a participant should have a complaint regarding charges for services, covered or not covered by a MetLife plan, our trained customer service representatives will review the issue with the participant and generate a response and follow-up investigation, if necessary.

For the Dental HMO/Managed Care, each dental office gets a facility reference guide with a section on the plans. A provider relations representative initially conducts a thorough on-site orientation with the dental office staff to help them fully understand the plans. The representative also conducts periodic on-site visits to reinforce understanding of the plans and policies. Quality Management reviews member concerns and conducts regular chart audits. The network specialist is also required to review all member concerns and address these concerns directly with the provider, this will allow the office to be counseled on these specific issues to help prevent any future member concerns and the potential risk of the office being closed to new member enrollment.

Principal Financial Group: We provide online, telephone, and fax service options for providers to verify benefits and eligibility. We encourage pre-determination to be performed for inlays, onlays, single crowns, prosthetics, periodontics, and oral surgery.

Securian Dental: Dentists can verify benefits by calling our toll-free customer service phone number or via our Website.

United Concordia: Dental offices can confirm benefit coverage information on our Website via “My Patients’ Benefits,” through our telephone interactive voice response (IVR) system, or by speaking to a customer service representative. In some instances, we also inform dentists of important benefit changes through our quarterly newsletter, a stuffer included with dentist checks, and/or with an automated telephone call. Dentists can also reference benefit information using our Dentist Reference Guide, available on our Website. Professional relations representatives are also available to provide assistance when necessary. We identify abnormal practice patterns through a comprehensive quality assurance process. United Concordia reviews thousands of claims each year to ensure the acceptability of treatment and quality of services. Advisors and consultants also review dentists’ fees and practice patterns. Dentists who fall outside of the norm are targeted for education and additional monitoring.

Western Dental: Each provider is trained and given training materials to ensure that they are knowledgeable about Western Dental programs. Western Dental Services also monitors customer service inquiries and grievances in addition to reviewing utilization data supplied by each provider.

11. How many provider offices have you lost over the past 12 months? If asked, will you provide the names and phone numbers of at least three of these offices?

Aetna: In 2010, we lost 2.5% or providers in our DMO network and 1% in our PPO network. This is the voluntary termination rate. We are not at liberty to provide specific dentist information, such as names and phone

Aflac: Aflac Dental has no provider networks. Policyholders have the freedom to choose any dentist without restriction.

Ameritas PPO: 2,591 provider access points were lost (Ameritas = 1,578, FDH =1,013). Yes, we would provide names, if requested.

Anthem Blue Cross: In the past 12 months, our Dental Prime and Dental Complete networks have grown significantly and less than 1% of dentists have terminated participation (primarily through retirement or death). Anthem does not make it a practice to provide names and phone numbers of dental offices that have left the network.

BEN-E-LECT: For all plans combined, the turnover is less than 2%. Many offices have been terminated due to lack of meeting credentialing standards, retirement or death of the provider. BEN-E-LECT does maintain the information for these offices; however it is not common practice to release the information.

BEST Life: Less than 3% of providers have left our PPO networks over the past 12 months. Reasons for leaving include retirement, relocation of practice, changes within group practices, and voluntary terminations. For the sake of privacy, our network does not share such information for the purpose of a general interview. Our networks also focus on growth. Our national network has added 1,594 dentists in California for the month of May.

Blue Shield: Dental PPO: For 2011, the voluntary turnover rate (excluding deaths, retirements and practice relocations) was less than 1%. Dental HMO: For 2011, the voluntary turnover rate (excluding deaths, retirements and practive relocations) was 2%.

Cigna: Cigna’s dental network turnover rates have been lower than published industry average data. Dentist and dental office information can be shared with clients and brokers if required.

Delta Dental: Our Delta Dental Premier network increased by 16%; our Delta Dental PPO network increased by 16%; and our DHMO network increased by 7.3%. Turnover rates in 2011 were: Delta Dental Premier – 5.83%; Delta Dental PPO – 5.22%; and DeltaCare USA – 1.2%. Delta Dental does not release specific information on its contracted dentists.

Dental Health Services: Although roughly 5% of participating dentists have been lost over the past 12 months, our overall network size has made up for this and has increased by 5% over the previous year through a focus on seeking out only the most qualified dentists while improving accessibility and availability. The names and phone numbers of all offices are available on request.

Guardian: Over the past 12 months, turnover in both our DHMO and PPO nationwide networks has been approximately 3%, and includes dentists who voluntarily discontinue their participation (retirement, moving from area, closing the practice) and those whose participation is ended by Guardian. We can provide names and phone numbers of terminated offices, subject to permission from the offices.

Health Net Dental: In 2011, our DHMO turnover rate for voluntary terms is 1% and our PPO turnover rate is 1%. We do not release specific information on our contracted dentists.

Humana: 87 California dentists were termed during the past 12 months, including seven that were termed by HumanaDental due to not meeting our credentialing standards. We will not identify terminated providers.

MetLife: For Dental PPO, our turnover rate was 1.69 % for 2011. For Dental HMO/Managed Care, 2.22% of contracted dentists in California left the network in 2011

Principal Financial Group: For our PPO network, we’ve lost 2,270 provider locations. For our EPO network, we’ve lost 720 provider locations.

Securian Dental: Very few providers choose to leave the DenteMax network. Less than 3% of our network dentists discontinue participation with DenteMax every year. The majority of these terminations are due to a provider’s retirement or death or the moving or closing of a practice. We would be willing to provide names and phone numbers of terminated offices upon request.

United Concordia: In California, we grew our PPO network from 13,485 to 13,739 dentists and our DHMO network from 1,612 to 1,635 dentists in the last 12 months. Yes, if requested, we can provide the names and phone numbers of dental offices that no longer participate in our network.

Western Dental: Turnover is about 3% for the past year. Yes, we will provide the names and phone numbers for 3 of these offices, if requested.

 12. What percentage of your network is closed to new enrollment? How many offices does this represent?

Aetna: For California, approximately 4% of our DMO participating providers are closed to new patients. All of our PPO providers are open to new patients so 0% is closed.

Aflac: Aflac Dental has no provider networks. Policyholders may visit any dentist they choose.

Ameritas PPO: Only 34 Ameritas Offices and 6 FDH Offices are closed to new enrollment. This represents approximately 0.1%.

Anthem Blue Cross: Our Dental Prime and Dental Complete network model is open-access. We do not contractually require providers to report on new-patient status. We have not heard reports of any members having issues with finding a participating dentist that is open to new patients.

BEN-E-LECT: All of BEN-E-LECT’s dental PPO providers are accepting new patients. For the DHMO product, less than 3% of the offices are closed to new enrollment, representing approximately 60 offices.

BEST Life: All participating PPO dentists are accepting new patients.

Blue Shield: In 2011, less than 2% of dental HMO plan network providers maintained closed practices; this represents approximately 30 offices.

Cigna: DPPO network offices don’t close to new enrollment. For DHMO in California, the total number of general dentist network locations is 1,475. Of those, 1,327 are open to new enrollment.

Delta Dental: 0%. Under the PPO/Premier plans, enrollees are free to see any licensed dentist. Contracted dentists can close their practices to new patients but cannot close their practice exclusively to new Delta Dental patients; 5.3% DHMO dental facilities are closed to new enrollment.

Dental Health Services: About 8% of network general practice dentists are closed to new enrollment (63 offices). No specialty offices are closed to new members.

Guardian: In California, only .029% of our PPO network and 5.1% 1.826% of our DHMO network is closed to new patients.

Health Net Dental: As of June 2012, for DHMO, 6% (116 out of 2,025) of our unique locations are closed to new enrollment. For PPO, 3% (1,049 out of 31,582) of our dentists’ offices are closed to new enrollment.

Humana: Under HumanaDental’s provider contract, participating dentists must schedule and treat members without discrimination, including benefit or payer differentials. Because this is a fee-for-service reimbursement program, closed practices are not common.

MetLife: Nationally, less than 1% of our participating Dental PPO dentists have requested that their names be removed from our provider listing for purposes of not accepting new MetLife-eligible patients. For Dental HMO/Managed Care, 4.2% of general dentist providers are closed to new enrollment in California.

Principal Financial Group: Less than 1% of the offices participating in our network are closed to new enrollment.

Securian Dental: All of our network dentists are open to new enrollment.

United Concordia: In California, more than 99% of our PPO dentist network is open to new enrollment, as well as almost 95% of our DHMO dentist network.

Western Dental: Less than 3% of our network providers are closed to new enrollments – about 60 offices.

 13. Do all of your contracted offices accept every benefit level sold by your company or do they have the option to pick and choose only the programs with co-payments they want to accept?

Aetna: All DMO offices accept all of our DMO coinsurance and fixed co-payment plan designs. Our PPO offices accept all of our PPO plan designs.

Aflac: Aflac Dental has no provider networks.

Ameritas: All providers accept patients from all plans sold through Ameritas Group Dental.

Anthem Blue Cross: Anthem Blue Cross recommends all participating providers accept all plans offered.

BEN-E-LECT: All benefit levels are accepted and to date no offices have limited or requested to limit the programs they will accept.

BEST Life: All contracted offices accept every benefit level. Furthermore, by contract, all providers will honor the PPO discounts on all procedures, including non-covered services. They must also honor a discount for members who are within a waiting period or who have exceeded their annual maximum.

Blue Shield: Offices are not allowed to pick and choose which plan designs they accept.

Cigna: All contracted DPPO offices accept all of the insured benefit DPPO plan designs that we offer. All contracted DHMO offices accept all of the DHMO plan designs that we offer. For our discount dental programs, not all DPPO contracted dentists are required to participate. They may opt out of participation in these discount dental programs if they desire.

Delta Dental: Delta Dental holds contracts with individual dentists for participation with each network (Premier, PPO and DeltaCare USA [DHMO]). Dentists can choose to participate only in those programs with copayments they wish to accept.

Dental Health Services: All new dentists are contracted for all plans offered by Dental Health Services.

Guardian: All contracted PPO and CA DHMO offices accept all of the plan designs that we offer.

Health Net Dental: All participating PPO dentists accept all of our plan designs. Contracted DHMO providers accept all Health Net Dental DHMO plans.

Humana: The PPO contract is for all network-based programs, excluding DHMO, which requires a separate agreement.

MetLife: For Dental PPO, all participating dentists accept all of our plan designs. They cannot pick and choose which MetLife plans to accept. For Dental HMO/Managed Care, when contracting with a dental-care provider, it is understood that the dentist will accept all managed dental plans that are actively marketed.

Principal Financial Group: Providers can choose to participate in our PPO and/or EPO networks. Within each option, providers need to accept all benefit levels sold by our company.

Securian Dental: Yes, they accept every benefit level sold by our company.

United Concordia: All contracted PPO dentists accept all United Concordia PPO plans. All contracted DHMO dentists accept all United Concordia DHMO plans.

Western Dental: The entire network accepts all of the new Series 7 plans.

 14. Do you have a way to monitor the length of time patients have to wait in the doctor’s office?

Aetna: A semi-annual written survey is collected from all Calif. DMO general dentists

Aflac: Since policyholders can choose any dentist without restriction, Aflac does not monitor wait times.

Ameritas: We monitor patient wait time through random customer and patient surveys. Providers are contacted, if necessary, to discuss specific feedback.

Anthem Blue Cross: Yes, we monitor this as a metric in our member satisfaction surveys. Through our complaint/grievance tracking processes, issues such as wait times are logged and monitored. Additionally, we monitor appointment wait times and emergency wait times through surveys conducted by our organization.

BEN-E-LECT: This information is tracked closely with for Freedom Pre-Paid Dental Plans. Surveys and questionnaires for the PPO products track this information.

BEST Life: Network accessibility and wait times are included as part of the credentialing and ongoing monitoring processes.

Blue Shield: Yes, we monitor and track wait times several ways. We document member complaints on this issue in our customer service workbench and track them electronically until they are resolved. We also conduct an annual member satisfaction survey, which contains specific questions about wait times with our network offices.

Cigna: The dental network management team monitors wait times in our DHMO general dentist facilities via monthly telephone calls. Additionally, we are able to identify lengthy wait times through our patient satisfaction surveys.

Delta Dental: Delta Dental conducts random enrollee surveys semi-annually for the fee-for-service enrollees and annually for DHMO enrollees. Surveys include questions about dentist access (for example, number of dentists from which to choose and appointment availability with their dentist) as well as other customer satisfaction issues. For the DHMO, the appointment availability is also monitored via regular office visits from a Delta Dental representative.

Dental Health Services: Yes, we monitor our members’ experiences through frequent member surveys, regular on-site dental office visits and quarterly access surveys.

Guardian: We do not monitor appointment scheduling or wait times for the PPO plan, although every month we send member satisfaction surveys, which include questions concerning wait times, to randomly chosen PPO members who have been to a network dentist within the previous 90 days. The DHMO has established access standards and monitors this quarterly by mailing access monitoring forms, member satisfaction surveys, transfers, and grievance data. Telephone calls are utilized on an as-needed basis.

Health Net Dental: We monitor individual wait times in the dentist’s waiting room through our member satisfaction surveys and provider access surveys. Results of these surveys are a critical tool in assessing a member’s experience with network dentists and their specific offices. In addition, we get feedback on office wait times from members calling our toll-free Health Net Dental Member Services number.

Humana: We rely on member calls to keep us apprised of scheduling issues. Sometimes, the member is limiting their options (i.e., after 5:00 p.m.), which is discovered through discussion with our customer-relations representatives. If the issue becomes chronic, the information is forwarded to our National Dental Network department because additional providers may be needed in the area.

MetLife: For Dental PPO, we monitor patient impressions of wait time through monthly satisfaction surveys that specifically ask this question. For Dental HMO/Managed Care, we monitor the length of time that patients wait in the reception area and the operatory through the quarterly accessibility survey and service visit reports by provider relations representatives. In addition, we track wait times through a monthly report and member satisfaction survey.

Principal Financial Group: We do not monitor this.

Securian Dental: We do not monitor this.

United Concordia: Yes, it is monitored through member surveys, a customer service grievance process and periodic phone audits of the offices.

Western Dental: Western Dental monitors patient’s length of time by onsite reviews, surveys, and questionnaires. In addition, our staff model offices use the Quality Assurance Management System. The state-of-the-art, proprietary software tool tracks measurable items, such as wait times, which ensures that our members have timely access to quality dental care.

15. Are there plenty of providers who stay open late and are open on Saturdays?

Aetna: Office hours are set by each individual dental office. We document dentists’ office hours as part of the credentialing process. We use the information to balance networks by contracting with dentists who offer weekend and evening hours.

Aflac: Aflac Dental does not have a network of providers. Policyholders may visit any dentist they choose, which includes those with extended hours.

Ameritas PPO: Yes, each office sets its own hours. Those hours are available to all our members on our online provider listings. Our goal is to balance care availability throughout the area to ensure needed care.

Anthem Blue Cross: Each dental office sets its own office hours. However, as part of the credentialing process, we document dentists’ office hours and use the information to ensure our networks include dentists who offer weekend and evening hours.

BEN-E-LECT: Yes, many of BEN-E-LECT’s provider offices offer extended evening and early morning hours in addition to weekend hours for ease of access

BEST Life: Yes, many providers have extended and flexible hours.

Blue Shield: This varies by provider, but many do stay open late and are open on Saturdays.

Cigna: DHMO: There are 2,804 network offices (24.8% of the total DHMO network) offering Saturday office hours, and 3,778 network offices (33.5% of the total DHMO network) with evening hours (6:00 p.m. or later). DPPO: Since members are able to visit any licensed dentist for care, we do not measure evening or weekend hours for network dentists. Additionally, our dentist contracts require dentists to provide or arrange for emergency care 24 hours a day, 7 days a week and to provide emergency appointments within 24 hours.

Delta Dental: Our online dentist directory contains information on hours and access, including maps, directions and languages spoken. In addition to posting hours and access, DHMO network dentists are required to provide 24-hour emergency service to enrollees seven days a week.

Guardian: Many PPO and DHMO provider locations have extended or weekend hours.

Health Net Dental: The office hours of each dentist location is listed in our online provider directory. This information is also available to all members through Health Net Dental Member Services. As part of our dentist agreement, all locations are required to have an emergency contact available for members whenever the dental office is closed.

Humana: Members can see the provider of their choice and they are encouraged to contact their dentist for appointment availability. Based on today’s busy lifestyles, many providers are extending their hours to meet the needs of their patients.

MetLife: For Dental PPO, as part of MetLife’s credentialing criteria, all participating dentists must provide acceptable hours of service and have established emergency care and/or off-hour protocols. For Dental HMO/Managed Care, we contract with individual dental practitioners, many who have evening and Saturday hours.

United Concordia: Yes.

Principal Financial Group: Members can see any provider of their choice, which can include those who have extended hours.

Securian Dental: Yes.

United Concordia Dental: Yes.

Western Dental: Yes, many of our IPA providers have evening and Saturday hours. The Western Dental Staff Model Offices are open from 9:00 AM to 8:00 PM, Monday through Friday and 8:00 AM to 4:00 PM on Saturdays.

 16. With respect to your mid-range benefit level, what is the specific amount of capitation paid to the general dentist? Do you offer validation for these amounts?

Aetna: We establish varying compensation rates under each customer’s benefits plan for subscribers, spouses, and children. Monthly compensation rates are based on community averages and plan design. Actual capitation amounts are proprietary.

Aflac: Aflac Dental does not offer capitation plans.

Ameritas PPO and the FDH Networks: Neither of these networks is  used for dental HMO purposes, so no capitation is paid.

Anthem Blue Cross: Decline to respond

BEN-E-LECT: This is not applicable for BEN-E-LECT’s PPO plans. All dentist capitation has been added to the dentist premium amounts collected for the DHMO products.

BEST Life: We do not compensate our providers through capitation. Our Indemnity and PPO plans allow patients to utilize providers of their choice.

Blue Shield: This information is considered proprietary.

Cigna: Network general dentists’ payment consists of the following four components: fixed monthly payments (capitation), patient charges (copays), office visit payments, and supplemental payments for certain covered procedures. Network specialists are paid based on a fixed fee schedule.

Delta Dental: Capitation rates are developed based on the plan design, annual utilization data, enrollee/dependent mix and employer contribution. Compensation is designed to reimburse approximately 60% to 65% of usual fees.

Dental Health Services: Our compensation system involves many more components than capitation and is designed to keep the participating dentists whole while providing incentives for appropriate treatment and care.

Guardian: DHMO capitation amounts paid to the general dentist vary based on plan design, adult or child, and region.

Health Net Dental: Capitation information is proprietary.

Humana: Managed dental care capitation varies by plan schedule and geographic location.

MetLife: For Dental HMO/Managed Care, capitation is actuarially set by plan design and that information is proprietary. Capitation is augmented by supplemental payments for certain procedures. In addition, the plan pays fees for each member visit. Dental PPO plans do not pay capitation.

Principal Financial Group: N/A

Securian Dental: We do not offer capitation plans. We offer PPO and Indemnity plans.

United Concordia: Specific capitation amounts are considered proprietary information.

Western Dental: Series 7 plans reimburse providers with capitation  and supplemental payments. Total compensation, as with fee for service designs, depends on how much treatment is provided.

 17. Are there incentives for the provider to be thorough?

Aetna: Quality management programs are designed to help protect members and providers.

Aflac: Aflac: It is expected that the dentists selected by the policyholders treat their patients with the utmost respect and provide the highest standards of quality care without requiring incentives to do so. If the policyholders are unhappy with the service received, they may change dentists at any time.

Ameritas PPO: Provider thoroughness is an expectation; we do not offer an incentive for this. We do, however, monitor patient care through quarterly utilization review. If standards are not met, it could result in the provider’s termination from the network.

Anthem Blue Cross: We do not offer incentive programs to dentists, as we feel that these types of programs do not increase the quality of care.

BEN-E-LECT: Yes. BEN-E-LECT may offer bonuses to providers who exceed quality of services and accessibility standards.

BEST Life: Our networks administer comprehensive utilizations reviews for dental necessity and appropriateness of care.

Blue Shield: Appropriate care provided by dentists in our networks is measured continuously through numerous oversight mechanisms. While routine treatment plans are carried out by dentists without prospective review, more complicated treatments are evaluated by our dental consultants. These professionals assess the proposed treatments for appropriateness and benefit determination. All dentists involved in our review process are fully licensed. Our clinicians are also actively involved in the annual review of dentist records. These quality-of-care audits involve the use of comprehensive guidelines established by the American Academy of Dental Group Practice, the California Dental Association, and the American Dental Association (through the University of North Carolina School of Dentistry). A random sample of each dentist’s records is selected for scrutiny by our dental consultants. Necessary recommendations are made to any dentists who do not meet our quality standards and follow-up audits are conducted to verify corrective action has been taken.

Cigna: Our Integrated Quality Management Program drives overall quality across our all of our dental networks. While we do not provide incentives as part of our Quality Management Program, the expectation is that the dentists in our networks meet professionally recognized standards of care. The Cigna DHMO Pay for Performance Rewards Program is a new patient-centered care model that rewards Cigna DHMO general dentists for promoting routine preventive care, patient satisfaction, and patient convenience. While some medical insurance carriers offer pay for performance-type programs to doctors, Cigna is the first to offer this type of incentive program to dentists. We piloted the program in southern California in 2011 and have seen a 5% reduction in specialty costs versus the same time in 2010.

Delta Dental: Delta Dental does not pay any special incentives. We expect all credentialed network dentists to provide high-quality care within professionally accepted standards and to maintain the dental health of enrollees, with the intention to reduce the need for more invasive care later. Dentists who provide quality care and service retain their assigned enrollees, and as a result, gain enrollment and greater overall compensation.

Dental Health Services: Our supplemental payments and rigorous Quality Assurance Program are designed as incentives to provide appropriate and thorough care. Only caring, experienced, qualified doctors are accepted into our exclusive prepaid network. All of our dentists undergo a careful and highly selective screening process. To ensure ongoing quality, a panel of quality assurance professionals conducts regular monitoring, reviews, and audits while an extensive checklist helps to make sure that plan members get the best and safest care possible.

Guardian: Our PPO fee schedules and plan provisions are adequate to encourage proper care. We do not offer incentives. Guardian requires participating dentists to treat PPO members the same as any other patients and we investigate all quality of care complaints from members. Our DHMO reimbursement schedules, capitation payments, office visit fees, supplemental payments, and chair-hour guarantees are adequate to encourage appropriate care. Participating dentists treat DHMO members the same as any other patient, and we have a grievance process in place to follow up on all quality of care complaints from members.

Health Net Dental: We do not offer financial incentives to our dentists. Our expectation is that our dentists perform in accordance with high professional standards without incentives. Our extensive credentialing process ensures that our contracting dentists are of the highest caliber.

Humana: Fee-for-service reimbursement encourages thorough treatment. Member complaints are reviewed by our Quality Assurance Department and through our standard grievance process.

MetLife: For Dental PPO and HMO/Managed Care, providers are expected to perform in accordance with high standards of competence, care, and concern for the welfare and needs of participants.

Principal Financial Group: Being thorough is an expectation and we do not provide incentives to meet expectations. All providers in our networks or those we might recommend must meet strict credentialing requirements. This means they have all been independently reviewed and found to have proper professional credentials and a verified history of responsible billings. However, a member is free to choose any provider.

Securian Dental: All DenteMax dentists undergo a rigorous credentialing process to ensure the highest quality dentists are treating our members.

United Concordia: Our expectation is that all services performed by participating dentists will meet the high standards of the dental industry. In addition, participating DHMO primary dentists get supplemental reimbursement on the most highly utilized procedures in addition to monthly capitation and member co-payments, which encourage dentists to provide the services necessary to ensure the oral health of members.

Western Dental: Western Dental Services Inc. may pay the dentist  a bonus based on exceeding standards specified by Western Dental with regard to accessibility of services and quality of care.

Look for Part III of the Dental Survey in our September Issue

Voluntary Benefits View from the Top Addendum

Following are the answers from Principal Financial’s Amy Friedrich, which were inadvertently omitted from last month’s feature on Voluntary Benefits

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

Amy Friedrich, vice president of Specialty Benefits for the Principal Financial Group: The answer to this question depends on an employee’s perspective of “extra money” and what brings them comfort or security. For employees who value protection, the cost of voluntary benefits likely isn’t seen as “extra.”  It’s seen as a good use of dollars for them and their families.  According to the Principal Well-Being Index, 74% of employees find it important to be able to buy voluntary benefits at work.

2. Considering that brokers generally make less commission on voluntary benefits, how can they offer these benefits to clients in an efficient way that provides a good return on investment for the broker’s efforts?

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

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

Amy Friedrich: The answer is easy – ask employees. Effective benefit programs are designed for employees’ unique needs. After all, they are the people who will ultimately pay the premium. Whether it is a formal survey or just an informal conversation, talking to employees can help determine the benefits that they both need and will purchase. Questions that help uncover their needs versus asking if they want coverage will provide a much better indicator of the true need.  For example, ask questions, such as ”If you weren’t working, how long could you pay bills before tapping into your retirement? A month? Three months? Six months? A year?”  In the end, when the voluntary benefit solves a specific problem, it provides real value.

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

Amy Friedrich: Benefits need to match a company’s occupational and organizational culture. For example, a bank with a majority of single, female tellers probably has different benefit needs than a law firm with older, more highly compensated attorneys. “One-size-fits-all” benefits don’t meet the needs of today’s diverse employee population.

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

Amy Friedrich: The need for benefits really hasn’t changed much over the years. As a carrier, we need to make sure we bring our products to the market in a way that the value of the benefit can be easily understood, so what’s popular and what’s needed are more closely correlated. Voluntary disability, for example, is a product that has increased in popularity. This increase in popularity probably isn’t a result of changing needs, but a result of carriers and brokers doing a better job simplifying a product historically seen  as complicated.

6. How do you choose a carrier?

Amy Friedrich: All carriers have products, but the best carriers also have knowledge, data and tools that put those products in context and support the customer experience. Benchmarking data to help employers understand how their benefit package stands relative to peers is an example of how a carrier can move beyond product and pricing to help support benefits design.

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

Amy Friedrich: The goal with voluntary benefits should be to help employers offer a more comprehensive benefit package when they aren’t able to afford to pay for all the benefits. Voluntary products fit best when they are filling gaps in employer-paid benefits.

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

Amy Friedrich: An important, but often skipped step, is taking time to create an education and enrollment plan. People consume information differently and have varying degrees of understanding of how benefits work, what they cover and more importantly why they need them. Creating a plan that takes into account the unique demographics of an employee population or the previous successes or failures of other benefits introductions can help ensure employees make an informed decision without overwhelming them.


 Helping Brokers Get Their Balance After the Supreme Court Ruling

by Leila Morris

In a landmark decision, the Supreme Court has upheld the health care reform law’s individual coverage mandate and left virtually all other provisions of the law intact. The court’s validation of the individual mandate removes one of the major uncertainties plaguing the legislation, which still faces a contentious political outlook.

In this special report, we compile expert opinions on how health reform will affect brokers and their clients as well as the carriers. Experts gave their opinions on how the law will affect the market in podcasts, press statements, white papers, blog posts, and interviews. The consensus seems to be that we won’t know how health reform will shake out until the November election. Experts also agree that brokers and private health insurance carriers are still vitally important to healthcare delivery. Finally, the entire healthcare industry needs to get on the fast track to comply with looming deadlines under the law. That means that brokers will have their work cut out for them in the coming months.

How Will Health Reform Affect Brokers In California?

Phil Lebherz, Chairman of LISI: Don’t panic. Brokers are here to stay. With the complexity of the market, brokers are needed more than ever. At LISI, we expect to lose 25% of our micro-groups under five because some will qualify for the tax credit to go to the exchange. However, we expect premiums to rise under health reform. Your monthly commission level will be consistent because you will get a lower commission, but on a larger premium. Peter Lee, the executive director California Health Benefit Exchange Board, has said that he needs brokers for the exchange to work. Commissions under the exchange will be set up the same way as in the private sector. They plan on negotiating commissions. However, we want to make sure that we are vested in our commissions. As brokers, we can say, “No, we are not going to sell it.” When the state sets up the exchange, we don’t know how good their service will be. As brokers, we advocate for clients. In contrast, state employees have no incentive to take care of people who call. For example, the uninsured have to contend with excessive wait times to reach anyone by phone to sign up for Medi-Cal. This is despite the fact that California has 27,300 employees (at a cost of $3 billion a year) whose job it is to enroll people in the Medi-Cal and foods stamp programs.

Michael Mahoney, vice President of Consumer Marketing at GoHealth ( As part of the ACA, commission paid to insurance agents was largely reduced by carriers to meet the 80/20 medical loss ratio (MLR) requirements. The Supreme Court decision does not affect that, making the amount of money per sale earned by the average agent lower in 2011 to 2012 than in 2009 to 2010. In addition, the role that agents play in the to-be-created health insurance exchanges is still largely undefined, adding further uncertainty to this market. But agents can still succeed and will find distribution platforms that are very advantageous to partner with.

Arthur Tacchino, JD, Assistant Professor of Health Insurance at The American College:  If you have not been paying attention to health reform, now is the time to start. People in the industry have been hiding from reform, hoping it would go away. Make sure you are tracking new regulations that will be coming from the Dept. of Health and Human Services, the Dept. of Labor, and the IRS.  Most likely, your clients are in a panic with limited resource to understand what health reform means to them. Employers in small to medium size companies don’t have the resources to understand their requirements under health reform. They will be looking to agents and brokers for strategies. Employers need to make decisions today in order to save confusion and money tomorrow. Health reform will eventually lead agents to transition from a commission-based model to a fee-based model with more of an advisory role. Agents need to get up to speed on how to make that transition.

How Will the Medical Loss Ratio (MLR) Requirement Affect Commissions?

Lebherz of LISI: The MLR has already dug into our commissions. But, I am waiting. I know that an insurance company will come to us and ask, ìWhy aren’t you selling our product and we will say, “Your commissions are too low. Another company is paying us more.” The market will settle where it needs to. Also, there is a fight now in Congress to take commissions out of the MLR.

Will Employers Stop Offering Health Benefits?

Truven Health Analytics (An analysis of insurance claims and wage data from 33 large employers with 933,000 employees): There is no short- or long-term advantage for employers to eliminating group health benefits in favor of Patient Protection and Affordable Care Act (PPACA) penalties.

Eliminating group health coverage is not cost efficient. Also, it would have an enormous negative impact on an employer’s competitive market position and eventually on the wellbeing of employees. Federal insurance exchanges are twice as expensive as group health plans. Employers will bear a burden of as much as $17,269 per employee (roughly $9,000 more than they spend now) to shift their benefits to federally subsidized coverage through a federal exchange in 2014. If employers eliminate group health without giving employees a subsidy to buy coverage through an exchange, their costs would fall to $2,000 per employee (the cost of fines imposed by the PPACA for not providing coverage to employees). However, each employee would be responsible for paying an average of $16,551 per year for health coverage in 2014. This cost differential should encourage most companies to continue offering group health benefits since employers must provide market value to retain skilled workers.

Lebherz of LISI: When you mess with your employee benefits, you are a dead duck. For example, Safeway employees went on strike over being asked to make a $5 copay for prescriptions. Employers have competition for good employees.  However, micro groups buy coverage because group insurance is tax deductible. That incentive will be gone if Congress makes individual plans tax deductible also. Since micro groups don’t get fined if they don’t buy insurance for employees, they may decide to pay the employees to buy insurance on their own. That way, they don’t have to do the HR administration. Expect some of those small employers to make that decision.

When Will the Healthcare Exchanges Start Signing People Up and What Challenges Does the State Face?

Lebherz of LISI: The health exchanges are planning on signing people up on October 1, 2013 for January 2014 effective dates. But what they are trying to do is really hard. They will probably announce that they are ready when they are not.

Marian Mulkey, director of the California HealthCare Foundation’s Health Reform and Public Programs Initiative: There is a lot of work to be done in California under an aggressive timeline. Luckily, our state has already taken significant steps forward. Officials will need to ensure that Medi-Cal offers timely access to care; create a user-friendly enrollment process; and provide effective oversight of private insurance markets. This challenge is intensified as

California struggles to maintain a balanced budget. Timely federal guidance will be needed if California is to meet the 2014 implementation goal. California policymakers must decide a number of important questions, including the definition of “essential health benefits” and whether to pursue the ACA’s Basic Health Program option.

How Will the Election Affect Health Reform?

Jeff Goldsmith, president of Health Futures Inc. and associate professor of Public Health Sciences at the University of Virginia: The law is very misunderstood as well as being unpopular. It is far from clear that this law will get implemented despite the Supreme Court ruling. The biggest uncertainty is the election. The law is gone if the Senate flips to a Republican majority and Mitt Romney is elected. If President Obama is reelected, but Democrats lose a majority in the Senate, Republicans have the votes to not fund the Affordable Care Act. Also, since we are still running trillion dollar deficits, a future congress might look at the subsidies contained in this law and say that we just can’t afford to do this.

Lebherz of LISI: Nothing will happen between now and the election in November. For 2012, most plans will not be changed.

How Will Health Reform Affect Premiums?

Lebherz of LISI: We expect premiums to go up substantially in California with adverse selection and more people on Medi-Cal. In addition, hospitals will charge more to the private sector. States that have implemented health reform have much higher premiums for young people. In New York it is $550 a month. The reason is that they have community rating in which everyone pays the same thing.

America’s Health Insurance Plans (A technical analysis by Oliver Wyman done on behalf of AHIP): As a result of health reform, premiums in the insured market, nationwide, will increase 1.9% to 2.3% in 2014 and 2.8% to 3.7% by 2023. Premiums for single coverage will increase $1,900 to $2,400 over a 10-year period. For family coverage, the increase would be $4,500 to $5,700. For small employers, premiums would increase $2,400 to $3,100 for single coverage over a 10-year period. Family coverage would increase by $6,000 to $7,700. For large employers, premiums for single coverage would increase $2,300 to $2,900 over a 10-year period. Premiums for family coverage would increase $6,200 to $8,000. Medicare Advantage beneficiaries would see increased costs of $16 to $20 per member, per month in 2014. Costs will increase $32 to $42 by 2023, with an average expected increase in the cost of Medicare Advantage coverage of $3,590 over 10 years. Premiums for Part D beneficiaries will increase $9 in 2014 and $20 in 2023 for a total increase of $161 over 10 years. For Medicaid managed care beneficiaries, there would be an increase in the average costs of Medicaid coverage by about $1,530 per enrollee between 2014 and 2023.

Marian Mulkey, director of the Health Reform and Public Programs Initiative for the California HealthCare Foundation: Health care spending continues to rise faster than the rest of the economy; unless that trend is addressed, any gains in coverage and access under the ACA will be short-lived.

Arthur Tacchino, JD, Assistant Professor of Health Insurance at The American College:  Premiums will continue to rise because health care reform removes some the carriers’ traditional cost containment strategies, such as pre-existing condition limitations, cost sharing, limitations, waiting time frames, and lifetime and annual maximum limits. Some of the costs will be absorbed by carriers and some will be shifted onto the employer and the consumer. In 2014, there will be a total prohibition on pre-existing condition limitations for everyone. In 2014, there will also be non-discrimination regulations and elimination of medical underwriting. That is a huge change to the industry. We will also see guaranteed renewability.

How Will Health Reform Affect Employers?

David Levine, CEO of the American Sustainable Business Council: Measures taking effect in 2014 will create more competition among insurance companies, which will drive down prices. When the ACA is fully implemented, small businesses will no longer pay more than large corporations for their insurance. However, one element in the Court’s opinion could hurt small businesses. The Court said that states need not expand Medicaid to 133% of the federal poverty level, as required under the ACA. Small businesses would benefit from the expansion since it would reduce the number of employees needing to be covered by a company’s healthcare plan.

AHIP: Employers will have more incentive to self-insure their health coverage, increasingly shifting the burden of the fees to smaller employers and individuals who must shoulder the cost of a statutorily fixed level of fees no matter the relative size of fully insured coverage markets.

Edward Fensholt, JD, and Mark Holloway, JD – leaders of Lockton’s

Compliance Services group: Employers will need to begin making significant decisions in the next several months. Regulations will be very complex, particularly on the employer mandate. We can expect a crush of complex guidance compressed into a very short time. The next stops on the health reform train include distribution of four-page plan summaries; W-2 reporting of health plan values, limits on health flexible spending accounts, and capital gains taxes on executives. The Supreme Court opinion also adds a wrinkle to the expansion of Medicaid eligibility. The Court said the feds cannot hold a state’s Medicaid funding hostage if the state doesn’t play. That could mean that more people will seek subsidized coverage in an insurance exchange or-worse – some won’t qualify for Medicaid or exchange-based subsidies.

Julio Portalatin, president and CEO of Mercer: Any employer that has not conducted a health care reform check-up should make it their first order of business. Employers need to redouble their compliance efforts, especially for immediate requirements, such as providing summaries of benefits and coverage to employees. This court’s decision reinforces popular features, such as providing coverage of dependents up to 26 and eliminating exclusions for preexisting conditions.

David Rahill, president and Sharon Cunninghis, U.S. leader of Mercer’s Health and Benefits business: Mercer polled more than 4,000 employers immediately after the US Supreme Court’s decision. While 40% said they would begin taking action now that the court has ruled, another 16% will wait until after the November elections.

Employers are already struggling with annual health care cost increases of double or triple general inflation. They are determined to avoid this tax. We’ve been seeing a lot more interest in cost-saving measures, such as consumer-directed health plans and employee health management, since the tax was proposed.

Employers must act quickly to implement new requirements for 2012 and 2013, such as providing benefit summary disclosures, complying with new dollar limits on health care flexible spending arrangements, and increasing Medicare withholding for high earners. But the rules that go into effect in 2014 will have broader implications for many employers since they are aimed at expanding access.

Twenty-eight percent of employers say it will be a significant challenge for them to comply with the new requirement that employees who work an average of 30 or more hours per week must be eligible for coverage.

With the average cost of health coverage now exceeding $10,000 per employee, a big jump in enrollment is not economically feasible for many employers. Those with large part-time populations face a difficult choice of increasing the number of employees who are eligible for coverage or having employees work fewer hours.

Still, the provision that has the most employers worried (47%) is the excise tax on high-cost plans, which is expected to go into effect in 2018.

Fifty-two percent of employers agree that the reform law has given them the impetus to pursue more aggressive health benefit cost-management strategies. Employer actions were one factor that helped to slow health benefit cost growth in 2011 compared to 2010. Fifty-four percent plan to be more aggressive about managing plan costs. While 41% do not plan to be more aggressive, it’s only because they have already been taking aggressive action to manage expenses.

Employers can expect a spike in plan enrollment for 2014 as a result of the individual mandate. But they may see enrollment level off once the state exchanges become operational. By 2014, health insurance exchanges will be operating in every state, offering community-rated insurance to certain small employers and individuals, with federal premium tax credits available to help some people buy that coverage. In the near term, employers must report the value of employer coverage on IRS Form W-2, cap dollar limits on health care flexible spending arrangements and increase Medicare withholding for high earners (those earning more than $200,000 per year). They must also comply with the reforms already in effect, such as coverage of dependents up to age 26.

Michael Mahoney of GoHealth: For the next three to five years, small firms with fewer than 50 employees will see the most immediate benefit. Small businesses that offer health insurance for employees can get a 35% tax credit for the premiums they spend for coverage. Then in 2014, that tax credit is increased to 50%. That could be a boon for smaller businesses to offer health insurance, but some may opt for a defined contribution model in which employees get a set dollar amount to purchase coverage on their own. In the next five years, the coverage that larger businesses provide most likely won’t change drastically. But eventually, we’ll probably see many big companies also move toward this defined contribution option. Because of these trends, we expect to see a large number of consumers move away from employer coverage and buy in the individual market.

Arthur Tacchino, JD, Assistant Professor of Health Insurance at The American College:  In 2013, there will be a 2,500 cap on FSA salary reduction contributions that employees can make. Employers need to let people know about this change because families use these FSA funds for dental work etc. They need to be aware of the private exchanges that are forming all over country; public and private exchanges can be available to them. In 2014, the play or pay tax will take effect. There may be some new tax liabilities for employers with 50 or more full time equivalent employees.

Also in 2014, the small business tax credit will change. You can only use the credit if you offer a qualified plan through the exchange. Also, W2s must now include the amount of employee sponsored health coverage.

What Are the Biggest Opportunities For Carriers As a Result Of Health Reform?

Jeff Goldsmith of Health Futures: The biggest opportunities are in Medicare and Medicaid. The growth in Medicare Advantage is a huge opportunity. In contrast to the Congressional Budget Office, which sees these programs shrinking, I see them doubling. They have almost 13 million subscribers now. I see the opportunity to add 12 million to 15 million more Medicare Advantage subscribers. Also, Medicaid has 53 million people, but only about 18 million of them are in managed care plans. Under almost any scenario I can think of, that 18 million number goes up.

What Are The Biggest Challenges For Carriers?

Jeff Goldsmith of Health Futures: When carriers sell through the exchanges, they will have to adjust from a business-to-business model – as with group plans – to a business-to-consumer model. The health plans will have to tell the consumer why they should chose them among all of the other companies participating in the exchange. Health plans need to provide meaningful choices for subscribers. How do you reward members for making intelligent choices? A lot of disease management initiatives have involved working around the physician rather than complementing and strengthening them, so I think that is going to be a challenge. Most importantly, a consumer driven company saves members money with network discounts with hospitals and doctors. But they also save them money by helping members make better choices and better manage health risk factors. If we can help members avoid health problems that cost them money, we will get their business and create value for them. There is a tremendous lack of information to general public about what is available to them under this law. Every health plan needs to have a strategy to deal with communication to public.

Clark Slipher, Milliman Health Practice director: Major concerns for healthcare stakeholders include adverse selection, strength of the individual mandate, new complexity surrounding Medicaid expansion, and changes to employer-sponsored insurance. Even with the individual mandate in place, the success of many insurers, under PPACA, will depend on their ability to minimize adverse selection. Medicaid expansion just became a far more complex and variable proposition. The court’s decision to allow states to opt out of Medicaid expansion creates dynamic changes across the healthcare system. Something’s got to give. Keeping rate increases under 10% may become more challenging with many of the traditional cost-control mechanisms no longer available to insurers. Complying with minimum loss ratios will pose an ongoing challenge for insurers.  Increased volatility in medical costs that may come from adverse selection could compound the difficulties for insurers. Risk adjustment is essential. A new reform calculus is required with traditional risk selection since techniques, such as medical underwriting, are no longer allowed.

A.M. Best Company: We are maintaining a negative view on smaller companies that specialize in the small group and individual health sectors over concerns about profitability due to the minimum loss ratio requirement. Many carriers have diversified over the past few years – offering products to multiple segments, including individual, employer groups, and government-sponsored (both Medicare and Medicaid managed care), which provides for more diversified membership, revenue and earnings. Several of the largest carriers have expanded with supplemental business that is more service oriented and non-regulated. These complementary products provide health insurers with varied sources of earnings and cash flow, which can enhance sustainability of operating results. However, A.M. Best has concerns about profitability for smaller companies that specialize in the individual and small group markets. Typically, these segments have a lower medical loss ratio and a higher administrative expense ratio. PPACA has a requirement for a minimum medical loss ratio. While these carriers have reduced broker commissions, their lack of economies of scale may affect their ability to lower administrative expenses enough to comply and remain profitable. Also, these companies tend to have less diversified product portfolios than those of larger carriers and could be more negatively affected by the implementation of exchanges in 2014.

AHIP: Adverse selection could be a problem in the individual and small group markets as younger, healthier individuals go without coverage, leading to a less stable risk pool and higher premiums.

Arthur Tacchino, JD of the American College: The immediate impact of the Supreme Court decision is that consumers will be receiving checks for MLR rebates in August from the carriers.

Michael Mahoney of GoHealth: Because health insurance companies have been preparing and planning since health reform was signed, we probably won’t see too many big shifts. But we will see some benefit changes to current health insurance plans that do not meet the minimum requirements for the “metallic” health plan coverage levels for 2014. Those levels include bronze, silver, gold and platinum plans. We’ll also see pricing changes as carriers plan to absorb the millions of new consumers that were previously denied coverage as they were deemed “too risky” to underwrite. With the provisions still requiring insurers to provide certain benefits and meet a specific medical loss ratio (MLR), they will continue to look for ways to provide competitive and quality products. That said, carriers will put a heavy focus on consumers. In other words, carriers are going to have to find solutions to not only attract consumers to their products, but also retain them.

What Are the Global Effects Of Health Reform?

Kelly Barnes, leader of PwC’s U.S. Health Industries practice: Implementation deadlines that once seemed far off are rapidly approaching. There is renewed pressure on health organizations to comply with rules and compliance deadlines and find innovative ways of delivering high-quality, affordable care that proves their worth. The health business is becoming a retail operation with the new state and private insurance exchanges, greater pricing transparency, mobile technology, and nontraditional competitors. Incentives for collaboration are quickening the convergence of hospitals, insurers, drug makers, physicians, and technology companies. Economic uncertainty and federal budget reductions add muscle to efforts to improve efficiency, eliminate waste, and constrain overall cost growth.

Among the provisions that are scheduled to take effect soon are new reporting and disclosure obligations for employers, benefit design changes for certain health plans, penalties for hospitals that have unnecessarily high re-admissions, and a requirement that insurers devote 80% to 85% of their premiums to medical care or refund the difference. Participants will need to accelerate efforts to compete for federal funding that will be available for innovation, health insurance exchanges, new quality measures, and other provisions of the law. To date, more than $1 billion in grants has been allocated to support state exchange readiness. Medicaid spending is expected to total $4.2 trillion from 2012 to 2021. With 23 million individuals expected to buy insurance from the exchanges and 17 million people enrolling in Medicaid by 2021, the two provisions are heightening activity in states.

Christine Eibner, economist, The Rand Corporation: The ruling keeps the key components of the Affordable Care Act in place, but allows states to opt out of the Medicaid expansion.  Should states opt-out, some individuals who would have otherwise been covered under Medicaid may instead choose private health insurance coverage for the exchanges.  So, this would potentially expand the market for private  health insurance carriers and health insurance brokers. An increase in the number of lower-income individuals in the health insurance exchanges could also have implications for exchange premiums. To the extent that the people moving to the exchanges are younger, premiums might go down, but to the extent that they are less healthy, premiums would go up.


Leila Morris is senior editor of California Broker Magazine.

Voluntary Benefits:

Strategies for Success with Voluntary Benefits

by Karen Gustin, LLIF

Voluntary dental benefits remain high on the list of popular plan options for employees and their families. According to the National Association of Dental Plans (NADP), voluntary coverage is an important part of employee benefit packages since it allows employers to keep costs in line with their cash flow while providing employees with access to dental care.

A study conducted by NADP identified four reasons why employers continue to offer voluntary dental:

1. Employees ask for it.
2. There is a link between oral health and overall health.
3. Plans are Affordable.
4. Flexible plan designs allow employees options that will meet their needs.

This interest in voluntary plans gives producers an excellent opportunity to build and strengthen relationships with employers by recommending the right dental insurance coverage.

Guidelines for Success with Voluntary Dental

For success with voluntary dental, the plan must be designed correctly to match the needs of the employee group, accompanied by excellent communication provided on a regular basis to educate employees and their family members about the services and features of their dental benefits.

Review the following four strategies to experience success with voluntary dental:

1. Listen to group members to identify needs and expectations

A thorough understanding of the demographics and dental needs of the employee group is essential to designing the plan:

1. Determine how dental benefits are used.
• Which features are used most often? Are some more popular with specific age groups?
• How many employees exceed their annual maximums?
• How many employees and their dependents use the plan?
• What is the employee turnover percentage?
• Do employees generally take good care of their teeth, with one or two dental visits each year for checkups and restorations?
• How much do employees spend for basic or major dental services?
• Research employee demographics.
• What is the average age of the employee population?
• What is the percentage of employees selecting single vs. family coverage?
• What are the primary dental needs of employees and their dependents? For example, if many employees have kids with orthodontia needs, you may want to include an ortho option in the plan.

2. Work with a Trusted Carrier Partner
Many insurance carriers offer voluntary dental products, but few actually have extensive experience to support these plans. Due to the complexity of voluntary plans, it is critical to select a carrier with an excellent reputation for its voluntary dental coverage.

Evaluate these areas:

• Claims processing and customer service
• Flexibility in plan design
• Reputation with other employers
• Provider network size
• Spectrum of plans that can be customized to employers’ changing needs
• Experience in working with employer groups of similar size to that of your clients
• Persistency and pricing

Carriers that are successful with voluntary plans are experienced in pricing plans, so premium costs remain consistent. If plans are not priced correctly and premiums have to be adjusted each year, employees quickly will become dissatisfied and drop the coverage.

3.Find the Wellness Connection 

In recent years, health professionals have reinforced the importance of regular oral health examinations as an excellent disease management tool, since many medical concerns and diseases can be detected in the early stages during regular dental checkups. When employees or their family members do not have good oral health, employers may experience increased health costs and lost employee productivity and performance due to absenteeism.

4. Communicate With Multiple Tools

Share these nine ideas with your clients for successful enrollment and satisfied participants:

1. Initiate benefit communications as far in advance of enrollment as you can. Four to even six months ahead is not too soon.

2.Target messages to reach different groups of employees; take into account multicultural and multilingual needs.

3. Employ different methods to communicate benefits information to employees, such as:
•Face-to-face meetings
• Newsletter articles
• Electronic brochures or fliers
• E-mail messages
• Online video or digital stories
• Social media, including Facebook, Twitter, and mobile apps
• Web seminars

4.Post benefit highlights and rates on company intranet along with information about any change in benefits or carriers.

5. Keep messages simple; avoid jargon and acronyms; and show costs and savings.

6. Offer incentives to encourage timely enrollment and require a response whether people choose to enroll or not. Provide an easy way to submit questions and then answer quickly.

7. Invite your insurance representative to enrollment meetings.

8. Remind employees about major life events, such as marriage or the addition of a child, when they need to re-evaluate their benefit choices.

9. Regularly evaluate employees’ understanding of the benefits information and refine messages.

Enhance Relationships by Offering Voluntary Dental

Voluntary dental benefits are in high demand by employers and employees. Producers have an excellent opportunity to grow their businesses, especially by focusing on the wellness and financial value of dental benefits. Communicate how these plans enhance employee performance, productivity, recruitment and retention. Take the time to understand employees’ dental needs and help employers educate the group about dental benefits. Not all plans and insurance carriers are the same, so work with the right partner to provide benefits and support that will match expectations.


Karen M. Gustin, LLIF, is senior vice president– group marketing, national accounts and block acquisitions for Ameritas Group, a division of Ameritas Life Insurance Corp., with headquarters in Lincoln, Neb. A leading provider of dental and vision products and services, Ameritas Group added hearing care to its product portfolio in 2008. Gustin joined Ameritas Group in 1983. She is chair of the National Association of Dental Plans board of directors and also serves on the board for the National Association of Vision Care Plans. Contact Gustin at

Voluntary Benefits – Group Plans Are in Demand

The Advantages for Employers and Employees


by Chris Covill

It’s no secret that today’s employers are facing diminishing budgets and rising health care costs. They need cost-effective insurance options to help protect employees who may face out-of-pocket costs associated with accidents or health issues that cause extensive hospital stays and loss of work.

Many organizations recognize that by offering group voluntary insurance plans, they can benefit from lower premium costs while enhancing their core plan offerings. Offering group voluntary options can also increase worker satisfaction, better protect employees, and increase employee productivity. The 2012 Aflac WorkForces Report reveals the following:

• 53% of employees are only somewhat satisfied, not very satisfied, or not at all satisfied with their overall benefit package.

• 44% of employees agree say they feel fully protected by their current insurance coverage.

• 65% of employees say that their overall benefit package is somewhat influential to very or extremely influential on their productivity at work.

Ten percent of U.S. companies are actually reducing the number of ancillary benefits options they offer in 2012. Many others are reducing a portion of their benefit options, leaving employees with fewer choices for coverage and protection. In short, employers should consider adding group voluntary insurance plans to their overall benefit offerings.

Lower Rates, Easy Enrollment, Employee Options

Group insurance plans feature group rates at little to no direct cost to the employer. Group savings can be applied to group plans that have a maximum number of participants. This a crucial feature for many companies that are trying to find affordable ways to offer competitive insurance benefits. With group insurance options, employers and employees benefit from simple and straightforward enrollment. Many voluntary group platforms only require one application, rate set, and underwriting structure.

Eligibility and Portability a Challenge

Even with a strong business case for offering group voluntary insurance, HR decision-makers still face challenges. The size of the business plays a significant role in determining whether group insurance is an option. This same decision applies to voluntary insurance programs. Smaller companies with too few employees have limited options for offering insurance plans to employees under a group platform. However, some voluntary insurance providers offer group insurance plans to businesses with as few as 100 eligible employees.

There are some key difference between group and individual plans. Under a group plan, individual certificate holders receive a certificate rather than a policy of insurance. Therefore, many of the policy terms are negotiated by the group, which has the option to terminate the policy at any time. When group plans are portable to the employee who changes jobs or retires; the plan will remain with the certificate holder as long as the group policy remains in force.

The Perks of Group Voluntary Benefits

At little to no direct cost to employers, group supplemental plans are 100% employee-paid and available on a voluntary basis. Many companies choose these plans as a cost-effective solution to help employees with the rising cost of out-of-pocket health care expenses and as a way to help attract and retain employees. Nearly half of employees say that improving their benefit package is one thing their employer could do to keep them in their current job, according to the study.

Today’s group voluntary plans include: critical illness, accident, hospital indemnity, life, dental, and disability coverage. Plans are not available in all states and benefits may vary for plans that are available.

Nearly half of employees are enrolled in a disability insurance policy through their employer and more than half of employees hold a life insurance policy through their employer, according to the survey.

Some group plans offer one rate, one application, and one plan design for each account, making them easy to understand and simple to enroll and administer. Since group plans are filed on a state-specific group platform, employees in multiple states get the same benefits and rates. And everyone can get coverage since they are guaranteed-issue provided participation requirements are met.

Group voluntary plans also complement existing benefits and offer a strategic advantage for employers. A product, such as group disability, is one of the most valued employee benefits offerings. It can supplement core employer-sponsored coverage, which can result in greater workplace performance and efficiency including higher retention, improved employee morale, and increased productivity. Consequently, employees feel more secure and better protected.


Christopher P. Covill joined Aflac in January 2012 as the president of Aflac Benefits Solutions. He leads strategic planning and direction as Aflac works with the largest national and regional brokerage firms in the nation. Chris and his team focus on developing joint partnerships with brokers and consultants, helping craft strategies for voluntary benefits and positioning Aflac as the insurer of choice. Visit, call 888-861-0251 or e-mail to learn more.

Life Insurance View from the Top

by Leila Morris

In this year’s view from the top survey, executives tell us about some very promising opportunities in the life insurance industry. In fact, life insurance sales are heading up for the first time in three years. Annual growth of whole life insurance outperformed other types of life insurance for the second consecutive year. Since consumers are demanding guarantees, the market is seeing a sales increase for single premium immediate annuities (SPIAs) and variable annuities with living benefits. Employers are showing more interest in purchasing life insurance for employees. The middle class as well as the emerging affluent make up growing niches for brokers.

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

Chris Covill, President of Aflac Benefits Solutions: We are seeing a higher awareness of risk among employees — bringing voluntary life insurance top of mind for individuals. We find that consumers are more likely to focus on term life due to lower premiums given the reduced discretionary incomes in recent years.

Eric Henderson, senior vice president, Individual Products and Solutions, Nationwide Financial: The life industry was up again in 2011 and has continued its increase this year. Total premium growth from year-end 2010 to year-end 2011 was 7%, according to LIMRA. Life insurance continues to be an important vehicle for protection in today’s economy with seven in 10 U.S. households owning it.

Michael L. Weintraub, CLU president of the retirement division of Ascension Benefits & Insurance and MDRT member: The life insurance market is faring well because it was made for times like these, along with its sibling products, such as fixed and modern variable annuities. The guarantees of appropriate life insurance and fixed annuities provide the sound foundation needed by the majority of people in the United States. Many modern variable annuities also provide protection for retirement income streams as well as potential legacy benefits. There is a cost for all of this, but to many clients, it provides value that is hard, if not impossible, to duplicate in other ways.

Scott Lilya, Colonial Life: After several years of declining life insurance ownership, LIMRA reports are showing that life insurance sales are heading up for the first time in three years. Colonial Life’s sales mirror industry trends with positive sales growth in the first quarter of this year.

Gene Lunman, senior vice president, Retail Life & Disability Insurance Products at MetLife: As with many businesses that are interest rate sensitive, the life insurance industry is facing challenges. At the same time, the need for consumers to secure adequate coverage has never been greater.

2. Has there been a significant change in product mix over the past 12 months in terms of guarantees, variable, or term? Do you see that changing again?

Chris Covill, President of Aflac Benefits Solutions: We see more movement in voluntary term life due to lower costs. In fact, the Eastbridge Worksite/Voluntary Sales Report for 2011 reported term life accounted for 17 percent of sales in 2011. Whole life tends to be a combination of both risk hedging and a savings vehicle. Again consumers have less disposable income available, there is more focus on voluntary plans.

Scott Lilya, Colonial Life: The only noticeable shift in product mix, from an industry perspective, has been that annual growth for whole life insurance outperformed other types of life insurance for the second consecutive year, according to LIMRA. In fact, sales of whole life have increased by double-digits in three of the past four years. Colonial Life’s whole life sales also experienced strong performance in 2012 and growth over the past few years.

Michael L. Weintraub, Ascension Benefits & Insurance: The middle market trend has been to use term insurance because it maximizes the death benefit per premium dollar over the period when the coverage is needed the most. This will continue as long as middle America lives paycheck to paycheck. Wealthy families are still buying survivorship policies for estate transfer, liquidity, and permanent policies. Since interest rates continue to hover in the cellar and the federal government says there are no changes coming, this puts pressure on carriers to increase premiums for all lines of coverage, or get out of the life insurance business altogether. We are already seeing this happen.

Eric Henderson, Nationwide Financial: No-lapse guaranteed UL continues to own the largest share of the life market due to consumer demand for guarantees. However, according to LIMRA in 2011, sales of no-lapse guaranteed UL declined throughout the year, quarter over quarter. While no-lapse guarantee remains a popular product, producers and their clients are beginning to be concerned again about the availability of cash values. For this reason, indexed universal life grew 43% in 2011 and continued its growth in first quarter 2012, according to LIMRA. Our new indexed product was introduced in November of 2011 and policy counts are growing exponentially.

Gene Lunman, Met Life: According to LIMRA, Individual life insurance annualized premium sales grew 3% in the first quarter of 2012, and the largest part of this increase can be attributed to whole life (WL) sales.

Our focus has been, and continues to be, to highlight the guarantees and protection offered by cash value life insurance products. As consumers look for ways to restore their retirement portfolios and plan for leaving a legacy, financial advisors and clients are turning to these products as a way to address recent market volatility and the growing appetite for guarantees. In fact, LIMRA reported that annualized premiums for whole life reached 32% in the first quarter of 2012. This is just seven percentage points lower than that of Universal Life, the product that has held the lion’s share of premium sales since 2003.

It’s also interesting to note the shift in the UL product sales mix as a share of market.  Indexed Universal Life (IUL) policies, as both a percentage of total UL sales and as a percentage of total life sales, continue to rise.  According to LIMRA, as of first quarter 2012, IUL sales have grown to more than 25% of all UL sold. trend reflects the tightening of the availability of secondary guarantee UL products from many carriers as carriers reduce their interest rate exposure.

Altogether, companies in the industry issued 5% more individual life insurance policies than they did in first quarter 2011.¹ That’s an encouraging trend if it continues.

3. Do you see growth in particular niche markets? For example, does the fact that fixed annuity sales are taking off in this economy affect your product mix or strategy?

Chris Covill, President of Aflac Benefits Solutions: Life captured the largest share of total voluntary sales by 25 percent, according to the Eastbridge Worksite/Voluntary Sales Report for 2011. Additionally, the 2012 Aflac WorkForces Report found 61 percent of workers would be likely to apply for voluntary insurance benefits if offered by their employer. The greater the access, the greater life sales will be.

Scott Lilya, Colonial Life: Our strategy has always been to focus on customer need rather than pushing a particular product. Employees have different needs at different life stages and with different family situations. We like to meet with each employee one-to-one and help that person evaluate their current coverage and what gaps might exist in their financial protection. Then we can look at types of coverage to best meet that need.

Eric Henderson, Nationwide Financial: Consumers are demanding guarantees. That’s why we are seeing an increase in SPIAs and in variable annuities with living benefits. Today’s low interest rate environment has made it difficult for some carriers to continue to provide living benefits. Over the past six months we’ve seen some of them exit the business or pull back dramatically. Nationwide remains committed to its variable annuity business for the long run.

Michael L. Weintraub, Ascension Benefits & Insurance: We are seeing more interest in employers participating in life insurance purchases for key employees. It can be as simple as paying the premium on a 20-year term policy or an executive bonus arrangement. We are also finding more sales of fixed and variable annuities than ever before.

Gene Lunman, Met Life: While our strategy continues to focus on our core products, there are various products that we see as being attractive to niche markets. The growth in the fixed annuity market points to clients wanting more stability. As such, clients who are interested in guarantees as well as asset growth in their financial plan may want to consider whole life, which can play a role in supplementing a retirement strategy. Whole life can also be useful for those clients seeking wealth accumulation while still protecting their loved ones. With no income contribution limits, tax-deferred growth and tax-favored distributions, combined with the protection of an income tax-free death benefit, whole life can be a powerful financial solution to meet client needs. Lastly, consumers who have a need for death benefit protection are also taking advantage of the guaranteed cash value and upside potential of dividends.

4. What is happening with your distribution systems? If you have an agency force, is it growing, are you hiring, and this there more attrition than usual?

Chris Covill, President of Aflac Benefits Solutions: The Benefit Broker Segment was the only distribution segment with a sales increase for 2011, according to the Eastbridge Worksite/Voluntary Sales Report for 2011. Aflac is in a unique position in the marketplace to have both a broker and career agent distribution system. For instance, Aflac recently launched a separate subsidiary, Aflac Benefits Solutions (ABS), which is focused on providing dedicated and specialized services to the nation’s largest brokerage firms. ABS is designed to foster new and expanded partnerships supported by an experienced, national team of business developers, consultants, strategic account marketers and account service executives.

Eric Henderson, Nationwide Financial: We continue to hire new primary agents in our exclusive agency system, though we have largely maintained the size of this distribution force over the past year. We’re excited about the progress we’ve made in recruiting experienced financial services associate agents within our agencies. We’re proud to have a retention rate for financial services associates well above industry averages. We’re also proud of the progress we’ve made in the past year working with Independent agents to help them grow their financial services businesses. Nationwide’s recent acquisition of Harleysville Insurance will allow us to expand this presence further in the years to come. We continue to see positive results in our relationships with nonaffiliated distribution channels including brokerage general agents; regional and national brokerages; wirehouses; and banks. The breadth and depth of our strategic distribution relationships are core strengths for Nationwide.

Scott Lilya, Colonial Life: We distribute through a career agency sales organization that works directly with employers as well as through brokers. As brokers become more involved in even smaller markets, we see that side of our business continuing to grow. Our career agency sales organization has seen very strong growth over the past couple of years and we expect that to continue. The flexibility and income potential of our entrepreneurial opportunity appeals to a lot of people in today’s economy. Plus, we’ve established a very positive reputation with brokers for our expertise and quality. They trust us to partner with them and provide excellent value and service to their clients.

Michael L. Weintraub, Ascension Benefits & Insurance: My distribution is part of a pension-producing third party administration department with a large case benefits company. We have been steadily hiring producers and analysts over the past six to nine months and expect that trend to continue. At the recent Million Dollar Round Table (MDRT) Annual Meeting in Anaheim, fellow members told me they were having a similar experience.

Gene Lunman, Met Life: In addition to benefiting from a diverse mix of businesses, MetLife also benefits from a variety of distribution channels. We remain deeply committed to our face-to-face distribution channel, which includes our career agents and third party intermediaries such as brokerage general agents, national broker dealers and banks. We believe our product mix, producer support services, wealth management expertise and competitive Broker Dealer makes MetLife a premier partner for experienced producers. We are also focusing on multicultural and women recruitment to reflect the changing demographics of our customers.

Lastly, as part of MetLife’s distribution strategy, we are building our direct channel to serve the growing needs of the middle market – a segment of the population that has traditionally been under-served.

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

Chris Covill, President of Aflac Benefits Solutions: There is a consistent shift to fewer employer-paid premiums with more buy-up options being offered to the employee.

Scott Lilya, Colonial Life: Both employer-paid and employee-paid life insurance are doing equally well. Some studies seem to indicate that carriers are seeing a shift from employer-paid to employee-paid business, but there hasn’t been enough volume of response to say definitively. Carriers need to be able to offer both options to meet different customers’ needs.

Michael L. Weintraub, Ascension Benefits & Insurance: Since employees are looking for guarantees and nothing provides more than life insurance, I think we will continue to see increases for employer paid coverage for highly compensated employees and employee-paid coverage for non-highly paid employees. This can be handled as part of a benefit package and will help show the government that life insurance agents are serving the middle market as well as serving wealthy people.

Gene Lunman, Met Life: Group life insurance sales have a strong correlation to overall employment conditions. Continued high unemployment could result in lower than normal growth in group life sales.

However, a strong counterbalance to the job market conditions – with positive growth implications – is the importance of the workplace as a source of life insurance for employees. Employees are also recognizing the role they play in providing these benefits. But as corporate budgets remain tight, we see growth opportunities in employee-paid supplemental life plans and other voluntary offerings. In fact, MetLife’s 10th Annual Study of Employee Benefits Trends (EBTS) found that 54% of employees surveyed indicated that life insurance through the workplace is an important benefit even if they have to pay for it on their own.

Brokers and consultants have a unique opportunity to work with employers to design a comprehensive benefits package, and in turn, promote the value of that benefit package to employees to help them secure the right amount of coverage to protect themselves and their families.

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

Chris Covill, President of Aflac Benefits Solutions: We are constantly assessing the effectiveness and efficiency of our systems. Benefit Broker and Career Agent segments continue to be the most productive distribution systems for Aflac products and services.

With 93 percent brand recognition, Aflac Benefits Solutions (ABS) augments the company’s solutions and services targeted at regional and mid-tier brokers. ABS services include ongoing research and insights into industry trends to national brokerage firms and consultants, tools for understanding voluntary benefits products and services, strategic marketing and enrollment assistance, and leading technology to help them better educate and serve their clients.

Scott Lilya, Colonial Life: Colonial Life continues to focus its distribution on its nationwide career agency system, which works directly with employers and through brokers. We aren’t active with alternative distribution systems.

Eric Henderson, Nationwide Financial: We are very active with banks and wirehouses and value their business and partnership. We are also highly active with the Brokerage General agent community on the life side and are piloting a program, which offers our competitive annuity solutions through them as well.

Gene Lunman, Met Life: MetLife is very active with alternative distribution systems. In addition to some of the efforts mentioned previously, we also offer point of sale support to a select few national broker dealers and banks. Through our National Accounts channel, we provide support to securities-based professionals, like stockbrokers.  We work closely with them to identify opportunities in their books of business, help them to engage clients in meaningful discussions about protection products and assist with implementing the solutions. For this channel, it is important to have credentialed professionals who can offer both expertise in case design and support throughout the sales process. That’s why we have a robust Advanced Markets organization that offers consultative expertise on a wide range of topics including charitable, estate and business planning.

7. How have recent events in the news affected the way you do business, if at all?

Chris Covill, President of Aflac Benefits Solutions: We continue to maintain a fundamental commitment to worksite distribution, and our customers see automatic payroll deductions as an advantage. For more than 55 years, Aflac has had a history of rate stability across almost all product lines.

Aflac’s investment approach helps ensure that Aflac is well-positioned to fulfill its promises to claimants, policyholders, certificateholders, employees, sales associates and shareholders. We maintain the highest ethical standards in our business practices and financial reporting. For example, Aflac has once again been named a World’s Most Ethical Company by Ethisphere® Institute, a leading international think-tank dedicated to the creation, advancement and sharing of best practices in business ethics, corporate social responsibility, anticorruption and sustainability. Aflac is the only insurance company that has maintained a spot on the list for six straight years, every year since the inception of the award.

Michael L. Weintraub, Ascension Benefits & Insurance: Recent events have caused me to spend more time doing due diligence. Years ago, I thought it wasn’t necessary because the institution of life insurance seemed bullet proof or because the rating services were thought to be the guardians for consumers, agents, and brokers. When we found that neither was the case, we needed to do our own research to make proper disclosure to our prospects and clients. This is an important added value for those who become our clients.

Eric Henderson, Nationwide Financial: Nationwide is highly diversified, with a robust property and casualty business and a full line of financial services products. We continue to be a strong and financially stable company with midwestern values that producers and customers can rely on now and in the future. Our risk management strategy and financial strength have positioned Nationwide to weather the storm of recent financial market turmoil and remain focused on our long-term strategy of helping people prepare for and live in retirement.

Scott Lilya, Colonial Life: The slower economy and unemployment have affected sales at the worksite, resulting in lower overall sales growth volumes industry-wide. But this really hasn’t changed the way we do business. We’ve continued to see sales growth throughout the recession and the persistency of our business is strong, which indicates employers and employees continue to see value in the products and services we offer.

Gene Lunman, Met Life: MetLife continues to stand apart as a strong, stable leader in the financial services industry and is well capitalized, with a strong balance sheet. Through our acquisition of Alico from AIG, MetLife is now a global company that operates in more than 50 countries around the world.  Our investment portfolio is well balanced and defensively positioned; our excess capital position and financial strength ratings are among the highest in the industry; and I believe we have benefited from a “flight to quality” by both financial professionals and their clients. We preserve market share and differentiate ourselves from other companies through our disciplined approach to risk management and strong capital position.

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

Chris Covill, President of Aflac Benefits Solutions:  Health care reform is top of mind for everyone in the industry. Aflac’s voluntary group and individual insurance plans are not major medical insurance, the changes resulting from health care reform and the U.S. Supreme Court ruling do not have a direct impact on our business or the need for our products. Aflac plans continue to provide invaluable protection for American families in any health care system.

We have seen this in Japan, a country that has had a national health care system for many years. Our policies are highly regarded by the citizens of Japan, and in Japan, Aflac is the No. 1 insurance company for individual policies.

Eric Henderson, Nationwide Financial: The increasing federal deficit is of great concern to all of us. As Congress works to address the deficit, we must continue to be vigilant to protect the tax benefits of life insurance, annuities, and qualified retirement plans. We’re watching the debate closely over estate tax exemption as well as the tax-deferred status of these important retirement savings and protection solutions.

Scott Lilya, Colonial Life: Obviously, health care reform is generating a lot of uncertainty in the benefit marketplace, but the recent Supreme Court decision doesn’t change the needs of American workers for voluntary insurance and stronger knowledge about their workplace benefits. Voluntary insurance coverage is still a very relevant part of employee benefits. It provides employees important financial protection as more risks and costs become their responsibility. As far as life insurance customers, declining life insurance ownership over the last several years means there is strong opportunity in all segments and niches.

Michael L. Weintraub, Ascension Benefits & Insurance: The biggest concern is the continuing threat of taxing life insurance death benefits and cash values. This will continue to be an issue as long as the government thinks that the only people who buy permanent life insurance are wealthy. To make substantive inroads into the middle market, we need to have an industry-wide campaign to educate consumers of the need for life insurance. The average age of a widow in the U.S. is not a female in her 70s or even in her 60s, but a woman in her 50s with many years still to live. Our industry must educate the masses about their need for reasonable amounts of life insurance and the low cost of coverage today. We also need to make it easier for consumers to get the amount of life insurance they need.

Gene Lunman, Met Life: There are a few we are watching very closely. For example, the deficit and revenue picture at the federal level has caused the industry to remain alert to make certain that the tax treatment of life insurance products is not adversely impacted either in an end of year Lame Duck session of Congress, or when tax reform is expected to receive broader consideration in 2013.  Another issue we’re tracking is the status of estate and gift taxes which are expected to receive consideration in 2012 or 2013.  With possible movement on this issue in either the House or Senate MetLife is actively engaged at all levels of the business with a unified strategy industry-wide.

Also of interest is financial services regulatory reform.  We are currently reviewing the comprehensive financial services reform legislation to fully evaluate its implications for MetLife.  As it calls for several studies yet to be completed and regulations yet to be written, it is not yet certain what impact final rules could have on MetLife, the industry or policyholders.  The important outcome here is that insurance companies not be measured by bank-centric rules or financial measures.

As far as niches or opportunities, many financial professionals continue to focus on the baby boomer 55+ market exclusively.  By focusing on the emerging middle market, which includes both the gen x and gen y markets ages 25 – 45.  These markets present an excellent opportunity for brokers to grow new business and may yield cross selling opportunities in the future as these markets mature and their financial needs change.

9. Speaking of life insurance customers, are their certain niches or age groups that brokers should put more of a focus on?

Chris Covill, president of Aflac Benefits Solutions:  Throughout my career, I’ve had the good fortune of leading a number of sales teams. In my experience, the traits of a successful broker boil down to these basics:

• Someone who seeks to expand their comfort zone,

• Someone who has a keen respect for process,

• Someone who is a team player and

• Most importantly, someone who genuinely cares about the outcome for their client.

Eric Henderson, Nationwide Financial: According to LIMRA more than 58 million or half of U.S. households say they need more life insurance. This represents a significant coverage gap for middle class Americans. Brokers can successfully build their businesses to meet the needs of this broad group of consumers. Brokers who are winning in this business are the ones who focus on a business model that is repeatable and scalable with a heavy emphasis on education around the protection gap. The emerging affluent also make up a growing niche for brokers. These individuals have high incomes and are focused on accumulating assets. These individuals seek life insurance solutions to allow their families to maintain their standard of living should the worst occur as well as accumulation strategies that allow them to amass wealth. Brokers winning in this business offer a high touch, customized approach to meet client needs.

Gene Lunman, Met Life: The qualities I see in all the successful brokers that I have had the pleasure to work with are professionalism, integrity and expertise in multiple products. They also need to have the interpersonal skills to be able to work well on a team that can address the holistic planning needs of clients today.

Successful brokers are usually credentialed professionals who always work towards upgrading their skill set to become better at what they do.  Many are involved in the industry through associations and are actively involved in their communities as well.

An increasingly important trait is the ability to work with multiple generations of people when solving both individual and business planning needs. Providing either estate or business planning solutions may include helping to educate multiple generations of clients, as well as their advisors, about financial products. Successful financial professionals are able to simplify complex strategies to make them easy for multiple generations to both understand and appreciate the value of the solution.

Brokers who demonstrate these traits are well positioned for success.

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

Eric Henderson, Nationwide Financial: Our most successful brokers are passionate about their role in their client’s lives and genuinely believe in the services and products they provide to their clients. Brokers really have to fill two key roles these days – as a financial advisor and a psychologist. Clients who are wary of economic turmoil and hesitant to trust financial planners need someone who will truly listen to them, address their fears or concerns, and put a reasonable plan in place that makes them feel protected and prepared for their future needs. Brokers can have expert knowledge on the products they sell, but without an empathetic mindset, they’re not likely to be able to nurture and maintain long-term client relationships.

Scott Lilya, Colonial Life: Successful worksite brokers have much higher levels of effectiveness by leveraging core benefit communication and education as well as having a turnkey enrollment organization. These brokers also use innovative solutions, such as cost containment strategies, benefit administration, and consumer-driven product solutions. Some of the most successful brokers we work with understand the value of partnering with other experts to provide the best possible solutions for their clients. Instead of trying to be experts in everything, they find the highest-quality providers and carriers to work together to meet customers’ needs. Small to mid-sized brokers, in particular, typically don’t have the team to conduct enrollment, benefit communications, and education themselves. Our ability to partner with them and enhance their scalability is what allows both of us to be successful.

Michael L. Weintraub, Ascension Benefits & Insurance: Successful brokers are self-starters, personable, intelligent, persistent, and helpful. Most importantly, they know everyone!


Leila Morris is senior editor of California Broker Magazine.

Ancillary Benefits See a Surge of Growth in the Personal Plan Market

by Phillip M. Needleman

The marketing of ancillary benefits has taken many twists and turns over the past several years. Beyond the machinations brought on by health care reform, external factors are working to change the way benefits are viewed and purchased by consumers. The first major game changer involves the skyrocketing costs of group benefit programs. The second is the fact that the average consumer has become more sophisticated due to access to first-hand information on the Internet. Finally the Internet, itself, has had a dramatic affect on marketing and direct to consumer access to products.

First let’s address the first issue – rising coverage costs. As major medical insurance premiums stretch the budgets of employers across the country, many have opted to convert their ancillary coverage offerings (dental, vision, chiropractic, life, etc.) to voluntary status or remove them altogether. This has lowered the participation on these programs thereby jeopardizing the availability of the programs to all employees.

Employees will often then seek coverage elsewhere when they no longer have the opportunity to acquire benefits through their employer. This brings us to point number two — the increasing sophistication of the consumer. When ancillary coverage is no longer available from an employer, many consumers turn to their broker, or more often, to the Internet for information and access to what many view as primary benefits. At this point, many potential plan members put on their consumer hats to shop and compare plans for coverage levels and, more importantly, value.

In this way, the Internet is the great equalizer since a great deal of product and service information is available online. Consumers, who have experienced several years of employer sponsored coverage to determine the value of a particular benefit, now have access to compare plan benefits and rates online. They understand which are the most cost effective, covering the desired benefits at fair pricing.

Brokers who have embraced the technology that is available to them are making significant advances, particularly in the personal plan marketplace. For every 10 employees who have lost ancillary benefits, six will shop for similar coverage online or with their local health plan broker. In fact, we have experienced exponential growth over the past two years in the personal plan segment. The Internet has been a wonderful tool for both large corporate and individual brokers who place embedded links within their own Website. They are able to drive sales 24 hours per day, seven days per week.

If you have not yet begun to offer individual coverage to your clients who downgrade or eliminate their ancillary benefits, you are missing exceptional pass though opportunities and leaving the door open for other brokers to walk through.


Phillip Needleman, senor vice president of Vision Plan of America, is a licensed broker and third party administrator who as been working in the ancillary employee benefit and individual ancillary benefit market for more than a decade. 

Life Settlements – Deconstructing a Life Settlement Offer

 Behind-the-Scenes Look at Creation of a Settlement


by Stephen E. Terrell

Last month, our CEO Wm. Scott Page appeared on FOX Business Network with Stuart Varney on “Varney & Co.” to discuss life settlements as a financial alternative for seniors concerned with affording retirement. In preparation for the live television studio interview, producers pressed us for a standard value of a typical life settlement.

As anyone in the industry knows, settlement offers vary greatly due to life expectancies and premium costs. However, for the sake of delivering concise, consistent message points, we chose to cite a statistic gleaned from the latest Conning Research & Consulting 2011 study on life settlements: The average life settlement value is 20% of the life insurance policy face value. Little did we know that this statement would unleash a tidal wave of consumer backlash, with many taking to our Facebook page to warn the masses and publicly decry settlements by drawing focus at the discounted percentage off a policy’s face amount.

At first glance, 20% might seem like a grossly unfair cut of a policy’s potential value. However, one should compare this value against the average cash surrender value, which amounts to only 10% of a policy’s face value. One should also remember this 20% average value is just that, an average. As we already mentioned, every settlement is unique. Lastly, life settlements serve as an option for those that do not want or do not need life insurance. Almost 90% of life insurance policies in America lapse due to unpaid premiums or a decision not to renew a policy. The overwhelming majority of policyholders receive little or nothing, after decades of paying premiums.

Even after properly addressing consumer misconceptions about Conning’s 20% average settlement value, it’s now clear providers need to advocate for more widespread education and awareness about life settlements. Consumer reactions to the Conning research, however misinformed and out of context, underscore just how little most people understand about how a life settlement transaction is constructed. Even agents who are aware-of or familiar with settlements, may not be able to explain to a consumer why the average settlement value appears highly discounted from the face value of a life insurance policy. This is a problem. All agents should be able to communicate a consistent message about the option of a life settlement to consumers – something, perhaps they cannot do without first understanding for themselves, all of the risks, costs and financial rewards for all parties involved. Therefore, with the intent to clarify confusion caused by contradicting messages, and dispel skepticism on a relatively new option for unwanted life insurance, we deconstruct how a life settlement provider reaches an offer.

To better understand the costs of a life settlement offer for a provider, let’s evaluate a common example. Below is an illustration of provider costs for a settlement offer for an 80-year-old with a 10-year life expectancy and $1 million policy.

In this example, the settlement provider offers $200,000 to the policyholder (This reflects the Conning 20% industry average). If the life expectancy remains accurate, the total cost for the settlement provider equals $632,000 after 10 years. But if the policyholder outlives the predicted life expectancy by just four years, the total cost at year 14 equals $1 million. With the cost now equivalent to the policy’s pay-out, the provider breaks even on the settlement. If the policyholder outlives the life expectancy by eight years, the total cost at year 18 equals $1.5 million. As you can see, the provider takes substantial risks. If the seller lives past age 98, the provider loses $500,000. What exactly do settlement provider “costs” cover? Costs comprise: the offered settlement amount (in this example, $200,000), premium payments – providers pay policy premiums for the rest of the policyholder’s life, underwriting costs, medical evaluation costs, administrative fees and tracking costs.

While eye-catching headlines portraying life settlements as preying on desperate and unsuspecting grandmas might sell papers, the fact is that this is just not true. Settlements have provided a legal and safe financial option to thousands of consumers for quite some time. In 1911, Americans won the right to sell unwanted life insurance policies in a unanimous Supreme Court opinion penned by Justice Oliver Wendell Holmes,Jr.  In the 1980s, life settlements gained traction as financial relief for HIV/AIDS patients with life insurance policies. As revolutionary advances in healthcare greatly improved the length and quality of life for patients diagnosed with HIV/AIDS, the industry shifted focus to patients suffering from cancer and other terminal health conditions. Today, life settlements serve as a financial lifeboat for baby boomers and seniors concerned about affording retirement.

Life settlements are not for everyone, but for those who no longer need or want life insurance coverage, a settlement is likely the smartest option for the policyholder and the agent. Funds from a settlement can drastically alter a client’s financial situation. Even for seniors who currently enjoy a financially prepared and comfortable retirement, a settlement returns more funds to the policyholder than a cash surrender or lapsed policy. Agents also benefit from settlements, as they continue receiving yearly commissions on the purchased policy. The bottom line is life settlements do not function like an ATM machine. They are complicated transactions, with numerous factors influencing a settlement offer. The discount off the face value reflects the costs and real risks involved in a life settlement, but the important take-away here is that those costs and risks fall on the provider, not the policyholder or the agent.

Who qualifies for a life settlement?

While every case is different, and factors such as life expectancy and premium costs seriously impact a person’s eligibility for a life settlement, most ideal candidates share several characteristics:

• Candidate has maintained an active life insurance policy for more than two years

• Policy has a minimum face value of $250,000

• Candidate is 70 or older

• Policyholder no longer needs or wants life insurance coverage

Common reasons for no longer desiring coverage include the consumer’s children already graduated from college, he or she is having a hard time making ends meet and/or he or she recently retired or left a company which provided key man coverage, or another employee life insurance coverage. Providers offer settlements on a diverse array of life insurance policies, including most:

• Whole Life

• Universal Life

• Term Life (Policy must be convertible term with a minimum face value of $250,000)

• Joint Survivorship

• Employer-Based Group (Group policy must be convertible into an individual policy)

Who does not qualify for a life settlement?

Policyholders who still need life insurance coverage are not a match for a life settlement. Common reasons why an otherwise eligible candidate still desires coverage include: Dependent(s) still rely on the policyholder for financial support; the policy covers estate taxes after his or her death; or the policyholder is financially secure or prosperous, with no debt and with abundant savings for retirement.


Stephen E. Terrell is Senior Vice President of Market Development and Branding of The Lifeline Program, a life settlement provider based in Atlanta, Ga. Terrell oversees all aspects of marketing including the P3 Program (Production & Performance & Profit) enabling agencies and agents to build a new market with life settlements, broadening revenue and increasing commissions. For more information, call 770-724-7300 or visit Or follow him on Twitter @LifelineProgram.

Self-Funding – SB 1431 & Self-Funding for Small Employers: What’s the Fuss All About?

An in-depth look at the Impact of Limits on Self-Funding that SB 1431 Imposes for Small Employers and the Consequences – Unintended or Otherwise.

by Mark Reynolds, RHU

It has been sometime, probably 1992, since any California insurance related legislative action has attracted the level of concern as does SB 1431. However, it is difficult to properly estimate the level of awareness employers, employees, brokers, and others in California have toward Senate bill 1431.

Because of this, it is tough to accurately state whether or not people truly understand just how dramatic the financial effect SB 1431 will have on tens of thousands of small employers and hundreds of thousands of employees.

The effort to modify or defeat this bill faces unprecedented obstacles and in the shadows of PPACA, the bill has tremendous forward momentum even though most legislators are unaware of the effects it will have on small employers. If you had been present at the July 3rd hearing of the California Assembly Health Committee, you would have witnessed the opposition efforts on behalf of the California Chamber of Commerce, California Association of Health Underwriters, Healthcare Administrators Assoc, Self Insurance Institutes of America, CIGNA, HCCA,  as well as many California TPAs, independent brokers, and small employers. You would have also witnessed the efforts of SB 1431’s supporters in the form of California Insurance Commissioner Dave Jones, Blue Shield of California, Kaiser, as well as Health Access.

But what is all the fuss about? What is it about this legislation that causes such concern and is that concern warranted? How will the limitations within SB 1431 affect small employer’s ability to control healthcare cost and the benefits small employers provide? Who is supporting SB 1431 and why would those groups want to limit the choices small employers have when selecting a health plan?

This article will address these issues. We will point out specifically how SB 1431 will limit choices and the consequences it brings if it is implemented. Clearly, your author is opposed to SB 1431, but I will endeavor to present both sides with an equal presence

First Let’s Frame The Discussion

SB 1431 is written with guidelines to place limits on stop-loss policies purchased by small employers that wish to self insure a portion of their company’s health plan. The small employer is defined in SB 1431 as two to 50 eligible employees until January 2014, at which time, the bill would increase the definition of a small employer to two to 99 eligible employees. It also places requirements and limitations on the underwriting and renewal of these products.

In its current form, SB 143 states that a small employer would not be able to buy a stop-loss policy with a specific deductible of less than $60,000. Further, the stop-loss policy would be required to calculate the aggregate protection at no less than $15,000 times the number of covered members. Both of these limitations would make the risk to small employers too punitive to consider; therefore small employers will not be able to buy or administer their self-funded group medical plan.

Three points of reference for those not heavily involved in self funding:

1. Employers can now purchase stop-loss protection with specific deductibles as low as $10,000. Employers may choose to purchase a policy with higher specific limits, such as $20,000 or even $30,000, but the point is that employers now get to make that choice for themselves.

2. Employers that are buying aggregate policies frequently see the aggregate factors and risk corridors as low as $4,500 per member and 115% of expected claims.

3. SB 1431 would prevent an employer with 49 eligible employees from purchasing the same stop-loss policy as an employer with 51 eligible employees could purchase.

As even the casual observer will note, these limits on specific and aggregate coverage will deter small employers from self-funding their health plans. Small employers will have no choice but to purchase their group policies from fully insured plans or from the Exchange with the limits imposed by PPACA. The other alternative will be to discontinue the employer’s group plan, pay the penalty, and force employees on to the state plan.

What Is So Scary About SB 1431 For Small Employers?

To address this we need to look at PPACA and what 2014 will bring as well as what benefit plans will look like in January 2014? Let’s start with a few facts about the limits within PPACA. While everyone talks about the Essential Benefit Package, unlimited lifetime limits, kids to 26, etc., those are not the concerns come January 2014. There are many issues within PPACA that can cause debate, but let me address two that are directly linked to the consequences of SB 1431 along with a third issue which becomes a multiplier to make the consequences worse.

The first is the modified community rating imposed on fully insured plans by PPACA. Every reasonable estimate projects that this guideline may cause rates to increase by as much as 40% due to the limit of three rating brackets. Therefore, small employers should anticipate a significant rate adjustment on any fully insured health plan.

The second issue is due, in part, to the plans employers provide their employees today. The most prominent, if not popular, plans sold over the past four years have been plans with deductibles of $2,500, $3,000, $3,500, $5,000, and even $10,000. Thousands of employers have enrolled in plans like these regardless if they wrapped or not. The reason these plans are so prominent is price. Third, PPACA will limit the fully insured deductibles for plans to no greater than $2,000. This is key; it is the multiplier that I mentioned above.

So the multiplying affect means that the tens of thousands on fully insured plans with deductibles of $2,500 or above will have their rates increased for two compounding reasons: one, to get the fully insured deductible at or below $2,000 and two, the affect of modified community rating.

Supporters of SB 1431

The bill was authored and carried by Senator Kevin De Leon, but it is the support of Insurance Commissioner Jones along with Blue Shield of California that provided the language, background, and its momentum. The supporters of SB 1431 have been very honest about why they support the bill.

As presented in public hearings, the supporters state that if the limits within SB 1431 are not imposed than employers with younger members or healthier members will purchase self-funded plans. Commissioner Jones stated that this would leave the older groups and unhealthy groups to purchase coverage from the Exchange. In its presentation Blue Shield of California similarly stated that if small employers are allowed to self-fund their health plans, the younger healthier groups would purchase self funded plans leaving Blue Shield exposed to cover the older unhealthier groups. It was also suggested that unless self-funded plans were limited by SB 1431 that employers might provide plans with lower benefits or ìstripped outî plans.

However, the presentation during the public hearings was predominantly centered on younger, healthier employers being able to buy outside of the Exchange or fully-insured plans and therefore small employers must be limited on what they can purchase.

What does this mean to California’s employers, employees, and economy?

If SB 1431 is passed then many thousands of California’s small employers will be put into a predicament.  If those employers are currently insured under a traditional PPO or HMO plan then those employers will see their premiums increase as stated above. The modified community rating increases rates 30-40%. If those employers are covered by an HDHP then those employers will see their premiums increased by the multiplying effect explained above and could easily be 60%. Employees cost under either scenario will increase.

So how would one expect this to affect our economy, our employers, and our covered employees? The short answer is not good. SB 1431 is the only insurance bill this session that promises to increase insurance costs. It makes one ask, “Why would our legislature pass a bill that will increase cost for thousands of small employers at a time when our economy is fragile and possibly on the verge of a second recession?”

Maybe now is a time for a good analogy. If our legislature were considering building a one-mile long road or canal across a wetland of even farmland; how many environmental impact studies, traffic studies, or density studies would be conducted and how long would this process take? Answer: It’s impossible to predict.

Yet, not one study was conducted concerning how SB 1431will affect small employers and their employees. SB 1431 was created to protect the Insurance Exchange yet no one has conducted any feasibility studies or statewide tests or estimates to its affect on our small employers and their employees.

The Employee Retirement Income Security Act and its Preemption

ERISA is probably the most often noted and most often misquoted law in the insurance and healthcare industries. It is said that anyone who portrays themselves as an expert on ERISA then is either crazy or thinks you are. ERISA, through the Dept of Labor and IRS, provides the oversight and regulations for ERISA. One of the most often quoted statements about ERISA involves the ERISA Preemption – more about that in a bit.

ERISA is the regulatory guide for self-funded and stop-loss plans, but is a tool often used by fully insured plans. Fully insured plans started inserting ERISA statements in the back of their Certificates of Insurance, in the late 1990s, in an attempt to have any legal action against the plan, including punitive damages, take place in Federal court rather than state court. Check out any cert book you have lying around and you will see it.

Now, at the risk of over simplifying the ERISA Preemption here is what it means: “No state can interfere with an employer’s ability to administer its self funded plan.” So, if SB 1431 is passed in its current form, or any form for that mater, it will be argued in court that the State of California is interfering with a small employer’s ability to administer its self-funded plan.

The bill’s supporters point out that other states have implemented similar limitations without being sued. That is relatively true, but not exactly. The two states that have passed bills with limitations are Delaware and Oregon. There are two basic reasons why those states have not been tested. First, the limits that these states implemented are very low and present no real restriction to small employers. The second reason is, with all due respect to Oregon and Delaware, these states are small in comparison to California. Carriers, industry associations, TPAs etc. see no reason to waste litigation dollars in states where the population is low and the limitation insignificant.

That is not the case here in California. The industry has stated collectively that, if passed, litigation will be pursued. Small employers should be the ones carrying the litigation since the bill affects small employers so severely but it will be the various stake holders in the insurance and stop-loss industry that pursue such action. It would be good to avoid litigation since California has enough budget issues and cannot really afford such a significant legal cost. Plus, litigation will be very public and the press will likely be on the side of small employers.


You have heard it said that the closer one gets to watch our political process work, the further one wants to be from it. This is the situation with SB 1431. How can any legislator see wisdom in limiting an employer’s choices when it comes to a health plan? If an employer with 51 employees can purchase a $10,000 specific stop-loss policy then why can’t an employer with 49 employees do the same? There are many such questions but unfortunately we have yet to hear a reasonable answer from supporters of SB 1431.

Most of us are not politically active by nature. Plus, most of us are busy just trying to do our job to the best of our ability and don’t have time to be an activist. So, what can we do? If the bill is still in play as you read this article then the answer is that you can do more than you think. A simple phone call to your local state senator or assembly member is a start. Place a call to the Governor’s office. Call your employer clients and ask them to do the same.

As I stated in the introduction, SB 1431 presents the most significant restriction on small employer health plans since the early 1990s. As an industry we can lead small employers and their employees in understanding SB 1431 and the affects it will have on our economy, on employers, and most importantly on the hundreds of thousands of employees covered or who will be covered by self-funded plans.


Mark Reynolds is a member of the team at BEN-E-LECT, who’s employer driven health Plan model provides MERPs, HRAs, and Self-funded plans to thousands. BEN-E-LECT’s ERISA or E-Based health plans help employers from 2-500 lower and control the cost of their group health plans. BEN-E-LECT’s Employer Driven Health Plan model has been lowering employer cost since 1996.  BEN-E-LECT’s corporate office is located in Visalia, California. Mark can be reached directly at 559-250-2000 or