Aug2013CoverHealth Care Reform– A Look at the Coming Changes in HSAs, Health Tax Credits and Ancillary Benefits
The Ripple Effect of the Affordable Care Act
Consumer Driven Health Plans – A Health Reform Home Run

by Leila Morris  •  Enrollment in CDHPs has more than tripled over the past six years, according to America’s Health Insurance Plans (AHIP). And recent regulations under the Affordable Care Act are making these plans even more attractive to employers.
Selling All the Bells and Whistles
How Health Reform Creates Opportunities for Ancillary Benefit Sales
by Ron Goldstein  •  As the core health insurance products become more highly regulated, selling such products as dental and vision has the potential to contribute more than ever to a broker’s bottom line. Whether you’re already offering such benefits or looking to add them for the first time, brokers seeking new revenue streams and ways to set them apart from the competition should consider the potential of ancillary benefits.
How Can the Health Tax Credit Help Employee Benefit Agents?
by Garrett Viggers • One of the biggest changes coming is the emergence of the guarantee-issue individual market. Find out why employee benefit brokers would be wise to work with an internal mandate and compass to educate employers of all group plan options as well as the new guarantee-issue individual market inside and outside the individual exchange.
Answering Your Clients’ Questions About Health Reform
by Sean O’Connor  •  It would be wise to consider each of the health care costs and options available to your clients so that they employees are fully prepared when key provisions of the Affordable Care Act roll out.
Tailor Your Vision Sales to Your Client’s Occupation
by Anthony Glaub  •  You wouldn’t wear jeans on a sales call to a law firm any more than you would wear a suit and tie when visiting a factory. But shouldn’t you adapt your sales approach for vision benefits as well?
Medicare–You Should Care About Medicare
by Barry Streit, CLU, ChFC
Thanks to a massive wave of aging Baby Boomers, constant political debate and news coverage about healthcare, and the upcoming implementation of key parts of the Patient Protection and Affordable Care Act (PPACA), also known as “Obamacare,” Medicare will be front and center for many of your clients or their family members
Medicare–Go Retail During Medicare’ Annual Election Period
by Erin Ackenheil  •  There’s an old adage that if you want to catch fish, you’ve got to go where the fish are. The same could be said for sales prospecting. For brokers, that means leaving your home or office and getting out into the community.
Life Settlements–Fractional Life Settlement Shares – A Unique and Growing Investment Opportunity
by Ken Morris  •  Fractional ownership in life settlements is a unique investment opportunity for a qualified investor. When structured correctly, life settlements have the potential to outperform most other leading investments. In these tough economic times, investors, both young and old, are searching for ways to mitigate risk and still have the potential to earn equity-like returns.
Dental – Dental Judgement Day
Get Help with the Tall Order of Deciding  on Dental Plans with our Annual 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.  Read the second batch of  responses and sell accordingly. Part III of the survey will appear in our September issue.
Life Insurance–View from the Top:
Top Life Executives Give Their
Views on the Industry
Top executives in the life insurance industry answer questions as to where they think today’s industry is headed.

A Look at the Coming Changes in HSAs,Health Tax Credits and Ancillary Benefits…
The Ripple Effect of the Affordable Care Act

Health Savings Accounts–Consumer Driven Health Plans: A Health Reform Home Run

by Leila Morris 

When it comes to today’s health benefit market, consumer driven health plans (CDHPs) are hitting the ball out of the park. Enrollment in CDHPs has more than tripled over the past six years, according to America’s Health Insurance Plans (AHIP). And recent regulations under the Affordable Care Act (ACA) are making these plans even more attractive to employers.

Employers are turning to CDHPs for lower cost options and to comply with ACA requirements, such as minimal-essential coverage, affordability, and the Cadillac tax, according to a recent white paper by William J. West, Jr. MD of HealthEquity.

Paul Fronstin of the Employee Benefit Research Institute (EBRI) say the plans will get a boost from the excise or “Cadillac” tax on high-cost health plans, which takes effect in 2018. A 40% Cadillac tax will be imposed on the value of health insurance benefits exceeding $10,200 for individual coverage and $27,500 for family coverage. This will drive employers toward CDHPs, which offer less generous coverage.

Essential Benefits

A recent final rule also boosts HSAs. When determining -whether a plan offers essential benefits under the ACA, employers can now include their contribution to an employee’s HSA (employee contributions don’t count). Under the ACA, insurers must offer plans that fit within four levels of coverage: The 60% minimum level is a bronze plan; a 70% value is a Silver plan, an 80% value is a Gold plan, and a 90% value is a Platinum plan.

“HSA plans are gong to meet these minimum standards easily,” said Roy Ranthum, president of HSA Consulting Services.  In a podcast by the Institute for HealthCare Consumerism, Ranthum said, “There is no regulatory hurtle in offering HSAs inside or outside the exchanges like we thought there might be.” Even with the very highest deductible that can be offered, an insurance plan, alone, can qualify as a Bronze plan. Adding an HSA bumps up the value of a plan from Bronze to Silver or from Silver to Gold. “Since we are meeting the minimum threshold without the contribution, adding the contribution is really frosting on the cake,” he added.

Higher Deductible Limits

West says that a new contribution cap on flexible-spending accounts (FSAs) may drive even more employers to HSAs. Employees can now contribute only $2,500 to an FSA, which is only half the previous maximum (Employers can contribute additional funds).

In contrast, contribution limits have increased for HSAs. The maximum annual HSA contribution for individual coverage jumps from $3,250 to $3,300 for an individual for calendar year 2014. The maximum for family coverage jumps from $6,450 to $6,550. Also, HSAs have no use-it-or lose-it requirement; they earn interest; and they’re easier to administer compared to FSAs, according to West.

The annual maximum out-of-pocket expenses (deductibles, co-payments and other amounts) for CDHPs will increase from $6,250 to $6,350 for individual coverage and from $12,500 to $12,700 for family coverage. The minimum CDHP deductible limits will remain the same. Individual coverage is $1,250 and family coverage is $2,500. (For CDHPs with non-calendar plan years, the minimum deductible and out-of-pocket limits are in effect on the first day of the plan year).

The Medical-Loss-Ratio Limit

Not all of the ACA’s provisions are favorable for HSAs. A study by Milliman Inc. finds that the medical-loss-ratio (MLR) limit will pose a challenge, especially in the individual and small group markets. Under the MLR, large group insurers must spend at least 85% of premium dollars on claims and activities to improve health care quality. Individual and small group insurers must spend at least 80%.

The problem is that individual and small-group CDHPs are not likely to spend 80% of premiums on medical claims because many members never reach the $5,000 deductible in a plan year. CDHPs often cover medical services at 100% for members once they reach the deductible. If an employee reaches the deductible, claims costs for that year are typically higher with a CDHP than with a traditional health plan. But, MLR regulations don’t take this into account.

ACA provisions could limit rate increases for CDHPs and require them to issue rebates if they do not meet minimum MLR requirements.

HSAs supporters are calling on the Obama Administration to modify minimum medical loss ratio requirements. Milliman actuaries say that, without MLR modifications, it may be unfeasible for insurers to offer high-deductible plans with HSAs. “If Milliman’s predictions are correct, then it’s quite likely we will see fewer CDHPs offered in states where MLR waivers have not been approved. That, in turn, will chip away at affordable options that are especially attractive for young, healthy consumers, the very people that the CDHP risk pools need to survive,” according to a blog post by Joel Peyton, an analyst at HealthLeaders-InterStudy.

Higher Penalties for Non-Qualified Medical Expenses

The ACA now prevents health savings accounts from being used to pay for over-the-counter purchases. Also there are higher penalties for using HSA funds for non-qualified medical expenses for people under 65 (unless totally and permanently disabled). The penalty went from 10% to 20% of the funds used for nonqualified expenses. Funds spent for non-qualified purposes are subject to income tax.

The Effectiveness of CDHPs 

A Cigna study reveals that CDHPs offer several advantages over traditional PPO and HMO plans:

• When employers offered only a CDHP option, -individuals improved their health risk profile by 10% in the first year compared to customers in a traditional plan option.
• Compared to traditional plans, medical cost inflation was 16% lower for CDHPs during the first year.
• CDHP customers had consistent or higher use of over 400 evidence-based medical best practices than their counterparts in traditional plans.  CDHP customers sought preventive care, such as annual office visits and mammograms, more frequently than customers enrolled in a traditional plan.
• Through proper plan design and the use of incentives, CDHP customers were more likely to complete a health risk assessment and participate in a health-coaching program those in a traditional plan.
• Those who enrolled in Cigna’s pharmacy management plan were more likely to choose generic medications and had 14% lower pharmacy costs compared to those in a traditional plan.
• CDHP customers used an emergency room 13% less -often than did those enrolled in HMO and PPO plans.
• CDHP customers were twice as likely to use online cost and quality information to help them select a doctor or review potential medical costs than customers enrolled in traditional plans.

The Employee Benefits Research Institute found less favorable results in a recent study. The research used data from two large employers — one adopted a CDHP with an HSA for all of its employees in 2007 and the other had a traditional plan. After four years enrollees in the HSA plan had 0.26 fewer physician office visits per year and 0.85 fewer prescriptions. They had 0.018 more emergency department visits. EBRI says that these slight differences are statistically significant. Additionally, the likelihood of receiving recommended cancer screenings was lower under the HSA plan after one year.

Successful Plan Design

Fronstin expects the Affordable Care Act to spur more employers to adopt CDHPs as option or on a full-replacement basis. An increasingly common strategy is to completely replace the existing health benefits with a CDHP.  In the past two years, there has been a 75% increase in the number of employers using a total replacement strategy, according to a survey by Tower Watson. A big advantage of total replacement is that it helps employers avoid negative risk selection.

For CDHPs to be a success, it is critical to price them properly, according to West. Plans that offer too little premium savings over PPOs and HMOs lead to minimal adoption. But CDHPs that offer too much cost savings can lead the risk pool to perform poorly. Premium dollars may be too low to cover substantial medical spending after employees meet their deductibles and out-of-pocket spending limits. Negative risk selection occurs when employees can change their plan design choices each year, based on their anticipated medical spending. Ranthum said, “I still worry how these policies are going be priced.”

Despite the challenges, the future seems to bode well for account-based plans. Ranthum said, “I look forward to strong growth in the market for HSA and health reimbursement accounts. There is strong evidence that these plans bend the cost curve by getting employees to take better care of their health. This is the best way to control healthcare spending in this -country because it avoids someone else having to ration that care.” q


Leila Morris is senior editor of California Broker Magazine.

Selling All the Bells and Whistles: How Health Reform Creates Ancillary Sales Opportunities

by Ron Goldstein

In a business world that’s increasingly filled with me-too products and look-alike companies, finding a way to differentiate is becoming more difficult and more essential at the same time. Hotels, airlines, banks, and even hospitals are looking for new ways to add value, for they know that doing so attracts new customers, builds loyalty among existing clients, and separates them from the pack.

This is also true for health insurance brokers. As the Affordable Care Act takes hold and health insurance exchanges emerge nationwide, brokers need to find new ways to remain an essential part of the equation. But more than that, they need to find new ways to differentiate themselves from the broker down the street. Through products they offer, services they provide and value they add, what can a broker do to stand apart?

New Approaches to Ancillary Benefits

One way smart brokers are differentiating themselves is by offering their clients easy and affordable access to more than traditional medical benefits. By adding dental, vision, chiropractic, and life insurance policies into the mix, brokers can provide added value for their clients and added revenue for themselves.

Historically, many employers and their employees have not considered ancillary benefits for two primary reasons: the high cost and the notion that they would be forced into buying insurance coverage they don’t need or want in order to get what is most important to them. Fortunately, these concerns are no longer true. Today, ancillary benefits can be priced to fit most any budget and can be bundled (or unbundled) in personalized and customized ways that makes sense for an employer’s business and employee needs.

What also makes ancillary benefits increasingly attractive is how nicely they complement the defined-contribution model and the integrity of choice inherent in health insurance exchanges. And when it comes to choice, employers today have three models of how they might offer ancillary benefits to their employees:

• Define a monthly contribution: Consistent with the defined-contribution approach toward health coverage, employers can determine how much they want to spend in this area and then give their employees dollars that can be applied to the ancillary benefits of their choosing. If the plan/benefits that employees choose cost more than their employer’s contribution, employees simply pay the difference just like they do if they choose a healthcare plan that exceeds their allocated amount. Experience has shown that employees understand that enhanced benefits cost more, and most are willing to contribute to the cost so long as they have choice and feel that they are getting a benefit package that is right for themselves and their family.

• Offer benefits on a voluntary basis: Employers who choose to do so can make ancillary benefits available to their workforce without incurring any cost at all. Under this arrangement, employees get access to all of the voluntary benefits they select and are responsible for 100% of the cost. For employees who want or need these benefits, this is easier and usually less costly than seeking such coverage on their own.

• Mix and match: Through increasing popular programs, employers have the flexibility to combine the two options to find the formula that works best for themselves and their employees. For example, an employer may choose to contribute money to their employee’s dental benefits and then let their employees select and pay for other benefits (such as vision) on a voluntary basis if they so choose.

Health Insurance Exchanges

As insurance brokers in California know, a key part of the Affordable Care Act mandates that every state establish and launch its own state-sponsored health insurance exchange by January 1, 2014 or default to a federal program. Exchanges are designed to provide small employers the same advantages commonly available to larger groups by organizing the private insurance market in ways that create a more stable risk pool, greater purchasing power and more competition among insurers when it comes to price, quality and service.

With a launch date for these exchanges now less than four months away, many employers are understandably confused about what will and won’t be covered through an exchange and how that affects their offering of ancillary benefits (among other things).

Individual consumers are no better off or better prepared for the changes that the ACA will bring. A recent Aflac survey revealed that 76% of consumers are not very knowledgeable or not at all knowledgeable about federal and state healthcare exchanges, and 72% have never heard the phrase “consumer-driven healthcare.” Most telling is the fact that, while 75% expect their employer to educate them about changes to their healthcare coverage, only 13% of employers say that it is important for them to educate employees about healthcare reform.

For California’s brokers, these harsh realities are actually good news.  If ever there was a wonderful window of opportunity for sharp brokers to become go-to experts with the answers and the solutions customers are seeking, it is now. But to do so, brokers must take the time to become educated about all of these issues.

As it pertains to the relationship between exchanges and ancillary benefits, there are four important things for brokers and their clients to know:

1. Pediatric dental and pediatric vision benefits are the only ancillary products that are considered part of -the new Essential Health Benefits. Insurance carriers and exchanges must offer these benefits to employers with fewer than 50 employees.

2. While pediatric dental and vision coverage must be offered as a part of Essential Health Benefits, employers and individual consumers are not required to purchase stand-alone dental and vision benefits.

3. Employers and individual consumers who want to purchase stand-alone dental and/or vision benefits may do so whether they’re enrolled in medical coverage through the commercial market, a private exchange, or public exchange.

4. Dental and vision benefits sold in stand-alone -policies are subject to most ACA provisions.  Currently 98% of dental benefits are provided through standalone dental policies for individuals or families, independent of a medical plan.

As exchanges grab the nation’s headlines, it is important to remember that employers are not required to purchase any health coverage for employees and their dependents through a state’s health insurance exchange. Employers still have the option to purchase through private exchanges that operate under the same basic principles, but contain some significant differences relative to the use of licensed agents, the administration of COBRA, PPO, flexible benefits, etc., and the degree of field sales and enrollment support offered.

There is one other thing to remember as it applies to healthcare reform’s impact on ancillary benefits. Mid-size employers are looking for creative ways to control their costs while complying with the law, which requires them to offer health coverage to all full-time employees. We are already beginning to see a boost in part-time positions. But these part-time employees need health coverage, too, even if not covered by their employer. This means that there are new, previously untapped markets for America’s brokers who need to bring to these individuals products that meet their needs and budget. Among those products should be a full array of affordable ancillary benefits tailor to an individual’s needs

Finding the Right Partner

It is important for those who sell ancillary benefits to align with a partner that makes offering such products to their clients as easy and hassle free as possible. Toward that end brokers should look for a company that does the following:

• Provides access to the nation’s premier ancillary carriers.

• Offers an attractive commission on all ancillary products.

• Delivers a single quote that includes dental, vision, chiro/acupuncture, and life.

• Requires just one enrollment application for all benefits.

• Provides one easy-to-understand monthly bill for all of a broker’s clients.

• Has a strong customer service center where trained staff can assist a broker’s every needs.

• Offers a robust website where brokers can quote and manage their entire book of business.

Clearly, the year ahead will be one of many changes for the health insurance marketplace. All indications are that we will see more employee cost sharing, a rise in employer-sponsored wellness programs, increased consumer involvement, challenges with making health insurance attractive and affordable for younger Americans, and changes in health insurance offerings to comply with new federal mandates. Just 2% of health plans available to consumers in the private insurance market currently offer all the coverage that will become mandatory next year under the healthcare overhaul.

As the core health insurance products become more highly regulated, selling such products as dental and vision has the potential to contribute more than ever to a broker’s bottom line. Whether you’re already offering such benefits or looking to add them for the first time, brokers seeking new revenue streams and ways to set them apart from the competition should consider the potential of ancillary benefits. q


Ron Goldstein, CLU, is president and chief executive officer of CHOICE Administrators, the nation’s leading developer and administrator of health insurance exchanges.  Included within CHOICE Administrators is Choice Builder which gives employers with 2-99 employees access to some of the nation’s premier dental, vision, chiropractic and life carriers, all in one program.

How Can the Health Tax Credit Help Employee Benefit Agents?

by Garrett Viggers

Do your small and large group employer clients know about all of the options they will have on the ACA horizon? Do they understand how the health tax credit works and who is eligible? Do you? The world is changing whether we like it or not, and our role as health insurance agents must always be to serve with market expertise, along with educating and presenting all existing and new plan options. The biased broker will not survive. You are paid a commission to help employers and employees make the best decision for their household.

One of the biggest changes coming around the ACA corner is the emergence of the guarantee-issue individual market, which begins January 1st, 2014. All U.S. citizens will be able to shop for an individual family plan (IFP), both outside and inside the Covered California exchange regardless of any medical conditions. They may also be eligible for a health tax credit to help cover the cost. The IFP rates will increase for sure, which will give us additional hurdles to overcome, but now all of America will be able to shop for health insurance.

What is the Health Tax Credit?

In a nutshell, the health tax credit is premium assistance from the federal government offered through state-based public exchanges to help middle and lower-income families (U.S. citizens) purchase affordable coverage. The Consumers Union refers to the tax credit as, “helping to reduce the total amount of tax one owes to the IRS.” There are three ways to apply the tax credit:

1. Take it now: Pay less monthly premium (aka the advance premium tax credit)

2. Take it later: Pay full monthly premium (get a refund when filing 2014 taxes)

3. Take it partial: Split the difference monthly premium (if income/family fluctuate)

To more and more ACA stakeholders, it seems clear that most applicants will choose the advance premium tax credit. Just over 50% of the population would select the advance premium tax credit option, according to Consumers Union studies.

If it’s designed to cut the cost of health insurance for Middle America, most people won’t choose to take it later and pay the full $800 per month premium. They can take the entire monthly amount as an advance credit payment and apply it to reduce the amount they pay for coverage each month. For example, they can apply the full credit toward their premium if their monthly premium is $1,000 and they qualify for $800 per month in advance credits. Each month, the federal government will pay $800 directly to their insurance company, and they will pay the remaining $200 directly to the insurer.

Cash flow is king. Take, Healthy Families, for example. We know the actual gross monthly premium is not shown to the member, rather the member sees the net monthly cost after applying the Healthy Families premium subsidy. This advance premium tax credit approach keeps it simple for applicants to understand. On the other hand, people don’t really know how much the health plan truly costs when a parent with kids on Healthy Families or an employee doesn’t know how much their employer contributes every month toward the health plan.

Calculating the Health Tax Credit Amount

To arrive at a net monthly cost to purchase the Silver Metal Tier Plan, It’s important to understand the advance premium tax credit calculation along with the federal poverty level (FPL) guidelines on how many are included on the household tax return and household income (i.e. Modified Adjusted Gross Income). If your client is eligible for advance premium tax credit, the net monthly cost is the most they pay for a 20-year old as well as a 55-year old. This is because the net monthly cost calculation is based on income and family size, not age. Of course, the applicant can also buy-up or down to another Metal Tier Plan. One may qualify for the advance premium tax credit if household income is less than the numbers here:

Income Eligibility Limits for advance premium tax credit:

• 1 person – $45,960
• 2 person – $62,040
• 3 person – $78,120
• 4 person – $94,200
• 5 person – $110,280
• 6 person– $126,360

Furthermore, any income and family size changes that occur in 2014 that lead to under-projecting or over-projecting 2014 household income will effect the advance premium tax credit calculation. How many people know their household income for 2014? Nobody. The bottom line is that they have to project 2014 income using their 2012 income, or project otherwise and take any future changes into account. And, if changes do occur mid-year in 2014, they can always call Covered California and communicate the change, which would re-calculate the advance premium tax credit. Or they can wait until filing 2014 taxes and see where they stand with a refund if their income went down and/or family size went up or a repayment if their income went up and/or family size went down.

Your client should not be overly concerned if they project the repayment incorrectly. This may be a good time to highlight the triple-subsidy approach laid out by the federal government:

1. The advance premium tax credit will subsidize the premium cost.

2. Eligible applicants in a specific FPL range will have subsidized out-of-pocket costs (See Silver one to four eligibility categories).

3. Any excess advance premium tax credit amount has a repayment cap based on the applicants FPL. For example, an individual making $21,780 (under 200% FPL) would have a $300 repayment cap.

Getting back to the employee benefits side of things, under the Fair Labor Standards Act 18B, your employer clients are now required to provide a notice to employees, by October 1st, describing the coverage options available in the exchange. Your employer clients must tell all employees about the exchange and the new health tax credit. There may not be much impact for employers who already offer a health plan to their employees unless the health plan is considered unaffordable (more than 9.5% of the employee’s W2 income) or doesn’t meet minimum essential coverage with an actuarial value of 60% (the plan pays for 60% of the out-of-pocket costs).

If your employer clients meet affordability and minimum essential coverage testing neither the employees nor their spouse and children will be eligible for the tax credit. This may be problematic in a few scenarios. Today, most employer-sponsored plans cover little or none of the dependent premium, which means that many of these dependents are not currently covered.

The IRS and Michael Lujan, director of Sales & Marketing for Covered California, have described an option that hasn’t been utilized in structuring employee benefit portfolios: Employers can provide a group plan that only offers coverage to employees. This is a workaround for dependents to be eligible for the advance premium tax credit in the individual exchange. It may not be the best solution, but it is an option for brokers and employers to wrestle with.

Another workaround option is to raise the employee cost to be greater than 9.5% of their W2 income. This would allow all employees and dependents to apply for the advance premium tax credit. This option is a little easier to swallow for groups under 50 lives, but it comes with eventual penalties for large groups in 2015.

At the end of the day, the ACA is multi-faceted with good, bad, and ugly angles. Ultimately, it was designed to help Americans purchase affordable coverage, though it may take us to a single-payer system. The reality is that most of your employer group clients subsidize a large portion of the health insurance premium for full-time employees. Keep in mind that your employer clients that have part-time employees may still be eligible for the advance premium tax credit.

Let’s take a look at the seven eligibility categories to better understand the advance premium tax credit and Covered California individual exchange option.

1. Already Covered: Not eligible for the advance premium tax credit if covered under a group plan, eligible for group coverage through a spouse, or over age 65 on Medicare. This is the first category that contains most all our employer client blocks of business, except for part-time employees who aren’t eligible for coverage on the employer plan.

2. Medi-Cal (0% to 138% FPL): Not eligible for the advance premium tax credit. This can be a problem if an employer cancels their group plan and lower income Medi-Cal eligible employees don’t qualify for the advance premium tax credit.

3. Silver 1 (138% to 150% FPL): This is the least expensive monthly cost plan for applicants with the advance premium tax credit, and the richest plan benefit with subsidized out-of-pocket costs (i.e. $0 deductible). In other words, it’s actually the most expensive plan offered with the highest advance premium tax credit applied to cover most of the premium.

4. Silver 2 (150% to 200% FPL): This is the next jump up in monthly cost and subsidized out-of-pocket with advance premium tax credit. This category plan has a $500 deductible.

5. Silver 3 (200% to 250% FPL): This plan category has a $1,500 deductible plan benefit with a smaller amount subsidizing the out-of-pocket costs.

6. Silver 4 (250% to 400% FPL): This category includes a $2,000 deductible. Applicants in this category would be wise to look at applying the advance premium tax credit to a buy-down Bronze plan option, or even the Catastrophic Plan if under 30 years old.

7. No Subsidy (+400% FPL): This category of applicants should be encouraged to shop for a health plan both inside and outside the exchange. Since there is no advance premium tax credit available, it may not be advantageous to purchase a plan in the exchange.

The new evolution of employee benefit brokers would be wise to work with an internal mandate and compass to educate employers of all group plan options as well as the new guarantee-issue individual market inside and outside the individual exchange. It will make you the expert you need to be in order to retain and grow your current block of business and add new employer group business. See you on the other side. q


Garrett Viggers has spent 11 years in the insurance industry as a broker, consultant and CDH and ACA expert. He helped launch CDH company, Veritas Health Systems in 2002, and Inovius in 2006, a SaaS company taking static insurance cost and benefits data and making it interactive. He recently launched the cross-platform Affordable Health App (Silver Plan advance premium tax credit Quoting Tool) for brokers across the country, with the iPad/Tablet ACA Toolkit to be released soon. He is the president of Windfall App Technologies, a spin-off company from Inovius focused on app solutions for the Health Insurance Marketplace Exchange. For more information, visit or email

Answering Your Clients’ Questions About Health Reform

by Sean O’Connor

Health reform fully goes into effect on January 1, 2014. But the health care reform law probably remains a bit of a mystery to many of your clients. Even before that, under the individual mandate of the Affordable Care Act, millions of Americans will begin enrolling in coverage plans via the health exchanges. For those who qualify, the federal government will provide a tax subsidy to make buying coverage easier on their budgets.

Consumers are wondering how the tax subsidies are going to work and if they can expect to receive one. Here are five things that should help clear up a few concerns for your individual clients:

One: Tax Credits Are Only Available Through Government-Run Health Insurance Marketplaces 

The health insurance exchanges are the key to receiving a tax credit. Coverage bought from any other outlet will disqualify you.

Two: Household Income Eligibility Requirements

Americans with household incomes of 100% to 400% of the Federal Poverty Level (FPL) are eligible. The 2014 FPL guidelines have not been released yet, but the 2013 guidelines are as follows:

• 100% FPL – individual $11,490, family of four $23,550.

• 400% FPL – individual $45,960, family of four $94,200.

Three: Credit Amounts Vary By Income

A sliding scale is in effect here. If you fall on the lower end of the FPL percentage spectrum, you can expect more help from the government than someone closer to 400 % FPL.

Four: Tax Credits Are Advanceable 

Advance payments of tax credits will be made directly to the health insurance company on behalf of individuals/families.

Five: If Your Income Changes Over The Year, Your Tax Credit Will Be Adjusted Accordingly

If your income increases, you will have to pay the difference at tax filing time. It will be important to stay on top of any income changes so you have an idea of how much you will owe at tax time.

What Your Group Clients Should Know About Health Reform

Under the law, small businesses with fewer than 50 employees don’t have to offer health insurance. A client that fits these criteria is exempt from fines, fees, and penalties under the Affordable Care Act. However, small businesses that offer coverage to employees will be eligible for the new small business tax credit. Here are some details:

• Small businesses are eligible for tax credits if they -provide health insurance to their employees. The credits work on a sliding scale as long as the business has up to 25 -employees and pays average annual wages below $50,000.

• Small businesses are now eligible for a 35% tax -credit. but in 2014 the tax credit increases to 50%.

• The maximum credit of 50% is granted to businesses with less than 10 employees with average annual wages less than $25,000.

• Small business owners can also purchase health insurance through the new health insurance exchanges in each state. In theory, small businesses will have access to less expensive group rates that were once only afforded to large businesses.

Some of your group clients may ask you following questions:

I Have More than 50 Full-Time Employees. Will I Be Fined If I Don’t Provide Health Insurance? 

Technically, the law does not automatically fine large -businesses (over 50 employees) for not providing health -insurance. A large business is only penalized if or when any one of its employees receives a tax credit for buying their own private health insurance plan. Let’s break it down as follows:

1. The employee must be insured under the new law, but the large employer doesn’t want to offer coverage.

2. The employee buys their own health insurance plan through one of the new insurance exchanges, for which they will receive a tax credit.

3. The employer faces a penalty.

The bottom line is that there is no -guarantee that a larger employer will be fined if it doesn’t -offer health insurance, but it is likely.

A large business that offers no employer-sponsored health insurance will be penalized $2,000 per -worker beyond the business’s first 30 employees.

How Much Health Insurance Coverage Must My Business Provide?

Employer-sponsored plans must be affordable and provide minimum value — affordability meaning that out-of-pocket premiums paid by workers cannot exceed 9.5% of their family income. “Minimum value” means that the health insurance plan must pay for 60% minimum of medical care covered. This works to prevent employees from being overwhelmed by co-pays and deductibles.

What’s All This Noise About Health Insurance Exchanges?

First off, think of an exchange as a marketplace for purchasing health insurance. Exchanges are new organizations that are being created to provide a more organized and competitive way to purchase health insurance. Consumers can view several options and easily compare rates and coverage details.

Every state will have a dedicated health insurance exchange. However, states were given a choice to run their own exchange, have the federal government run it for them, or partner with the federal government. Exchanges will also act as information resources for consumers of health insurance, providing information about all the different options and answers to any questions that buyers may have.

What Type of Consumer Will Use an Exchange?

U.S. citizens and legal immigrants who are not imprisoned are eligible. Exchanges serve individuals, families, and small businesses up to 100 employees. If the employee has health insurance through the employer, they can keep it or pick a new plan through an exchange.

Do Part-Time Employees Qualify For Employer-Sponsored Health Insurance?

Businesses are not required to extend health insurance coverage to part-time workers. Under the Affordable Care Act, an employee working under 30 hours per week is a part-time employee. In the past, employers traditionally defined a part-time worker as someone who worked less than 32 hours per week. What a difference a couple of hours can make, right?

No doubt, we’ve left you with a lot to think about. Large or small, it would be wise to consider each of the health care costs and options available to your business so that you and your employees are fully prepared when key provisions of the Affordable Care Act roll out in 2013 and 2014.  q


Sean O’Connor is a health insurance expert and media liaison at GoHealth ( Based in Chicago, GoHealth is one of the fastest growing health insurance technology companies in the United States. O’Connor received a Master of Science in Integrated Marketing Communications (IMC) from Roosevelt University in Chicago and a Bachelor of Arts in Communications from DePaul University in Chicago.

Vision–Tailor Your Vision Sales to Your Client’s Occupation
No Four Eyes are the Same

by Anthony Glaub

You wouldn’t wear jeans on a sales call to a law firm any more than you would wear a suit and tie when visiting a factory. Adapting your look to match your clients’ occupation is a no-brainer. But shouldn’t you adapt your sales approach for vision benefits as well?

People in almost all occupations rely on their sight — some more than others. An obvious example of jobs require detailed, high-risk, up-close work, are those in a dental office. In some professions, being able to see well is truly a safety obligation. No one wants a to visit a dentist or hygienist who can’t see well. I often paint a picture of the employer’s responsibility to provide quality vision care.

Many professions also require detailed work on a computer screen. In these cases, whether a person can see well can make a huge difference in productivity. Even a slight miscorrection in vision — so slight that a worker may not notice — can decrease productivity by up to 20%, according to a study from the University of Alabama at Birmingham School of Optometry. This data is pretty compelling to factory workers who rely on speed and accuracy to maintain a competitive edge. The median age at some of our manufacturing clients is above 50, and these employees don’t want any young guns to come in and steal their jobs.

Not only can seeing poorly affect productivity, but it can also lead to more chronic issues like eyestrain and headaches. Eyestrain is a key complaint among office workers. In fact, 90% of those who use a computer for more than three hours a day suffer from symptoms of Computer Vision Syndrome, according to the American Optometric Association. Glare is another very common issue, especially among outdoor workers. While a Centers for Disease Control and Prevention survey showed that one in 10 Americans experiences eyestrain, a Transitions Optical survey showed that seven out of 10 agree that their eyes are sensitive to light, and more than eight out of 10 say glare affects their vision outdoors.

Research has shown that eyestrain and fatigue can cause employees to lose up to 15 minutes per day due to eye focusing problems (KAZI Personal Control Lighting Study: How Personal Control Lighting Can Reduce Eyestrain, Improve Productivity, and Save Energy). Glare and eyestrain can also lead to headaches on the job, which can to missed work and difficulties concentrating. Consider that headaches cost the nation $17 billion dollars in absenteeism, lost productivity, and medical expenses, according to the National Headache Foundation. Employees with severe headaches lose an average of 3.5 hours of productivity every week, according to a study published in the Journal of the American Medical Assn.

Poor vision can lead to other hidden costs in terms of mistakes. Imagine the landscaper who squints so badly that he makes the wrong cut when trimming a hedge or mows over a favorite toy left in the lawn. The cost to replace the hedge or toy is just one factor, but the damage to his reputation could be much larger.

The average consumer (and therefore probably client) associates certain professions more strongly with the need for vision protection than others, thinking mostly about vision protection as safety eyewear.

For example, most consumers say construction workers (64%) and medical professionals (64%) need to take extra steps to protect their eye health. Fewer selected occupations such as lawyer (18%) or salesman (13%), according to a 2012 survey by Transitions Optical.

The survey respondents are absolutely right; construction workers should wear safety glasses or daily eyewear made from impact-resistant lenses and appropriate frames. Medical professionals may need safety goggles to protect from biohazards. For companies in these sectors, we recommend a vision benefit option that covers or offers discounts on safety eyewear.

Some employees who work in these fields don’t like wearing safety gear over their regular glasses, so we recommend coverage of glasses with the impact-resistant lenses and the quality frames these employees need, so they don’t have to wear both. Often, these employers understand the importance of vision protection due to OSHA compliance and other factors associated with their industries.

But almost all professionals require high-quality vision care and vision wear. Even the lawyers and salespeople need special consideration. Lenses with anti-reflective coatings to cut down on glare or discounts on a second pair of computer glasses could make sense for lawyers who read a lot of paper work and experience a lot of screen time.

Sales people are often on the go, and some spend a lot of time outdoors. We have several car dealerships as clients, and this is the case with many of their employees. It’s important that their coverage includes adaptive lenses that filter light to reduce distracting glare and enhance vision outdoors.

The truth is that almost all employees are using their eyes longer and harder than they used to. Given the recent economic climate, it’s probably not a surprise that two in three employees spend more time at work than they did three years ago, according to a 2011 survey of businesses by Towers Watson.

With a tailored approach, you can point out how a client’s employees’ rely on their vision for the jobs and the staggering costs if their vision isn’t as good as it should be and protected for the future. Get specific about how coverage or discounts on the materials side can benefit their specific workforce. Taking the time to do this will reinforce the value of your offering. Nine out of 10 employees say it’s important for their vision benefits to cover the latest lens technologies, according to a 2010 employee survey by Transitions Optical. I know, from my own sales visits, that eyewear coverage really catches the attention of employers and employees because it is what differentiates one plan from another.

Adapt Your Educational Strategy 

Selling a vision benefit is as simple as educating employees about its value. Once you explain the possible cost savings, employees see that paying for the vision benefit is the obvious choice.

Our agency recognizes that selling a vision benefit is just half the battle. We need access to the employees in order to explain the value of the benefit. We insist on mandatory meetings with all employees when possible. I often start these meetings with vision and dental. That’s because we find that these benefits are near and dear the hearts of employees and employers. People will switch their family physician well before they switch their optometrist or dentist. There’s a real comfort factor there, and employees appreciate when their coverage provides the network that lets them keep their doctor and the coverage that saves them money on out-of-pocket. I often bring a latte to the meeting and point out the low monthly premium for the vision benefit is less than that one-cup of Joe. I then walk them through the savings on the exam and materials. Just doing the math makes the case.

We then give the employees time to think about what we’ve presented, giving them materials to take home to discuss with their families. We return at the end of the week to enroll them, creating a sense of support and helping answer any final questions.

Even with a thorough education, we know that out of sight is often out of mind. We work with our clients to educate employees on their eye health year-round, serving as a reminder for them to take advantage of the vision benefit. You can offer free educational tools like the Transitions Healthy Sight Working for You program ( For companies with younger computer-based employees, we rely on tools like the Intranet and e-mail blasts to share vision-related content. For companies in which employees are not online, mailers and paycheck stuffers can be useful, as can checking in with key managers to see if any employee questions have come up.

In summary, the key is to adapt your sales approach and educational strategy to meet your clients’ geography, occupation, and culture — even adapting your approach down to each employee you speak with. Your customers will value you much more when you can relate how the vision benefit would affect their job and their life. It demonstrates your commitment to them as a person. q


Anthony Glaub, UACRM, is president of Professional Insurance Enrollers, which provides benefit services to 400 medical clients and 1,200 voluntary benefit clients in northern Indiana and southwest Michigan. He was named the 2012 Transitions Vision Benefits Broker of the Year.

Medicare–Why You Should Care About Medicare

by Barry Streit, CLU, ChFC

My 11-year-old daughter was recently working on a school project about jobs and careers. “Did you always want to be in the Medicare business?” she asked earnestly, pen poised above paper. Of all the questions a kid can ask a dad, that was an easy one. “No,” I replied, “I honestly never even thought about Medicare.”

I think a lot of insurance professionals are in the same boat. We know that Medicare exists, and maybe have a vague image of random letters and phrases that must mean something, (Part A and B, Plan N and F, doughnut hole) but so far, most of us have not had to know much more than that.

However, the days of blissful ignorance are gone. Thanks to a massive wave of aging Baby Boomers, constant political debate and news coverage about healthcare, and the upcoming implementation of key parts of the Patient Protection and Affordable Care Act (PPACA), also known as “Obamacare,” Medicare will be front and center for many of your clients or their family members. Moreover, many of them will turn to you for answers and guidance. What are you going to do when they call?

The Medicare Opportunity

On January 1, 2011, the first American Baby Boomer turned 65, followed quickly by 9,999 of her closest friends. According to the Pew Research Center, about 10,000 Boomers will turn 65 every day until 2030 — about 3.5 million to 4 million people per year. California, by itself, has over 360,000 people turning 65 in 2013. And in the months leading up to their 65th birthday, every one of these people will find their mailboxes overflowing with marketing materials from just about every Medicare insurance company and agent in the market and that is just the newly eligible. There are already approximately 47 million current Medicare members, with over 4 million in California alone.

If you’re not helping your Medicare-eligible clients with their decisions, another agent probably is, and chances are those other agents may sell the same products you do. Why give a competitor the chance to build a relationship with your clients? You don’t have to.

You can get involved in helping your clients find the right Medicare insurance two ways:

1. Become contracted to sell Medicare insurance or have someone in your office become contracted.

2. Align with a local Medicare insurance agent who can service your clients while protecting your relationship.

To help put it all in perspective, let’s look at the basics of Medicare.

Medicare Basics

Medicare is a federal health insurance program for United States citizens and legal residents who have lived in the U.S. for at least five years in a row. In addition, participants must be age 65 or older; younger than 65 with a qualifying disability; or any age with End Stage Renal Disease.

Medicare coverage is made up of four parts, labeled A, B, C, and D.

Medicare Part A is hospital insurance. It is paid for through Medicare taxes, and generally has no premium if the participant paid taxes for at least 10 years.

Medicare Part B is medical insurance and primarily helps pay for doctor visits and outpatient medical care. Part B is optional, and currently has a monthly premium of $104.90 to $335.70, depending on income and tax filing status. Part B premiums can change annually.

Medicare Part C, also known as “Medicare Advantage” (MA), includes plans offered by private insurance companies contracted by Medicare. MA plans combine the benefits of Part A with the benefits of Part B, and often include prescription drug coverage and extra benefits not offered by Original Medicare. Participants must be enrolled in Parts A and B to be eligible for MA plans. Many Medicare Advantage plans have little or no monthly premium, with consumers instead sharing costs through deductibles and/or copayments.

Part D is prescription drug coverage, which helps pay for medications prescribed by doctors. Part D plans are offered by private insurance companies approved by Medicare and must meet federal guidelines for coverage and benefits. They can be stand-alone plans or part of a MA plan. Each Part D plan has its own list of covered drugs (formulary), and has its own pricing schedule for each drug or type of drugs. Stand-alone Part D plans charge a premium.

Medicare Parts A and B are obtained directly from the federal government. However, Part C (Medicare Advantage) and Part D (Prescription Drug Plans) are sold by private insurance companies, primarily through licensed, contracted, and certified insurance agents who generally earn a commission for each sale. Medicare Advantage plans and Part D Drug plans are often referred to as “Federal Products.”

Medicare Supplement policies (also known as MediGap plans) are also sold by insurance agents. These policies help cover some or all of the health care costs that Original Medicare Parts A and B do not cover. With Medicare Supplement, coverage levels are denoted by letters A through N. The plans are not necessarily lettered in any particular order of coverage levels or cost. For example, Plan F is the most comprehensive and expensive. There are no plans E, H, I or J.

Unlike MA and Part D Drug Plans, Medicare Supplement plans are primarily regulated by the states, though they must adhere to certain federal guidelines.

Medicare Supplement plans are standardized across the industry (that is, a Plan A with one company is identical in coverage to a Plan A with another company). Since coverage from company to company is identical, comparison shopping can be fairly easy, with consumers generally focusing on price, brand reputation, customer service, and rate increase history. However, in some cases, spouse discounts, tobacco usage, underwriting requirements, age bands, geographical pricing differences, and extras, such as gym memberships or riders, can complicate the decision.

Medicare Supplement plans also do not cover prescription drugs; therefore, Part D drug plans are often purchased along with Medicare Supplement policies. Consumers can buy Part D and Medicare Supplements from different companies.

So which is better for consumers? Like all insurance product decisions, there is no right answer that applies to everyone. Agents have to take into account a number of factors including current health conditions, current medications, frequency of doctor visits, financial situation, physician and hospital preferences, residency and travel plans, as well as personal opinions toward HMOs or other network-based, managed care programs, as well as other considerations

Write It Or Refer It?

In most states, a life and health insurance license is required if you want to sell Medicare insurance. Once the license is in place, the next step is contracting with the companies you want to represent. That includes getting background checks and proof of Errors and Omission coverage and getting certified to sell selected products. Depending on the company and the product lines, certification can require eight hours of training or more.

In addition, certification generally has to be done for each company you want to represent and must be repeated annually. For this reason, and the overall complexity of these products (benefits, provider networks, drug formularies, systems, and processes vary for each company), many Medicare insurance agents take a less is more approach and choose to represent just one or two companies.

When choosing a Medicare insurance company to represent or refer to, there are a number of factors to look for. Competitive benefits, large provider networks, broad formulary, large portfolio of products, and stability of benefits and pricing over time are just some of the things to look for. In the current, ever-shifting healthcare environment, there is a lot to be said for aligning with a big, financially sound insurer as well.

Once you have selected your company or companies and have become certified, you will need to get trained on the products as well as the various sales and marketing rules that govern Medicare insurance products. Because of the vulnerable nature of the Medicare client, compliance in this industry is taken very seriously. Rules around selling and marketing Medicare insurance, especially the federal products, are quite complex and often not intuitive. It is easy to run afoul of the rules if you are not careful. Training is generally done by the Medicare company with which you have contracted or with one of its agency representatives.

If this sounds a bit overwhelming, there is another option: consider aligning yourself with one or more local Medicare insurance agents to whom you can refer interested clients. While you will forgo the potential commission income, a referral relationship is an easy way to help your clients, without a lot of hassle or cost. After a period of time, you may decide to keep the referral model going, or you may feel you have learned enough about the business at that point to jump in with both feet and get contracted and certified yourself.

If you don’t already know a good local Medicare agent, you can contact the local offices of the Medicare plans in your market and speak with the sales director. They should be able to introduce you to several experienced agents. Make sure that you meet with enough to find at least two agents who you feel would fit well with your clients. Consider limiting your agent search to exclusive (captive) or employed agents; they generally only sell the Medicare products of a single company. If you choose to refer your clients to a broker who sells for multiple companies, and there are many excellent brokers out there, you may want to understand what companies will be presented to your clients.

Next Steps

Once you’ve become contracted, certified, and trained to sell Medicare insurance or you have aligned with some good local agents, it’s time to set your strategy. Do you want to position Medicare insurance simply as an accommodation to be used only when a client inquires, or do you want to actively market Medicare as a strategic growth initiative?

Are interior office signage and table-tents sufficient for walk-in traffic, or do you want to have an active mailing or outbound calling campaign to eligible existing clients? Do you want to do seminars (called “Community Meetings” in Medicare-speak)? Do you want to focus only on your existing clients, or do you want to try to find new clients using Medicare insurance as a lead product? Again, local sales directors of Medicare plans should be able to help you think through and implement a compliant strategy that works for your business. Many can also offer tools and marketing templates to create compliance-approved communications and turnkey campaigns.

In Summary

Without a doubt, Medicare is complex! As a government health care program that can be confusing to all, even the most seasoned insurance and financial professionals can find it challenging. With health care in the news and as more people than ever age-in to the Medicare space, they will be seeking answers and guidance from familiar professionals they know and trust. However you choose to participate, you can play an important role in the health and well being of your clients while continuing to build your business at the same time.

More information can be found in greater detail at,

with many educational tools and materials available for agents and clients free of charge. The author gratefully acknowledges the contributions of Medicare Made Clear to this article.


Barry Streit is the regional vice president for the West Region of UnitedHealthcare Medicare and Retirement. He can be reached at


Medicare–Go Retail During Medicare’s Annual Election Period

by Erin Ackenheil

There’s an old adage that if you want to catch fish, you’ve got to go where the fish are. The same can be said for sales prospecting. For brokers, that means leaving your home or office and getting out into the community.

Insurers work closely with brokers and participating retailers to establish sales kiosks in stores during Medicare’s annual election period, which runs from October 15 through December 7. With this arrangement, brokers benefit from a steady stream of customers in the form of foot traffic.

These retail kiosks can deliver solid results at low cost. However, it takes a lot of preparation, savvy, and effort to be successful. Following are some skills you might want to master.

Select the right store. Find a place that’s a good fit for you. Of course, you’ll want a store that is busy. But there are other considerations, too, such as the right demographics and supportive store personnel. Once you’ve found your location, be patient. It may take some time before you start generating results.

Choose the best location for your kiosk. Good places include near the store entrance or other high traffic locations. If you are selling Medicare Advantage plans in a store with a health care presence, such as a pharmacy or clinic, please keep in mind guidelines from the Centers for Medicare & Medicaid Services (CMS) regarding marketing in a health care setting. In short, you aren’t allowed to solicit in areas where patients intend to receive health care services or are waiting to receive health care services. Finally, make sure your space is easily identifiable with signage, etc.

Be approachable. Greet people as they walk by. Smile. Set aside other tasks and be there for the customer. The elements of Medicare can be confusing. Stress helping the customer, rather than selling to them. Also, put your best foot forward by making sure your workspace is clean and attractive.

Be an asset to the store, not a liability. You may want to help out with minor tasks, such as picking up trash on the ground. Develop relationships with the store staff. The more they want you at their store, the more they will do to promote your presence.

Clearly post your work schedule. Promote your hours and location as widely as possible within CMS guidelines. This includes sharing your work schedule with store staff so customers know where and when to find you. It’s important to have a predictable presence, including keeping regular hours and being on time.

Convinced? Are you ready to test the retail waters? If so, now is the time to reach out to your plans and start inquiring about retail opportunities available during annual election period.


Erin Ackenheil is vice president of sales with the senior business for Anthem Blue Cross. She has more than 15 years of Medicare sales experience. For information about opportunities with Anthem Blue Cross, visit

Life Settlements–Fractional Life Settlement Shares:
A Unique and Growing Investment Opportunity

by Ken Morris

In 1911, U.S. Supreme Court Case Grigsby vs. Russell (222 U.S. 149) laid the groundwork for today’s life settlement industry. In this case, a life insurance company refused to pay death benefit proceeds on the grounds that the policy had been sold to a third party who had no insurable interest in the insured. Upon hearing arguments from both sides, Justice Oliver Wendell Holmes read the opinion of the court. The Court ruled in favor of the new owner and made it law that anyone who owns a life insurance policy has the right to do the following:

• Sell the policy to a third party.
• Change the beneficiary designation.
• Borrow against the policy.
• Assign the policy as collateral for a loan.

The issue didn’t surface again until the early 1980s when AIDS became a national concern in the United States. People living with AIDS sought cash from their life insurance policies to help pay for ongoing medical treatment. Unfortunately for these AIDS patients, the cash-surrender values offered by insurance companies did not compensate them for the fair market value of their policies.

Viatical companies began to surface in response to this crisis to help AIDS patients liquidate their policies. The seller (viator) received a lump sum payout from the sale of their policy, allowing them to put their financial affairs in order and to live their remaining days with dignity.

Over the next several years, medical advancements were made in the fight against the AIDS virus. Protease inhibitors and cocktail drugs were found to be successful in prolonging the life of AIDS patients. For viatical investors, the certainty of death turned out to be an uncertainty. Investors who purchased policies on AIDS patients soon turned away from this strategy and started to purchase life policies on seniors instead.

This led to the emergence of the life settlement industry as an extension of the viatical industry. Life settlements and viaticals both involve the transfer of an existing life policy in which the insured has a projected life expectancy of up to 10 years. However, while viaticals focused on individuals with life expectancies of three years or less, life settlements focused on seniors who were over age 65 with life expectancies between two and 10 years. In addition, viaticals typically targeted policy sizes of $300,000 or less where life settlements targeted policies between $500,000 and $10 million.

This new segment of the secondary life market increased the number of policyholders who could potentially sell their policies. In 1997, it was estimated that there was $492 billion of in-force life insurance on seniors in the U.S. As the secondary market started to heat up, more and more financial advisors and insurance agents found this to be a win/win scenario for their senior clients, who could now sell their policy in the secondary market for up to five times their cash-surrender value.

In early 2000, this new “non-correlated” asset class garnered the attention of large institutional investors including Merrill Lynch, Morgan Stanley, BONY, Credit Suisse, Deutsche Bank, and HSBC. Warren Buffett’s Berkshire Hathaway also got involved in this lucrative asset class.

Since then, life settlements have blossomed into a multi-billion dollar per year industry. According to Erich Sippel and Co. and Conning Research & Consulting, Inc., the industry grew from $200 million in policy purchases in 1998 to a total of $1.3 billion in 2001. By the end of 2011, life settlement transactions totaled more than $19 billion.

Bernstein Research predicts the industry could reach $160 billion by 2030. More accurate life expectancy calculations, more transparency in life settlement acquisitions, and more state and government regulation are expected to drive growth in the industry.

Another driving force is the Baby Boomer generation. As of January 2011, about 10,000 Baby Boomers per day turned 65 in the U.S. It is estimated that this wave will continue for the next 17 years.

The future growth of this asset class has inspired alternative asset management companies to create and design programs allowing individuals to take part in the ownership of life policies. These are called “fractional life settlements or life shares.”

Fractional ownership in life settlements is a unique investment opportunity for a qualified investor. When structured correctly, life settlements have the potential to outperform most other leading investments. In these tough economic times, investors, both young and old, are searching for ways to mitigate risk and still have the potential to earn equity-like returns.

The benefits of buying fractional shares as opposed to a single life policy are numerous. Since costs are split among multiple parties, clients do not have to take on the full responsibility of premium payments. Small investors can invest less than the capital normally required to purchase entire policies. Clients in fractional shares can also diversify across multiple policies as opposed to committing capital to just one.

Life shares can help qualified clients diversify their investment portfolios with the potential for robust returns and no correlation to financial markets. Independent agents typically make a generous commission, often earning a mid-to-high six-figure income.


Ken Morris is director of New Business as well as Sales and Marketing for Reliant Life Shares, LLC in Sherman Oaks, Calif.  Reliant Life Shares is a fractional life settlement investment company. Reliant has created all of the necessary marketing tools that agents and advisors need to present this asset class to clients and prospects. Morris educates and recruits licensed life agents an RIAs.

Morris has been involved with the life settlement asset class for nearly 20 years, raising tens of millions of dollars on the private accredited investor side as well as on the institutional side. In the 1990s he created the first training course of its kind for this industry, “Viatical University.” Morris also started his own life settlement broker company in the 1990s as well as a large life settlement provider company in 2004, which ended up securing a $225 million line of credit with one of Germany’s largest banks.

Dental Judgement Day–Get Help with the Tall Order of Deciding  on Dental Plans with our Annual Survey!

Welcome to Part II of California Broker’s 2013 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.

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


Aetna: In 2012, we lost 2.7% or providers in our DMO network and 1.4% 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 numbers.

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

 Anthem Blue Cross: In the past 12 months, our Dental Prime and Dental Complete networks have grown significantly and less than 1 percent 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: (First Dental Health (FDH) and DenteMax ˆ we have no control of this number.) However, our provider locations have actually increased a total of 3,228 locations in the past12 months. Less than 3% of providers have left our PPO networks in the past 12 months. The majority of these terminations are due to a provider’s retirement, death, or the moving or closing of a practice. We maintain a clean and thorough network that involves regular network clean-ups. 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 438 access points in California in May 2013.

Blue Shield: Dental PPO: For 2012, the voluntary turnover rate (excluding deaths, retirements and practice relocations) was less than 1%.

Dental HMO: For 2012, the voluntary turnover rate (excluding deaths, retirements and proactive relocations) was 2%.

If requested, Blue Shield can provide the names and phone numbers of at least 3 offices that have left our network within the past 12 months.

Cigna: Not Available.

Delta Dental: Our Delta Dental Premier network increased by 13.5%; our Delta Dental PPO network increased by 18.8%; and our DHMO network increased by 9.1%. In California, there were 40 Premier terminations and 115 PPO terminations. 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  our DHMO and PPO nationwide networks has been approximately 6.9% for DHMO and 2.6% for PPO 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 2012, our DHMO turnover rate for voluntary terms was 0.2% and our PPO turnover rate was 0.5%. We do not release specific information on our contracted dentists.

HumanaDental: In the past 12 months, there were 105 provider offices termed in California, including 18 due to not meeting our credentialing requirements. We do not provide the names and phone numbers of termed offices.

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 1,500 provider locations. For our EPO network, we’ve lost 1,300 provider locations.

United Concordia: In California, we grew our PPO network from 13,739 individual dentists and 28,433 access points to 15,800 dentists and 37,833 access points. In addition, our DHMO network of primary dental offices increased from 1,635 to 1,657 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.

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

Anthem Blue Cross: Our Dental Prime and Dental Complete network model is open-access, and 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 2012, less than 1% of dental HMO plan network providers maintained closed practices; this represents approximately 30 offices.

Cigna: DHMO — Our systems include data on dentist capacity and current and projected Cigna patient loads. Network managers regularly monitor capacity and projected growth. They contact dentists as necessary to discuss capacity expansion through staff increases or office hour changes. If these actions are not feasible, we will consider adding more dental offices.

DPPO/DEPO — Network dentists do not cap or close their offices. Members are not required to select a primary network dental office.

Indemnity — There is no network of dentists associated with the Cigna Traditional indemnity plan.

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; 6.3% 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 0.4% of our PPO network and 1.6% of our DHMO network is closed to new patients.

Health Net Dental: As of April 2013, for DHMO, currently 3% of our General Dentist unique locations are closed to new enrollment. For PPO, currently 0.8% of our dentists’ offices are closed to new enrollmen

HumanaDental: 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 more than 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.

Anthem Blue Cross: Anthem Blue Cross recommends all participating providers accept all plans offered. Providers cannot cherry pick DHMO plans, they  accept all DHMO plans under the specific contract, or they do not contract. Providers can choose to participate with Dental Prime and Dental Complete, or Dental Complete only; however as for plan or benefit designs under each product, providers cannot cherry pick which PPO design they will accept.

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.

BEST Life: All contracted offices accept every benefit level sold by BEST Life. 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: Contracted dentists do accept all benefit levels within the products that they are contracted with Cigna.

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.

HumanaDental: The PPO contract is for all network-based programs, excluding DHMO, which requires a separate agreement. Dentists can opt-out of participation in the Medicare and Access (discount) programs, which are a subset of the PPO.

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: We do not monitor average wait times in a dentist’s office.

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

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 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: DHMO — Our dentist contracts require dental offices to be open during generally acceptable hours. They also require dentists to provide or arrange for emergency care 24 hours a day, every day of the week, and to provide emergency appointments within 24 hours. We maintain dental office profiles in our system and track wait times for network general dentists through routine phone contact. We also monitor appointment availability through on-site visits and patient surveys. If wait times are longer than four weeks, we collaborate with participating dentists whenever possible to reduce appointment wait times to acceptable levels.

Cigna: DPPO/DEPO — Approximately 94.6 % of DPPO members were able to receive an appointment within four weeks. We do not set the office-hour requirements for network dentists; however, our dental office reference guide outlines expectations about the scheduling of dental appointments.

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 receive feedback on office wait times from members calling our toll-free Health Net Dental Member Services number.

HumanaDental: We rely on member calls to keep us apprised of scheduling issues. Sometimes, the member is limiting their options (i.e., after 5 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.

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/or are open on Saturdays.

Cigna: DHMO — Not Available.

DEPO/DPPO — Members are able to visit any licensed dentist for care; therefore, we do not measure evening or weekend hours for DPPO network dentists.

Indemnity — The Cigna Traditional indemnity plan is not a network-based plan.

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.

HumanaDental: 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.

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

Securian Dental: Yes.

United Concordia: 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.

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: We evaluate the adequacy of dentist payments in a number of different ways including a chair-hour measure. We review dentist payment annually and adjust payment to achieve targeted earnings. These targets are modified each year to help keep pace with inflation. Dentists receive payment from four different sources: fixed monthly payments, office visit payments, supplemental payments, and patient copays.

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: Dental Health Services’ 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.

HumanaDental: 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

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: 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.

Anthem Blue Cross: We do not offer incentive programs to dentists because we expect quality of care with or without incentives.

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:  We expect all network dentists to provide our members with high-quality, thorough care; we continuously measure appropriateness of care through numerous oversight methods.

While routine treatment plans are carried out by dentists without prospective review, more complicated treatments are evaluated by our dental consultants who assess the proposed treatment(s) 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.  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: There are no financial incentives, monetary bonuses, or withholds built into our network payment agreements.

•  DHMO — There are no financial incentives or penalties related to utilization, although we may make additional payments to dentists who have experienced significant utilization during a given period of time.

• DEPO/DPPO — There is no risk sharing or risk pool. Primary care dentists and specialists are contracted on a discounted fee-for-service (FFS) schedule based on average charges in a geographic area. There are no financial incentives or penalties related to utilization.

• Indemnity — We do not contract with any dentists for the Cigna Traditional indemnity plan. Dentists collect the full fee directly from the patient or they accept assignment of fees.

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: As a prepaid dental plan, Dental Health Services provides plans designed to remove the incentive for dentists to over treat, by using a different reimbursement structure. Through a combination of guaranteed monthly capitation payments, selected supplemental payments and reasonable patient copayments, dentists  are rewarded for bringing patients to a state of optimum oral health and then maintaining this state. Dentists are required to submit encounter (utilization) data to the plan so that the services performed can be monitored and compared to expected parameters, resulting in the same monitoring ability as claims-based dental programs, while leaving very few actual submitted claim forms. (Specialty claims and claims for out-of-network emergency care being the common exceptions.)

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.

HumanaDental: 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.

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. 


View from the Top: Top Life Executives Give Their Views on the Industry State Today

by Leila Morris

The workplace will be a growing venue for life insurance sales according to nearly every executive featured in our annual view from the top survey. In fact, one executive expects employee-paid programs to account for most of the growth in life insurance sales. With health care reform, employees will be looking for supplemental coverage as they assume more of their health insurance costs. In response, the brokerage community is focusing more on voluntary products to meet the demand.

More than one executive sees a huge opportunity to help middle class Americans prepare for retirement. The emerging affluent market also remains underserved.

As for popular products and features, executives site whole life insurance, universal life insurance, guarantees, living benefits for permanent life products, and hybrid life insurance/long term care (or critical illness) products.

Low interest rates pose the single greatest challenge to the industry. All life insurers have to make product adjustments in order to manage lower investment income and profitability in the current environment.

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

Randy Zipse, vice president of Advanced Markets at Highland Capital Brokerage: The life insurance market is faring well in today’s economy. The uncertainty of investment products makes the stability of cash value life insurance very attractive. Increases in federal and state income tax rates have also made life insurance a very attractive retirement strategy, given the tax-favorable treatment of life insurance cash value growth.

Eric Henderson of Nationwide Financial: The steady growth experienced by the life insurance industry in 2012 has continued into 2013. According to LIMRA, total premium growth from year-end 2011 to year-end 2012 was 5.2%. In the first quarter of 2013, life insurance sales continued to increase, growing 6.4% since the first quarter of 2012. Seven in 10 U.S. households own life insurance today, proving that it continues to be an important vehicle for protection in today’s economy. However, there is still room for growth because every family should be prepared for the financial disruption that a death in the family can cause, and life insurance is commonly the best tool for addressing this challenge.

Drew Niziak, senior vice president, Broker Sales & Aflac Benefits Solutions: Life insurance products accounted for $526 million of voluntary sales per 2013 First Quarter Sales. For 2013 first quarter growth, all life offerings opened 2013 lower. Term saw a lower percentage decrease than did permanent life offerings or stand-alone AD&D coverage (Source: U.S. Worksite Sales survey, LIMRA, First Quarter 2013).

Michael Ferik of Guardian: Guardian’s whole life sales were up 15% for the first quarter vs. the first quarter 2012, while the industry average was up 6%. We remain cautiously optimistic about the prospects for growth in life insurance sales and specifically, whole life. The current landscape, however, is causing us to remain diligent about assessing and mitigating risks — in particular the possibility that interest rates could remain exceptionally low for an extended period or rise more sharply than anticipated. We expect continued market volatility and are positioning our portfolio to deal with a wide range of contingencies. That said, consumer uncertainty is also leading clients to seek safe havens for their money, which whole life insurance can provide. It is one of the few vehicles that allow clients to protect their families and businesses, obtain a competitive tax-deferred rate of return and offer guaranteed cash-value growth.

Steven Johnson, assistant vice president, Product Development Colonial Life & Accident Insurance Company: The life market isn’t growing as fast as the U.S. economy overall, but there are pockets of opportunity for life products sold at the workplace. Whole life sales through the workplace are growing at 6% to 7% annually. The volume of term life insurance sold in the past five years has increased slightly, but the premium associated with those sales is down as rates have declined, mostly because of improvements in mortality. Another factor at play is that 72% of all life insurance policies are sold at the workplace. The high-volume, low-touch nature of the workplace sales channel is best suited to the sale of simpler products designed to meet less complex consumer needs. Life policies sold at the workplace therefore tend to carry significantly lower face-amounts than those sold through other channels.

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

Randy Zipse of Highland Capital: Life insurance products continue to trend toward products offering cash values.

Eric Henderson of Nationwide Financial: Consumer demand for guarantees continues to drive sales of no-lapse guarantee universal life products, which still represent the largest share of the life market. According to LIMRA, indexed universal life sales grew 17.4% since the first quarter of 2012, making it the fastest growing life product. Our indexed product grew more than 370% during that period.

Michael Ferik of Guardian: Clients are looking for steady returns, safety and financial security, which is illustrated by the continued growth of our whole life product line. As long as the market remains volatile we expect this trend to continue.

Steven Johnson of Colonial Life: As health care costs increase and employers increasingly shift to a defined contribution model for their benefit plans, there’s likely to be a general upturn in term life sales as its low cost becomes increasingly attractive to consumers. As LIMRA’s 2013 Industry Predictions report points out, the market has moved back and forth over the years between placing risk on individuals and on carriers. Right now, companies are increasing product pricing while reducing the benefits on these guarantees, discontinuing sales of some products or riders, and in some cases exiting the market entirely.

 Drew Niziak of Aflac: From a mix of individual life insurance sales by product (percent of new premium), Universal life sales reflect a faster growth compared to term, whole and variable from 2009 to 2013:

Universal Term Whole Variable

2013 43% 24% 27% 6%

2009 38% 27% 28% 7%

(Source: U.S. Worksite Sales survey, LIMRA, First Quarter 2013).

3. Do you see growth in particular niche markets? 

Eric Henderson of Nationwide Financial: Guarantees remain in high demand. Nationwide Financial is seeing an increase in sales of single premium immediate annuities and variable annuities with living benefits. Some carriers have pulled back on variable annuities with living benefits or even exited the VA business completely due to the ongoing low interest rate environment. Nationwide Financial remains committed to its variable annuity business for the long run. We believe variable annuities with living benefits satisfy an important consumer need, and that’s why they will continue to play an important role in the suite of products and solutions we offer advisors and their clients.

Michael Ferik of Guardian: In addition to the valuable death benefit protection life products offer, we see a continued trend towards living benefits for permanent life products. The last few years have seen a shift in how consumers can protect themselves using long term care (LTC) insurance. The market for traditional LTC is shrinking, while the need to address the expenses associated with living longer are becoming more prevalent. Guardian believes a longevity solution that combines life insurance coverage with the ability to cover LTC is the most economical option and is in the process of rolling out a LTC rider to address this need.

Randy Zipse of Highland Capital: The fastest growing product is the hybrid life insurance/long term care (or critical illness) product. Consumers are very concerned about the fast growing cost of long-term care expenses and see these hybrid products as a very effective way to protect themselves and their families from the high costs of long term care. Consumers like these hybrid products because, unlike traditional long-term care products, a benefit will be paid regardless of the long-term care need. The only question becomes if the policy will be utilized during life to pay for long-term care or if it will be paid at death as a death benefit.

Drew Niziak of Aflac: We have not observed any substantially ­different growth of life insurance sales in any particular niche market. By all accounts, there is a significant need for increased life insurance protection, both term and permanent types of coverage, among the middle income wage earners in the United States. We believe the most efficient and effective way to reach that target is through programs offered at the workplace where employees have streamlined access to life insurance through guaranteed-issue underwriting along with the convenience of payroll deducted premium collection.

We anticipate continued growth in life insurance sales at the workplace as more and more brokers and employers recognize the need to offer this valuable coverage to their employees. In fact, voluntary product sales offered through the worksite continue to steadily grow with premium volume increasing by 7% over the prior-year according to LIMRA’s U.S. Worksite Sales: 2012 Fourth Quarter Review.

Steven Johnson of Colonial Life: Life insurance is needed across all markets as working Americans, in general, are uninsured or underinsured. A 2011 LIMRA study reported that 43% of U.S. adults don’t have enough life insurance, and 41% have no life insurance at all. This tends to be especially true of younger workers who may not yet have families and mortgages, so they don’t see the need as strongly as older workers. But as Gen Y begins to take over the workplace in the coming years, this represents a good opportunity to educate employees about their needs and help them match those needs with the right type and amount of coverage. The Hispanic population is growing also, so there’s a growing need for benefit counselors who not only speak their language, but also understand their culture to be effective in this market.

4. What is happening with your distribution systems? 

Drew Niziak of Aflac: The brokerage community is expanding its reach in the voluntary market every year. In response, ABS is in the process of growing its distribution system to meet the growing demand. We expect to have a presence in most of the large metropolitan markets by the end of 2014.

Eric Henderson of Nationwide Financial: Nationwide is hiring new primary agents for our exclusive agency channel, although we have largely maintained the size of this distribution force. We’re excited about the continued progress we’ve made in recruiting experienced financial services associate agents within our agencies. Our retention rate for financial services associates remains well above average for the industry. We’re also making a lot of progress developing a growing number of strong relationships within the independent agent channel. Nationwide’s acquisition of Harleysville Insurance allows us to expand this presence further.

Our relationships with nonaffiliated distribution channels, including brokerage general agents, regional and national brokerages, wirehouses, and banks continue to yield positive results. The breadth and depth of our strategic distribution relationships are a competitive advantage for Nationwide.

Randy Zipse of Highland Capital: Highland Capital Brokerage is a life insurance distribution company. It specializes in independent distribution and is not tied to a single life insurance company. Highland Capital Brokerage has been adding to its distribution force.

Michael Ferik of Guardian: Guardian has had three consecutive years of recruiting and net field force growth, with 2012 being our strongest single recruiting year in our 150+ year company history with 930 new recruits. Guardian also has a retention rate of 33%, well above the industry’s average of 10%. Guardian is focusing its recruitment efforts in 2013 on career changers and recent college graduates with a strong entrepreneurial spirit looking to begin their careers. Guardian’s training and mentoring program allows new financial representatives, no matter their financial planning experience, to get the necessary certifications while learning, on-the job, to effectively provide clients with the best possible planning solutions. The company also anticipates hiring more women in 2013 than ever before, which is an increasing demographic within the industry.

Steven Johnson of Colonial Life: Colonial Life’s career agency distribution system is strong and growing. It was at a record high last year, and we plan to continue building it this year. There is a tremendous opportunity in worksite benefits for people who care about helping others, who want to be their own boss, and who want to set their own level of earnings and success. Especially since the recession, a lot of people are seeing the value in being able to determine their own future. Our agency sales organization works both directly with employers and through brokers to serve their clients.

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

Randy Zipse of Highland Capital: With today’s high income tax rates, we are seeing an increase in cash value life insurance as a supplemental retirement tool. This is true of both employer and employee-paid plans.

Steven Johnson of Colonial Life: The shift toward employees taking more responsibility for benefit decision-making and purchasing is going to continue. In today’s economic environment, employers aren’t looking to increase their costs. Even for employers who continue to offer some employer-paid life insurance, the amount usually is far less than what a typical employee’s family would need. That’s why voluntary life insurance is so important. It gives employees access to the additional coverage they need at more affordable rates and, in some cases, the opportunity to talk to someone face-to-face so they understand their needs and what they’re buying.

Drew Niziak of Aflac: Most of the growth in life insurance sales will be seen via employee-paid programs offered at the worksite. However, we continue to see many employers reducing, if not eliminating their contribution to employer-paid life programs as they struggle with increased health insurance costs. For instance, offering robust benefits while staying within budget/cost constraints is a top benefit challenge for 40% of large business, 48% of medium-sized business, and 47% of small businesses according to the 2013 Aflac WorkForces Report.

Michael Ferik of Guardian: We continue to see a substantial opportunity to position life insurance as an ancillary benefit, especially as small businesses look for ways to retain talent while shifting some benefit costs to their employees. Guardian operates one of the largest dental networks in the United States, and protects more than six million employees and their families at 115,000 companies, making us well positioned to extend our life product to this market. In 2012, Guardian continued to invest in our multi-life DI and life offerings. We want to make it easy for an employer to offer supplemental group coverage for both DI and life.

Our year-over-year growth rate for multi-life DI has been at 50% for the past three years. Through that offering, we’ve been able to establish multiple relationships with industry-recognized benefit firms, which have opened the door for our employer-based Life and 401(k) offerings.

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

Michael Ferik of Guardian: We are continually exploring new distribution methods that complement our career agency system. For example, we have a bank-owned life insurance (BOLI) product and, as I mentioned, our multi-life DI platform has been a great opportunity for group brokers, pension brokers and P&C firms. In addition, we continue to be focused on growing our brokerage life business through our career agencies. We’ve hired eight new life brokerage managers already in 2013, with an eye to appointing 15 by year’s end. Our life brokerage business continues to group at a double-digit rate and this approach has enabled us to reach alternative channels such as banks, wires and large independent broker-dealers.

Randy Zipse of Highland Capital: Highland Capital Brokerage is a leader in bank and stockbroker life insurance distribution. Both banks and wirehouses are continuing to see steady life insurance sales growth.

Drew Niziak of Aflac: Benefit broker and career Agent segments continue to be the most productive distribution systems for Aflac’s products and services.

Eric Henderson of Nationwide Financial: We remain very active with banks and wirehouses and value their business and partnership. Brokerage General Agents are also important partners for Nationwide on the life side.

 7. What recent events have affected the way you do business? 

Randy Zipse of Highland Capital: Recent tax changes have affected the life insurance business. Higher income tax rates are driving cash value life insurance sales. Higher estate tax exemptions have put the focus on traditional life insurance needs, such as estate equalization and income replacement and away from estate tax planning.

 Steven Johnson of Colonial Life: Health care reform is on everyone’s mind, but it really hasn’t changed the way we do business. Voluntary benefits are mostly exempt from the provisions of the health care reform law, and they still offer a great way for brokers to help their clients offer a more competitive, customizable benefit package with no effect on the bottom line. This is true for all employers, even those sending employees to exchanges for major medical coverage: they can still make their benefits stand out from similar employers by offering voluntary benefits to their employees. And no matter which route the employer takes, there’s still a tremendous need to help people understand their needs and coverage gaps and which options best meet those needs. So one-to-one benefit education and counseling is going to be more important than ever as health care reform is implemented.

Drew Niziak of Aflac: We expect that health care reform to have a positive effect on our business. As employees assume more of the insurance costs they see a greater need for supplemental insurance coverage. In response, the brokerage community is focusing more on the voluntary space to accommodate their customers’ demand for these supplemental products.

Eric Henderson of Nationwide Financial: Product diversity is key to Nationwide’s strategy. We have a robust property and casualty business and a full line of financial services products. This variety of product offerings helps us absorb short-term fluctuations in the cycle of specific products, while maintaining commitment to our long-term business and product strategy. We continue to be a strong, 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 uniquely position Nationwide Financial to deliver on our mission of helping people prepare for and live in retirement.

Michael Ferik of Guardian: In today’s low interest rate environment, we have remained thoughtful about the volume of excess single premiums we take in, particularly from sophisticated investors that are looking for ways to leverage our dividend. As a mutual insurer, our core mission is to maintain financial strength to meet our future obligations to policyholders, and to pay a competitive dividend to our current ones.

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

Eric Henderson of Nationwide Financial: The entire industry should be concerned about the long-term implications of the federal deficit. As lawmakers work to address this challenge, it’s important that they continue to recognize the critical role that the tax benefits of life insurance, annuities, and qualified retirement plans play in helping Americans achieve a secure financial future.

Michael Ferik of Guardian: Over the next 17 years, 10,000 people will retire every day. Social Security alone is not enough to provide an adequate retirement. Today, 75 million American families count on life insurers’ products for peace of mind, long-term savings, and a guarantee of lifetime income when it’s time to retire. Savings in permanent life insurance and annuities represent more than 20% of Americans’ long-term savings in this country.

In the face of unprecedented retirement challenges, public policy should continue to encourage Americans to save more, plan responsibly and protect their financial and retirement security. So, obviously, we’d be concerned about any efforts that might make it harder to do so.

Drew Niziak of Aflac: One area of growing concern is how essential it is for employees to be educated about upcoming state or federal legislative issues that could affect their current benefits. The 2013 Aflac WorkForces Report has shown that 75% of employees agree that health care reform is too complicated to understand. Additionally, 53% of employees agree with the statement,  “I believe I may not adequately manage my health insurance coverage, leaving my family less protected than we currently are.”

Steven Johnson of Colonial Life: Low interest rates are the single greatest challenge facing the industry. These low rates will continue to put pressure on financial services companies and the interest-sensitive financial products they issue, including life insurance. All life insurance products are affected to varying degrees, but long-term contracts that rely heavily on earned interest, such as whole life and universal life, are especially affected. All life insurers will be challenged to make product adjustments in order to manage lower investment income and profitability in the current environment.

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

Drew Niziak of Aflac: At ABS, we focus on the employer market. We typically target a wide array of industries and demographics; that said, from an underwriting perspective, desirable employer qualities are often lower turnover, and a propensity to buy; the latter might push one towards female-centric groups. Further note that the larger the group, the greater the potential for underwriting flexibility and customization.

Eric Henderson of Nationwide Financial: More than 58 million, or half of U.S. households, say they need more life insurance according to LIMRA. The industry has a huge opportunity to help middle class Americans bridge this gap. Brokers who win in this business focus on a business model that is repeatable and scalable with a heavy emphasis on education around the protection gap. Another growing niche for brokers is the emerging affluent market. These individuals are focused on accumulating assets and have high incomes. They seek life insurance solutions to protect their families, as well as accumulation strategies that allow them to build wealth. Brokers winning in this business offer a high touch, customized approach to meet client needs.

Michael Ferik of Guardian: Emerging segments, such as the Millennials, are the clients of tomorrow. Even today, based on many estimates, there are more Millennials than Baby Boomers. The challenge is to understand and address the ways this segment wants to be approached and ensure we are adjusting for this market accordingly. Social media is a great tool for brokers who want to get serious with this group. We’ve seen some good early success with our career producers who have adopted social media into their practices.

Randy Zipse of Highland Capital: The large case and older age market is heavily served for obvious reasons. Younger people and the emerging affluent remain underserved.

Michael L. Weintraub, CLU, president of the retirement division of Ascension Benefits and Insurance in Walnut Creek, Calif.: A couple of years ago, while chairing the Life and Health Foundation for Education (LIFE), it became clear that we are not doing enough as an industry to provide consumers in the less affluent market to get the coverage they need and what they want to buy. LIFE has been working with LIMRA over the last few years to do an insurance barometer study to track the perception and behaviors of the less affluent market in the U.S.

A quick synopsis of the top findings in the Barometer study show there is a market we need to find a way to reach better:

• 66.6% of consumers are concerned about having enough money for a comfortable retirement.

• 33.3% of consumers believe they don’t have enough life insurance.

• 33.3% of consumers experienced the death of a relative or close friend in the past 2 years, and are more likely to be concerned about leaving dependents in a difficult financial situation.

• 17% of consumers are willing to purchase life insurance through retail outlets, such as warehouse clubs and superstores.

According to the survey, younger families think life insurance is much more expensive than it really is. Getting them to talk with an advisor can help them understand the life insurance they need is most likely within their budget. Brokers need to focus more on educating young, middle-aged American families who would benefit from term insurance now, with the option to convert the policy later to permanent coverage.

Many consumers in this demographic gather information about complicated purchases like cars and life insurance by doing research on the Internet first. Then armed with information, they prefer to make the purchase face-to-face. This is why we need a friendlier way for brokers to be able to take an application on a reasonable amount of life insurance and have a policy in the insured’s hands within a week or so.

Anyone can discover almost anything about anybody on the Internet today. Why must it take months to have a life insurance policy issued? It is not unreasonable to suggest that the industry finds a way to better serve the middle market by making it faster and easier to purchase and deliver policies. Perhaps this can be accomplished by working closely with top producers who work with middle market customers that are in industry trade groups, such as the Million Dollar Round Table (MDRT). The consumer, industry and broker will all benefit.

10. What are some of the common characteristics of your most successful life insurance producers?

Randy Zipse of Highland Capital: Life insurance remains a relationship business. Successful life insurance producers have strong relationships with their clients and often serve as a key advisor to their clients.

Eric Henderson of Nationwide Financial: Common traits of successful life insurance producers include a lifelong commitment to learning and a focus on client needs. For example, good producers will observe a trend, such as the lack of consumer understanding about the cost of health care in retirement, and then position themselves as someone who can help Baby Boomer clients address this challenge. We provide our producers with access to The Nationwide Institute Health Care Cost Assessment tool to help them estimate potential health care and long-term care costs for clients. The producers can then provide guidance to help clients close that gap, whether that is through the use of life insurance, an annuity or another financial service product.

Steven Johnson of Colonial Life: We strongly believe in the value of one-to-one, personal benefit counseling sessions to help employees understand their needs and options to create an effective financial safety net for themselves and their families. So our most successful life insurance producers are those who are not only experts in product knowledge, but who also excel at this customized counseling approach. They create trust and credibility, as well as long-term relationships — they’ll be back in the same account next year and the year after, talking to the same employees, whose needs likely will change. We’re developing a certification process so brokers, employers and employees can be assured they’re working with the best in the business when it comes to individual benefit counseling.

Drew Niziak of Aflac: Our most successful life producers are our most successful worksite brokers. They understand and thrive in the employer marketplace typically focusing on mid/large size groups. These brokers often bring us proven relationships built upon some foundational success fundamentals including:

• Cultivating strong client and prospective client trust, rapport, and confidence

• Taking a strategic, and long term, approach to the client relationship cycle

• Constantly seeking to understand client needs and expectations relative to a changing marketplace

• Understanding the merits of both term and permanent life insurance plans; enthusiastically promoting life insurance to their clients on a consistent basis as a vital part of an overall benefit strategy

• Appreciating the value of a team approach and valuing team members who have a keen sense of process management and technical detail

Being a responsive and relentless advocate for their clients

Michael Ferik Guardian: Our most successful producers are sticking to the basics — sound planning advice and simple sales approaches. During economic uncertainty, the key is to not get caught up in trendy fixes, such as consistently recommending some products that offer favorable illustrative but possibly unrealistic rates.

Any Other Insights?

Drew Niziak of Aflac: With the implementation of health care reform looming, there are valuable opportunities at hand for brokers to provide companies with guidance not only on health care reform, but also about the ways voluntary insurance can bolster their benefit offerings with little affect to their bottom lines while helping employees protect their families’ financial security. In fact, 46% of brokers expect the proportion of voluntary workplace benefits they sell to increase substantially in the coming year according to the 2013 Aflac study. Further, nearly half of these brokers (49%) say the voluntary insurance product that generates the most volume in terms of revenue is term life insurance.

Eric Henderson of Nationwide Financial: As Baby Boomers age, long-term care hybrid products are increasing in importance. Utilization of our long-term care rider has increased more than 10% from 2011 to 2012 and is on pace to grow even more in 2013.

In addition, there are still too many families who do not own life insurance and even more who don’t have enough. We’re urging consumers to think about life insurance in terms of income replacement. In other words, if you make $50,000 a year and plan to retire in 20 years, you need $1 million in coverage to replace your income. Consumers need to understand that if they fail to replace their income with life insurance, their family may be forced to reduce its standard of living. According to a survey of consumers we recently conducted, the average person has replaced only 16% of their income with life insurance. When you think about expenses later in life, such as weddings and college for children and the high costs of health care and long-term care in retirement, it’s easy to see how a family that loses 84% of a breadwinner’s income may face significant financial disruption. The good news is that life insurance is more affordable than most consumers think.