Dec12CoverAnnuities/Life Insurance – Creating a Social Security Legacy Plan With Annuities and Life Insurance
by John A. Davidson, LUTCF, FSS  • Consumers are trying to plan for a secure income for their families amidst the uncertainty about the level of Social Security benefits that will be available in the future.
Dental Plans–The Five A’s of Prepaid Dental 
by Josh Nace • Prepaid dental plans offer unparalleled value and provide a cost-effective way for employers to keep their staff healthy, happy, and more productive
Voluntary Benefits BundlingHealth Carriers Battle Voluntary Players for Sales
Ancillary Benefits Tug-of-War: When is Bundling the Best Option? 
by Karen Gustin, LLIF •  Are the savings real when bundling medical insurance with ancillary products like dental and vision? And are these options best for employers and employees?
Three Things Employers Want in a Life Insurance Product
by Chris McConathy •  When your clients need help with emotional, financial and/or legal matters, they’ll be happy that their employees have access to services that are included as a standard component of their life insurance benefit.
Critical Illness Insurance Has Room to Grow in California
by Jodi Anatole • California presents an unusually good opportunity for brokers to help employers deploy one of the fastest growing of voluntary benefits – critical illness insurance.
Value and Price Don’t Always Go Hand-in-Hand
Knowing Costs is Only One Component Influencing Consumer Behavior
by Bart Halling • To get value-based benefit plan members need to become more financially accountable. It’s important to understand what types of medical services and procedures are truly “shoppable.”
Voluntary Benefits: Seize the Opportunity to Engage Millennials on Voluntary Insurance
by Michael Klachefsky • Soon, half of employees will be Millennials. It’s influencing their employers interactions and brokers are using it to their advantage in the current Voluntary marketplace.
Understanding Generational Differences to Offer Better Benefits
by Todd Mason •  Today’s workforce is diverse, not only in ethnicity and gender, but also in age, ranging from 18 to about 70.
How Voluntary Disability Benefits Can Address the Needs of Younger Workers
by Paul D. Taylor • Helping HR managers connect Millennials with information on the benefits of voluntary insurance translates into a win for both employers and brokers.
Tips On Self-Reported Symptoms And Record Keeping As They Relate To A Disability Claim
Art Fries •  Self-reported symptoms and record keeping are just two areas of many that can have an influence on the outcome of your disability claim.
Worksite Clinics – The Next Generation
by Jonathan Spero, M.D. •  The use of worksite clinics is becoming an increasingly popular way to control health care spending and even enhance employee productivity.
Give Your Clients a Fresh Perspective With Vision Benefits
by Anya Simpson • During the holiday season, clients may still have a big hurdle to check off their wish list – achieve a successful benefit enrollment. This year, you’ve worked hard to streamline the renewal process for one of your oldest clients.
Life SettlementsLife Changes Lead to Reinvented Retirement and Life Settlements
by Stephen Terrell •  Life settlements as a part of the financial planning landscape aren’t new, but their use has evolved and is on the rise.
CAHU Show Coverage   CAHU Show Features Health Reform Trends in California
by Leila MorrisThe experts give brokers an idea of what the market will look like in 2014.
Pharmacy Network Strategies – Which Network is the Right Network?
by Tom Splitt •  Are limited, preferred, and exclusive pharmacy networks viable options for employers to reduce their prescription costs? There is no right or wrong way to configure a pharmacy network because it depends on many factors.

Creating a Social Security Legacy Plan With Annuities and Life Insurance

by John A. Davidson, LUTCF, FSS  

Whether you are planning to retire soon or you are several years away from retirement, you have probably have seen the latest headlines about Social Security. Unless Congress acts soon, Social Security and the fund that helps finance benefits for 44 million senior citizens and survivors of deceased workers is projected to run out of money by 2035.

That’s three years sooner than anticipated, according to the Social Security Administration’s (SSA) trustees’ annual report. So we don’t have a moment to lose to enact some important changes that will affect millions of Americans. This very serious topic of discussion opens up some great selling opportunities for making permanent life insurance and annuity sales to clients who are not likely to rely solely on Social Security to retire.

How can your clients plan for a secure income for their families amidst the uncertainty about the level of Social Security benefits that will be available in the future? They can leverage life insurance that is paid for with a portion of Social Security benefits. As politicians continue to discuss means tested benefits, this issue has become more important for clients who don’t rely solely on Social Security, but have it as additional income. As the federal safety net comes under increased strain, your clients may need additional dollars for spouses, children, and grandchildren to continue in the lifestyle to which they’ve become accustomed.

Suppose your prospect is a 66-year-old man who doesn’t need the full monthly amount of his Social Security to live on. He may still be working. We fund a permanent life insurance policy using $1,000 per month of his Social Security benefit. Upon his death, (provided sufficient premiums were paid), his beneficiary would get the full death benefit.   The surviving spouse has some great options to use money from the death benefit: invest it into an immediate annuity to provide income; put it into a trust to help ensure that adult children have retirement income in case the federal safety net fails; use it to pay off a mortgage; or use it for any other purpose the policy owner may have foreseen. Also, because this is life insurance, policy proceeds are tax-free income.

A tax-deferred cash-value accumulation can be accessed on a tax-preferred basis if needed. The client has flexibility to adjust planning needs moving forward. In the scenario described above, the $1,000 monthly premium could provide more than a $500,000 death benefit and an internal rate of return of 5.24% on an after-tax basis (using a universal life insurance policy). This competes very favorably with other fixed income alternatives. However, keep in mind that, with universal life insurance, the premium amount that’s needed to keep the policy in force may fluctuate more or less than $1,000 per month depending on future interest rates and other factors.

Whole life premiums are higher, but they do offer fixed premiums and stronger guarantees. Simply repositioning some of the monthly Social Security benefit into the life insurance policy is a great way to create a safety net for your Social Security benefits. Many seniors who remain employed after 65 find an alternative source of funds in the savings they get from purchasing a Medicare Supplement plan versus the high cost of traditional health insurance coverage. The premium difference may be as much as $500 per month, per person. Of course, premium dollars could be found from ongoing wages, or other retirement assets.

Regardless of how the clients fund the new life insurance policy, as long as sufficient policy premiums are paid, the benefit can provide guaranteed income for the family without them being entirely dependent on the unstable Social Security system. If the client’s wife uses the death benefit to get an immediate annuity, she could receive an additional $3,209 per month for the rest of her life (assuming age 80 and installment refund). This ensures that she will not outlive her assets and that the full purchase payment is made to an heir if she dies before it is paid out completely.  This amount is greater than the original planned $1,000 monthly premium. It could easily be used to supplement existing federal benefits, offset reductions, or make up for a complete cessation of those benefits.

This permanent life insurance sales plan can be tailored to a variety of needs. In addition to being set up for a surviving spouse and children, it can be used to create a legacy trust for grandchildren to fund college tuition or other future needs.  Another great option is to use the life insurance to fund a charitable planning program for a favorite charity. Check with a tax advisor about the tax benefits of gifting this policy and funding the program for seven or 10 years. A recent Gallup poll reveals that 57% of retirees say Social Security is their major source of income. With permanent life insurance, you can explore new possibilities for your clients and create a more stable future for their family and future generations.


John A. Davidson, LUTCF, FSS, has been associated with Ohio National since October of 2008 and is based in Thousand Oaks, Calif. John is past president of the San Fernando Valley Association of Insurance & Financial Advisors, past president of the California Association of Insurance & Financial Advisors and past president of the National Association of Insurance & Financial Advisors. He is also a member of the Society of Financial Service Professionals and a member of the Association for Advanced Life Underwriters. John is a 27-year Qualifying & Life and Court of the Table member of the Million Dollar Round Table. Davidson Insurance & Financial Services, Inc. can be reached at 805-495-6434.

The Five A’s of Prepaid Dental

by Josh Nace

The challenging economy hasn’t made much of a dent in employee demand for dental benefits. Dental coverage remains highly valued and is one of the most desired benefits. In fact, it trails only medical coverage and retirement options, according to the National Association of Dental Plans (NADP) 2011 Group Purchaser Behavior Study.

Additionally, more than 70% of employees believe it is important for a business to provide dental benefits, according to a survey conducted by Taylor Nelson/Sofres.  But rising health care costs and expenses have made it difficult for some employers to meet the dental coverage needs of their employees. While companies are not eliminating dental coverage entirely, businesses are turning to cost-saving alternatives to their current dental benefits.

One option that’s gaining favor in the benefits industry is prepaid dental coverage.  Prepaid dental plans offer members low-cost access to high quality dental care provided by participating network dentists. By choosing a prepaid dental plan, whether as an added option, a voluntary benefit, or an alternative to an existing dental plan, groups and employers will experience a positive effect on their employees’ satisfaction and, more importantly, their bottom line.

Brokers have an excellent opportunity to help their groups evaluate prepaid dental plans and determine which plan is the right fit. The following points, collectively known as the five As, describe different ways to identify which prepaid dental coverage meets and exceeds the clients’ needs.

Access to Quality Care  

When evaluating prepaid dental plans for clients, brokers must take note that member access is about more than just how far away network dentists are from enrollees. The quality of care accessed is also a key factor to consider carefully. Convenient access to a dentist means little if the quality of that care is below par and treatment outcomes are unsatisfactory.  Most prepaid dental plans that are committed to quality implement rigorous credentialing standards that dentists must adhere to before participating in the network.

It’s important to find out how dentists qualify for the plan’s network. Besides general qualifications, such as dental experience and education, other requirements such as a clean criminal and dental practice background are worth noting. Additionally, you can look deeper into how the plan ensures ongoing quality of service from participating dentists. Some plans require meticulous criteria, such as cleanliness and appearance of the dental office and sterilization procedures. Also examine what steps are taken to remove dentists who don’t measure up. Such follow-through demonstrates a plan’s commitment to quality. By choosing a prepaid dental plan that offers members access to a sufficient, high quality network, you’re helping your clients and their employees receive the best and safest care possible.


Availability is equally as important as access when examining a dental plan’s network. Your clients’ employees won’t benefit from having access to 26 participating dentists within a mile of home if none of them offer available appointments for 6 months. Members should be able to receive quality dental care and treatment in a timely manner, and plans must set proactive guidelines to ensure that dentists are able to treat patients without delay.


Prepaid dental plans are inherently more affordable than traditional dental insurance. According to the NADP, enrollees save up to 46% on premiums with a prepaid plan as opposed to a PPO plan. Prepaid dental also offers low out-of-pocket costs for patients as well as no maximums or deductibles. With the cost-saving benefits it provides to the employer as well as to the enrollee, a prepaid dental plan allows groups looking to reduce their contribution levels to still provide dental benefits for their employees. It’s recommended that you make certain the plan covers a wide range of dental services, and includes current procedures as well as benefits that members value most.

Appropriateness of Treatment

The prepaid concept is designed to reward dentists for helping their patients maintain excellent oral and dental health through the delivery of appropriate care. A prepaid dental plan can achieve this in a couple of ways. First, offering progressive plan designs that provide fair compensation to dentists can prevent under or over treatment. Although not common, there may be an instance where a dentist may choose to perform a more expensive, or even a non-covered procedure over a less costly one to gain compensation. Second, ensuring members and dentists clearly understand how the prepaid dental plan works avoids any confusion for members, promotes patient-doctor trust, and encourages appropriateness of treatment, all of which will increase satisfaction from both the member and the dentist.


Perhaps the most overlooked quality that brokers should consider is a prepaid dental plan’s advocacy, not only for its members, but also for its participating network dentists. A progressive prepaid dental plan balances the oral health needs of its members with the dentists’ sustainability and growth requirements.  Advocacy for members can be as simple as providing educational materials to help plan enrollees become better informed dental consumers. Member advocacy can also mean going above and beyond the status quo to provide excellent service.

Service-oriented prepaid plans encourage more face time with enrollees, address member concerns and needs, and make necessary adjustments to ensure member satisfaction. Plans that advocate for their participating dentists always consider the professional needs of dentists in plan designs and service. Plans should also work toward establishing open and ongoing communication with network dentists, which can lead to higher satisfaction and encourage providers to stay in the network.

In conclusion, brokers should highlight the five As of the prepaid model to clients considering fully sponsored or partially sponsored prepaid dental coverage. Prepaid dental plans offer unparalleled value and provide a cost-effective way for employers to keep their staff healthy, happy, and more productive. When brokers give their clients As, they give themselves As, too.


Josh Nace is the executive VP  for Dental Health Services in Long Beach, CA. Dental Health Services, an employee-owned company, has been a leader in providing innovative dental benefit solutions for more than 38 years. Josh Nace can be reached at 562-595-6000 or

Health Carriers Battle Voluntary Players for Sales

Ancillary Benefits Tug-of-War – Bundling Vision and Dental: When is it the Best Option?

by Karen Gustin, LLIF

We’ve all heard about the potential for cost savings from bundling medical insurance benefits with ancillary plans, such as dental or vision. But are the savings real? And are these options best for employers and employees?

Bundled benefit plans may look good on paper, but they can lack the specific benefits employees want and the savings employers expect. These plans need to be examined to avoid potential problems. Consider the following criteria when reviewing bundled plans:

Plan Design 

You have probably heard that every insurance carrier offers a different design for bundled medical and ancillary plans, such as dental and vision benefits. It is important to understand how these benefit plans are set up. Check for waiting periods that members must meet before using the benefits and whether there are exclusions and conditions for coverage.

Read the fine print. Plan restrictions are often placed within sections of small type, so it is easy to overlook them. Members using the benefits may not be aware of any plan limitations until coverage for procedures is denied. Look for hidden coverage information. With some bundled medical plans, details on dental or vision benefits may be buried within the plan description. If dental or vision coverage options are not communicated clearly, employees can forget about these benefits and not use them.

High Deductibles

Some medical plans that are bundled with dental or vision options feature high deductibles for all benefit services. Most annual visits for dental or vision cost around $200, which is a significant amount for employees to pay out of pocket, especially in our current economy. The high deductible becomes a barrier or disincentive for employees to use their dental or vision benefits.


Some medical carriers offer a flat discount off of their medical premium to employers that agree to add in an ancillary dental plan. While the advertised price may look like a good deal, ask these questions:

• Will the plan(s) meet the needs of employers and employees?
• Does the carrier have a history of consistent pricing?
• How long will the carrier honor discounted rates?
• At renewal time, will the carrier increase the price to offset costs it incurs with the discounted plans?

Pitfalls and Unexpected Costs

It is difficult to predict the future. During the year, a business may make decisions that require changes to benefit plans. Or employees may experience coverage problems, and the plan must be amended or dropped. What are the hidden costs of updating or changing benefit plans? If employers participate in a discounted bundled medical plan, what happens if one of the benefits is removed?

Will the carrier honor the discounted price for the retained product? If the medical, dental or vision plans need to be reissued, what costs will employers and employees incur?

Utilization issues

When medical is bundled with an ancillary product, such as dental and vision, it is difficult to identify how the various benefits are used without investing considerable time in evaluating the claims. And during benefit renewal discussions, it is hard to determine if plans need to be changed to make them more efficient or better at meeting employees’ needs

Claims Processing

Dental and vision are preventive care benefits, and they tend to be used more frequently by employees and their dependents. Medical carriers that are not prepared to handle a high volume of claims may encounter unexpected problems. Find out whether the carrier offering a bundled medical-dental or vision plan intends to process all these claims through the same processing system. Single-system claims processing may result in numerous errors. They may also use the same claims examiners to pay both medical and dental. When it comes to paying claims, expertise matters – quality and accuracy may be compromised.

Bundle the Right Products

Under health care reform, Americans are required to have medical insurance and limited pediatric dental and vision coverage. If medical, dental and/or vision are bundled with a single deductible, say $500 or more, dental and vision benefits may never be paid.

Bundling Guidelines

When deciding whether or not to recommend a bundled medical plan with dental and/or vision, thoroughly review these components:

• Plan design.
• Deductible amount.
• Pricing and the costs or problems associated with unbundling.
• Carrier’s claims processing experience.
• Combination of benefits bundled.

Designing a plan that fits employers’ needs should be an important focus for the carrier(s) selected for employee benefits. Insurance carriers that specialize in dental and vision coverage have greater expertise and flexibility in customizing plan designs with a range of options and pricing to meet specific needs of the employee group.


Karen M. Gustin, LLIF, is senior vice president – group field sales, national accounts and broker blocks for Ameritas Group. She joined Ameritas Group in 1983.

Gustin is past chair of the National Association of Dental Plans board of directors and serves on the board of the National Association of Vision Care Plans. She can be reached at or 800-543-7784 ext 82507 or 402-309-2507.

Health Carriers Battle Voluntary Players for Sales

Ancillary Benefits Tug-of-War – Three Things Employers Want in a Life Insurance Product

by Chris McConathy

When the unthinkable happens to an employee – such as the loss of a loved one – an employer counts on their group life insurance carrier to give their employees and/or the beneficiaries the life insurance benefits check. However, employers also expect more than just a check from their life insurance carrier. They are looking for services that will help their employees during this difficult time.

Employers are also concerned about the cost of the coverage – they want to make sure they are getting the best life insurance coverage at the best price. And, employers want to make sure their employees (and/or the beneficiaries) are satisfied with the support they receive and have a good experience with the life insurance company representatives.

More Than Just A Check

Since no one can predict the future, you do not know when your client’s employees will need help with emotional, financial and/or legal matters. However, when these moments do come up, your clients will be pleased to know their employees have access to these valuable services, especially if these services are included as a standard component of their life insurance benefit.

Some companies include services, such as 24/7 telephone counseling, grief counseling to help employees adjust to a new role or lifestyle, referral services and unlimited sessions with a legal or financial professional at no extra cost. These programs are included in the support services that are available to employers that offer their group life insurance plans.

These services provide your client’s employees with the opportunity to meet face-to-face or by telephone with a lawyer to get help with preparing a regular will, a living will, trusts, and discuss other legal issues. The employees also gain access to online resources that provide advice on handling difficult life events, such as losing a loved one. Identity theft victim recovery services are also available for employees and family members, including medical identity theft. Beneficiaries can also receive a special book that focuses on the age-appropriate needs of children who are coping with a difficult loss. Your client’s employees can also get help with:

• Getting copies of death certificates.
• Notifying financial institutions, creditors, public agencies and utilities of the death.
• Closing accounts and making sure all funds are distributed properly.
• Placing a freeze on credit reports to protect against fraud.

Cost (Getting The Best Product At The Best Price)

The cost of coverage is one of the main areas employers focus on when they are evaluating and trying to select a life insurance carrier. Since cost is so important to employers, you should consider talking with them about bundling their health and life insurance (as well as their dental, vision and disability products) with one carrier. When an employer bundles these benefits with one insurer, they can save on premiums immediately.

Research conducted by Anthem’s parent company, as well as other industry studies, indicates that cost is critical when it comes to selecting an insurance carrier. More than half of the employers in these studies say they selected their current insurer based on cost; and within the last two years, nearly 75 percent have left their former health insurer due to cost. With cost being such an important component, carriers developed programs in which employers can save various percentage points on health premiums when they bundle their health and life benefits (as well as their dental, vision and disability benefits) with them. As a result, cost savings programs like this are a win-win solution for your clients and their employees.

In addition to saving money on the premium, when employers bundle their benefits with one carrier, they can simplify their administration by having one point-of-contact and one bill that includes all of their lines of coverage. They can also provide integrated benefits that work together to help your clients from a holistic point-of-view. Companies can look at claims patterns and be proactive in working with employees on managing issues before they become a health emergency or ongoing health problem, which can also help the employer save money on costly health issues.

Employer/Employee/Beneficiary Satisfaction 

Although cost will always be a major factor employers look at when it comes to choosing a life insurance carrier, there are many other factors that influence what an employer wants in a life insurance carrier. Some of the top influencers include providing top-notch customer service that will address their employees’ questions, problems, and concerns, as well as sending timely communications to creditors and other institutions, and providing access to a variety of resources to their employees (or beneficiaries) during this difficult time.

Employers want to know that their employees and the beneficiaries are getting the help they need so they have the peace of mind to take care of things when their family member dies. When the insurer provides best-in-class customer service during this challenging time, it creates a positive experience for the beneficiaries.

As you know, employees provide feedback to their employers throughout the year, not just during open enrollment. They will also provide feedback on how a problem was resolved. When employers feel they are addressing their concerns as well as the concerns of their employees, employer satisfaction increases dramatically. Bottom-line: Make sure your clients and their employees are satisfied with the services they are receiving from their life insurance carrier. When employers, employees, and beneficiaries are satisfied with their interactions with the insurer, this makes an impact on whether an employer will remain with that carrier in the future.

Life insurance is one of the most commonly offered benefits. In recent years, the offer rate for this benefit has increased for most employer size segments. Almost half of smaller employees (10-19 employees) offer life insurance, and the majority of larger employers offer group life insurance. If you remember employers are looking for life insurance carriers that offer more than a benefits check, keep the cost of coverage as affordable as possible, and recommend carriers that have a good track record for keeping their members satisfied, you will be providing a service that is second to none!


Chris McConathy is director of Specialty Sales with Anthem Blue Cross Life and Health Insurance Company.

Critical Illness Insurance Has Room to Grow in California

by Jodi Anatole

California presents an unusually good opportunity for brokers to help employers deploy one of the fastest growing of voluntary benefits – critical illness insurance. More employers across the nation, operating in a cost-conscious mode, are viewing benefits, including voluntary benefits, as effective tools to build employee loyalty and to enhance productivity.

Not too surprisingly, only 28% of workers surveyed had heard of the critical illness product. Those who had heard of the product often confused it with medical or disability insurance, according to a study by MetLife. The good news is that once presented with some facts about critical illness insurance, three-fourths of employees surveyed liked the concept so much that most would be willing to pay the entire premium if critical illness insurance was offered through their employer, according to the study.

California’s employers are not offering critical illness insurance to the same degree as the nationwide trend. Nationwide, 41% of companies surveyed offer critical illness insurance as a voluntary benefit. In California, though, it’s only 32%. Interest among benefit managers and human resources professionals seems likely to intensify in California’s under-penetrated market for critical illness insurance, according to a MetLife study.

Other economic, societal, and benefit industry trends also favor inclusion of critical illness insurance in an employer’s benefit offerings. For example, serious illnesses such as cancer, heart attack, or stroke are often being treated successfully and people are living longer after being diagnosed with these illnesses, according to surveys by the American Heart Association and the American Cancer Society.

However, longer life spans often entail more care and more ancillary expenses. Critical illness insurance becomes even more attractive when you consider the general upward direction of co-pays for many employees. Insurance that helps meet some of the added costs can round out an employee’s health insurance coverage and ease the transition to higher deductible health care plans. The product is not a substitute for medical insurance, by any means, but rather a useful supplement that can help bring an added sense of security. A MetLife study found that households spend an average of about $5,000 on out-of-pocket medical expenses and about $1,600 on non-medical expenses. While employees are not well informed about critical illness insurance, 55% are somewhat or very concerned about the blow a critical illness could deliver to family finances, according to the study.

A key selling point of critical illness insurance is its great flexibility to meet an array of expenses, both expected and unexpected. The lump-sum payment a covered employee receives upon submitting proof of diagnosis can be used for any expense, such as travel for treatment, out-of-network treatment, child care, or just household expenses that accrue in case the typical family income declines due to inability to work. There is no physical exam and no need to keep and submit receipts or to file claims.

Employers that are not familiar with critical illness insurance may assume that it only appeals to an older employee population. However, the average age of an enrolled employee is 45. The study uncovered a palpable concern among younger employees, compared with older workers, about unforeseen financial risks. Younger employees also have a more pronounced tendency to look to employee benefits as a source of financial security.

Of course, cost is a necessary concern for many employees. Critical illness insurance scores well in that regard, too, providing coverage for a relatively low premium. Coverage can often be extended to include the employee’s family (spouse/domestic partner, and children). There may also be an option to take coverage with the employee if he or she leaves the company or retires.

Interest in critical illness insurance continues to grow and the industry is working to educate more employers and employees. The American Association for Critical Illness Insurance has launched a national consumer awareness campaign, for example. Employers are increasingly likely to find receptive audiences for this voluntary, affordable and fast-growing benefit, which can help people concentrate on gaining physical recovery because there is already a plan in place to help with financial recovery. q


Jodi Anatole is vice president, MetLife Inc. is a leading global provider of insurance, annuities and employee benefit programs, serving 90 million customers.  Through its subsidiaries and affiliates, MetLife holds leading market positions in the United States, Japan, Latin America, Asia, Europe and the Middle East.  For more information, visit

Consumer-Driven Healthcare — Value and Price Don’t Always go Hand-in-Hand

Knowing the Costs is Only One Component Influencing Consumer Behavior

by Bart Halling

Cost transparency tools have generated a great deal of excitement in the health care benefit marketplace. Many believe that delivering better, more accurate cost estimates for health care services, events, and procedures may be the silver bullet to solving a host of problems related to the cost of health care.

In theory, when consumers understand the true costs of care, they make better, more informed, and more cost efficient care decisions. There certainly is a great deal of merit to that concept and much to be excited about with the great advances that are being made in cost transparency. But just having the cost of care become more visible is not going to change consumer behavior by itself.

Understanding and Shopping for Value

One of the keys to any value-based benefit plan is getting plan members to become more financially accountable for health care decisions and purchasing choices. In order to do that, it’s important to understand what types of medical services and procedures are truly “shoppable.”

People may not be willing to make price and quality tradeoffs for all care events. For example, a person who is having a heart attack is not going to shop for the most cost-effective cardiac care center within a five-mile radius. Even planned procedures don’t automatically fall into the shoppable category if there is a high level of complexity involved. In some cases, people with less complex issues will pay more for what they perceive as a higher quality service. For example, most patients who are planning a full knee replacement wouldn’t settle for a knee that clicks, snaps, and needs oil once in a while, just to get a significant discount on the procedure.

The Cost Versus Quality Conundrum

One of the biggest challenges for employers is the common assumption that higher cost is linked proportionately to higher quality. It can be very difficult to get people to choose lower cost services if they assume that the quality will be lower. A recent study by The Journal of the American Medicine Association (JAMA) seems to affirm the notion that many people believe that cost is related directly to quality and they behave accordingly in their health care decision-making. Researchers administered small electric shocks and subjects were asked to record their level of pain on a scale of one to 10. Before a second round of shocks, researchers gave the subjects placebo sugar pills, which they said were painkillers similar to Codeine. Researchers told half the patients that their painkiller cost $2.50 per pill and half that their painkiller had been discounted to 10 cents per pill. Eighty-five percent of the subjects who took the “more expensive” pill said that the second set of shocks were less painful while only 61% of those taking the “cheaper” pill said they were less painful. Furthermore, it appears that  consumers will only trade off lower cost solutions if the evidence shows it would have the same or better result or quality.

Rising to the Challenge

While overcoming the ingrained you-get-what-you-pay-for mindset is a challenge, it’s not insurmountable. The key is getting consumers to realize that a more fiscally responsible approach to their health care purchasing decisions will pay long-term dividends.

Greater out-of-pocket exposure, asset-based benefit structures, and incentive programs are effective tactics to drive home the point that employees must share in the responsibility of managing cost trends that would otherwise be unsustainable.

There is evidence that consumers are beginning to recognize how their behavior can affect their financial future. A recent Health & Wealth Planning for Retirement survey shows that health care expenses and outliving financial nest eggs are by the far the two biggest worries participants had about retirement.

Cost transparency tools will continue to play an important role in the health benefit market, particularly tools that are sophisticated enough to demonstrate that quality and cost are not attached at the hip. In many cases, price, much like real estate, can vary greatly because of location rather than quality.  Having access to the most accurate and actionable information about cost allows consumers to maximize the life of their health care assets.

What’s Next?

Possibly as soon as the next two to five years, the next generation of cost transparency tools may start calculating the cost of decisions you have made in the past and help you understand what you can do to change your health in the future.

Consumers can already perform their own financial health care checkup with tools that blend financial information, such as health care account balances and assets with behavioral information, such as smoking and eating habits. With this type of scenario analysis, consumers can ask the “what if” questions to see the projected impact of their decisions. It provides the opportunity for long-term behavior change.

Price and cost transparency are certainly very powerful tools in the struggle to create true health care consumerism. Benefit plan participants are challenged every day with difficult decisions and inadequate information to make the right choices. Any effort toward producing and delivering better cost transparency with health care expenses will bear fruit, but will be most effective when incorporated in an overarching program to help consumers find and harvest true value. As Henry David Thoreau stated, “The price of anything is the amount of life you exchange for it.” q


Bart Halling is vice president of Customer Solutions overseeing product and services management for UMR, the third-party administrator (TPA) unit of UnitedHealthcare. Before joining UMR,  Halling served as director of Financial and Treasury Operations at Definity Health Corporation from 2000 to 2005. Halling is a native of Winnetka, IL where he earned Illinois State Scholar honors.  He received a bachelor’s degree in mathematics and economics from St. Olaf College, Northfield, Minn. and completed his graduate MBA coursework at the Carlson School of Management with a focus on strategic development. To reach him, email:

Voluntary Benefits: Seize the Opportunity to Engage Millennials with Voluntary Insurance

by Michael Klachefsky

By the year 2020, one in two employees will be a Millennial. This level of age density, which has not been seen since the Baby Boomers, is starting to influence the way employers interact with their employees. According to the Pew Research Center, the moniker, “Millennials” refers to those born between 1981 and 2000 who have come of age in the new millennium.  A trend that brokers are using to their advantage in the current marketplace that also affects Millennials is voluntary benefits.

As employers cover the increasing cost of health care, many are shifting the scope of benefit coverage for their employees. Where this shift is highly evident is the transition from employer-sponsored life and disability insurance benefits to voluntary insurance. This shift allows employers to have additional products and services available for employees to purchase. It doesn’t cost the employer a penny and it presents a new sales opportunity for brokers.

Currently, one out of every three employers is considering replacing employer paid benefits with voluntary benefits. While voluntary coverage is playing a larger role in employers’ benefit offerings, it is crucial for brokers to find fresh, engaging ways to educate and assist employees. For the Millennial generation, that demands instant technology access and information right at their fingertips. Using an online educational module is an opportunity to inform them of the need for coverage and, in turn, encourage enrollment.

The Outlook for Millennials 

Tech-savvy Millennials are part of the first generation in history to view social media and Internet technology as an everyday part of their lives and use it to better understand the world around them. Although they excel with technology, they have also been subjected to the pressures of an uncertain economy and a lackluster working environment. This group is especially vulnerable to risks against which disability and life insurance protect.

According to the Pew Research Center, the median wealth of households headed by adults younger than 35 has 68% less wealth what their same-aged counterparts had in 1984. This decrease in income makes it seem unlikely that they will have the savings to help them withstand interruptions in their household incomes.

They also have a lot at stake: Millennials tend to have more to protect than those in the same age range did 30 years ago. In fact, in 2009, 38% of adults under age 35 owned their own homes, compared to 4% of the same age group in 1984. Additionally, 17% of this same group has an IRA compared to 1% in 1984, according to the Pew Research Center.

Bringing Information to Millennials 

Brokers can turn these insights into action. By harnessing this generation’s demand for instant information and educational training, they can inform HR managers on bridging the information gap and educating Millennial employees on the importance of voluntary disability insurance. Two types of communications initiatives can assist HR managers in this mission and encourage enrollment.

First, brokers can work with HR managers to help workers better understand the financial challenges that may arise if they experience a disabling disease or injury by using an online educational program. More than two thirds of workers do not have private long-term disability insurance. Industry wide educational initiatives, such as the Council for Disability Awareness’ Defend Your Income Campaign, can equip this generation to take the important steps necessary to preserve their ability to earn an income.  According to a survey taken by the Council for Disability Awareness, over half of survey respondents thought only one in 100, or one in 50 working Americans are likely to become disabled during their working careers. Because many young workers think they will never experience a disability, they have not taken the proper steps to protect their critical need to earn an income.

Second, brokers also can work with employers to better engage Millennials in the voluntary market by using an online interactive educational module to help them understand the voluntary life and disability benefits available to them. These modules offer employees a go-to benefit resource that can help them overcome enrollment barriers and allow them to make the right decision.  Many modules can be customized and tailored to include specific employer benefits and features. They can also help employees learn the basics of how their unique policies work, including how to estimate their needs, select appropriate coverage and, ultimately, enroll.

Online interactive educational modules give employees an opportunity to take full advantage of their benefits, and understand how their coverage meets their needs.

Preparing Millennials for the Future 

Implementing these two online educational tools can protect employees, especially those in the Millennial generation, from the financial risks of serious illness or injuries. Educating them, in a manner in which they are accustomed to learning, on the need for voluntary life and disability insurance also can lessen the risk of the financial impacts of a disability, better preparing them for the future.

By helping HR managers understand the educational needs and inherent characteristics of the Millennial generation entering the workforce, they can sell unique tools to help employers adequately prepare for this new generation. Learning how to connect this generation with information on the needs of voluntary insurance translates into a win for both employers and brokers.


Michael Klachefsky is national practice leader of Standard Insurance Company (The Standard) Workplace Possibilities program and author of several white papers on managing absence and disability, including his latest series of Productivity Insights on health-related lost productivity. He has more than 30 years of experience in the absence/disability management and productivity industry. In this role, he works with The Standard’s corporate marketing team and with The Standard’s Strategic Partners to promote and enhance the program, as well as represent the company at conferences, workshops and other events that focus on absence/disability management topics. He can be contacted via email at or by phone at 971-321-2679.

Voluntary Benefits–Understanding Generational Differences to Offer Better Benefits

by Todd Mason

Today’s workforce is diverse, not only in ethnicity and gender, but also in age, ranging from 18 to about 70. Generation Y, Generation X, and Baby Boomer employees have distinct viewpoints about what makes a workplace desirable. Brokers and agents who understand how each generation views and values benefits can help HR leaders and managers focus on products that are most meaningful to their employees.

By understanding each generation’s risks, concerns, and health care needs, employers can provide targeted and cost-effective benefit solutions.

Employees are looking to their employers for new benefit options and education to help them create a more secure safety net. Voluntary insurance is a smart solution that can expand benefit offerings by providing a wide range of coverage choices including accident, short-term disability, critical illness, and hospital indemnity plans.

Voluntary insurance offers benefit options that go beyond the coverage provided by major medical insurance and can be customized to meet the varying needs of each generation of workers. It can also have a big impact on a business’s finances, with 30% of employers seeing fewer workers’ compensation claims after introducing voluntary insurance plans, according to a study conducted by Research Now on behalf of Aflac.

Employers that offer voluntary insurance can create competitive insurance packages to attract and retain a diverse range of talent without adding benefit costs to the company.

Generation Y Settles Into Employment

Born after 1980, Generation Y, or Millennials, are today’s youngest workers. Gen-Y workers are typically finishing their education, entering the workforce, and making choices about living arrangements, marriage, and lifestyle.

The 2012 Aflac WorkForces Report reveals that 42% of Generation Y workers are employed part-time; 31% work for small employers with fewer than 25 employees; and 20% work in the retail industry.  These jobs may not provide the insurance coverage that this young generation is seeking, such as life insurance, dental, or vision coverage.

It’s not much of a surprise that only 69% of employees are offered major medical insurance and only 62% of those who are eligible to participate are enrolled in their company’s plan. This is the lowest percentage of any generation, leaving nearly 40% Gen-Y workers without major medical coverage. Having part-time employment, being in good health, and staying on their parents’ major medical plan until they turn 26 may be reasons why more Gen-Y workers don’t consider their employer’s insurance.

However, many Millennials say they want protection and they need help to choose the right benefits, which gives agents and brokers a great opportunity to advise their clients about the needs and characteristics of this group. For instance, 72% of Generation Y employees say they are more likely to take advantage of benefit options that are tailored to their situation. Forty-four percent say they need to be more engaged in making benefit decisions and 55% say their HR department doesn’t communicate enough.

By educating HR managers on the benefits of voluntary insurance for Generation Y workers, agents and brokers can help employers offer the expanded coverage that may prove valuable as these workers begin their careers. These benefits can help employees protect their financial future while giving employers the opportunity to build a competitive compensation package to attract and retain this young workforce.

The survey found the following benefit preferences among Generation Y employees

• 78% say that brand names and reputation matter when selecting benefit options.
• They want low-cost benefit options. Sixty-seven percent say they would purchase voluntary insurance to better protect themselves and their families.
• They are interested in company wellness programs that can improve workplace health and boost company productivity. The majority would participate in wellness programs, but less than 25% work for a company that offers a wellness plan.

Goals for Generation X Protect Income and Assets

Generation X, aged 25 to 44, is an often-overlooked segment with a demographic situation and outlook that makes it ideal for voluntary insurance protection. Eighty-two percent of Generation X workers have major medical insurance, but only 29% have voluntary insurance. As Generation X workers experience major life changes, such as starting or raising a family, purchasing a home, and planning for their financial future, it’s a critical time to take advantage of the employers’ insurance plans.

These growing assets can also mean debt including mortgages, car loans, and education costs. As they face these expenses, it is critical that Generation X workers protect their assets and income in case of a medical emergency. Voluntary insurance can protect Gen X workers against the financial stress that comes with an unexpected emergency by offsetting health care costs that aren’t covered by major medical insurance.

By educating employers about the financial protection offered by voluntary insurance, brokers and agents can help Gen-X employees build a strong financial foundation.

Employers need to establish themselves as competitive recruiters and savvy talent managers to Gen X employees who will take the reins as Baby Boomers begin to retire. Forty-nine percent of Generation X workers say that improvements in their benefit package would keep them with their employer.

Implementing better benefit programs for this generation means the following:

• Offering financial planning assistance to help eliminate student loan payments or debt and save for retirement.
• Including wellness programs to help Gen Xers improve their health and well being.
• Providing income-protection options for them and their growing families.
• Marketing benefits in a variety of ways, including online and through social media, to help them find relevant information easily.
• Coordinating one-on-one or group meetings with insurance consultants to ensure that employees understand their benefit choices.

Retirement Anxiety is High for Baby Boomers

The Baby Boomer generation of 45- to 64-year-olds represents the largest group of full-time employees in today’s workforce. Many Baby Boomers lost their retirement savings when the housing bubble burst and the economic recession hit, resulting in delayed retirement and little time to rebuild their wealth.

Baby Boomers are very apprehensive about retirement, according to the 2012 AARP Anxiety Index. Seventy-two percent of working Boomers say they will probably be forced to delay retirement, and 50% have little confidence that they will ever be able to retire. An additional 65% have little confidence that they will have the means to live comfortably in retirement. Ninety-five percent of those who expect to retire later than they had originally planned, say it’s because they are financially unprepared or they need to maintain health insurance.

Baby Boomers are interested in retirement savings assistance, heavy retirement savings plans/incentives, and health savings plans. They are also likely to be interested in the following:

• Voluntary insurance plans to better protect their savings in case of a serious illness.
• Portable insurance policies that can be retained after they stop working.
• Fringe benefits, such as grandchild care, flextime, or phased retirement programs.

Voluntary insurance offers cost-effective, customizable solutions to help employers protect the assets of their workers in case of serious accident or illness. Additionally, voluntary insurance policies are portable, which allows Boomers to retain their insurance coverage when they retire.

Consider Generational Differences when Designing Benefits Packages

Brokers and agents can help clients identify the right benefit packages to appeal to workers of any generation. Tailoring benefits to meet the needs of Millennial, Generation X, and Baby Boomer employees comes down to understanding their distinct attitudes and expectations about lifestyle and financial security. Many voluntary insurance products, such as dental, vision, hospital indemnity, and short-term disability, can offer financial peace-of-mind to workers and be a powerful factor in retaining valuable employees.

By sharing insights about each group, brokers and agents can enable employers to assemble the right product mix and educational programs to attract and retain a diverse, cross-generational workforce.


Todd Mason is the California-Los Angeles Northeast state sales coordinator for Aflac. He is responsible for creating and implementing the state’s strategic market development plan as well as the acquisition and training of new talent for the sales force. For more information about Aflac, visit or send an e-mail at

Voluntary Benefits – How Voluntary Disability Benefits Can Address the Needs of Younger Workers

by Paul D. Taylor

Offering employee benefits can help play a vital role in strengthening the relationship between employers and employees. This is especially true for workers that are part of the Gen Y demographic. Forty-nine percent of all employees surveyed for MetLife’s 10th Annual Employee Benefits Trends Study say that because of the economy they are counting on employers’ benefits programs to help with their financial protection needs, and that percentage jumps to 66% for Gen Y workers.

One reason for this high percentage is likely because Gen Y workers are in diverse life stages, and some have multiple family financial obligations. According to MetLife’s study, 55% of this demographic are married or in a domestic partnership; 46% are parents of young children; and 13% provide care for an elderly parent or relative. Two-thirds of surveyed Gen Y workers are very concerned about their family’s financial security if the principle wage earner is unable to earn an income due to illness or injury – making the providing and promoting of a voluntary disability benefit, where the employee can buy-up coverage to supplement any core offering, very attractive to the Gen Y demographic.

Benefits can be leveraged as an employee retention tool. According to the MetLife study, 63% of Gen Y workers say that benefits are an important reason why they continue to work for their current employer. That is a compelling statistic since the study also found that while one in three employees would like to work for a different employer in 2012, that rises to one in two for Gen Y workers.

You may have clients that are underestimating the value employees place on their non-medical benefits, including disability coverage. For instance, the study found that 51% of employees said that non-medical benefits like dental, disability, and life insurance were very strong influencers of their feelings of loyalty towards their employer. However, only 32% of employers believed the same. Employees who are satisfied with their benefits are much more likely to feel a strong sense of loyalty towards their employer. The study found that 61% of employees who are very satisfied with their benefits feel a very strong sense of loyalty to their employer compared to 24% who are very dissatisfied with their benefits. Furthermore, the study found that younger generations, in particular, are interested in voluntary benefits. While 51% of surveyed employees are interested in a wider array of voluntary benefits that percentage jumps to 57% for Gen Y and Gen X workers. Therefore, it is easy to see how voluntary benefits, such as disability coverage, can play a key role in helping both the employee and the employer.

Workplace Education Can Help

Even with a disability plan in place, it is important for employers to ensure that employees know that a plan is available and understand how it addresses their needs. Having educational materials and effective communication is critical for maximizing the value of the plan for all stakeholders. It is important to help employees understand how to determine how much disability insurance they need. While a basic rule of thumb is to cover 60% to 80% of after tax income, Gen Y might need the higher limits. According to the study, almost half of Gen Y spends 70% or more of their monthly take home pay on essential expenses, and a fourth of Gen Y even spends 80% or more of their after tax income on essential expenses. Employers that offer access to voluntary supplemental disability coverage give employees the opportunity to obtain those higher limits they may need without affecting the company’s overall benefits budget.

It stands to reason that people who understand their benefits are more likely to value them and appreciate that their employer has made them available. Don’t neglect to explain the basic facts in easy to understand language. Even people with disability insurance are unaware or mistaken about the amount of time that their insurance lasts. For example, a MetLife Disability Literacy Study found that 46% of workers with short-term disability benefits are unsure how long benefits would be paid, or thought that they would be paid for a year or more. Additionally, 36% of workers are unsure of the duration that long-term disability benefits would be paid or believe that they are paid out for the remainder of their life.

Keep in mind that Gen Y also has different preferences than other generations. Gen Y wants the use of online tools when they are looking for financial education. According to MetLife’s Employee Benefits Trends Study, 70% of Gen Y says that they are interested in their employer providing online tools, compared to 69% of Gen X and 58% of Baby Boomers. Fifty-nine percent of Gen Y are also interested in having financial planning and retirement webinars via the Internet, where only 55% of Gen X and 47% of Baby Boomers are. Remember, to meet Gen Y’s preferences, it is important to craft programs that are relevant to the needs of a younger generation.

Gen Y Wants Advice 

The good news about disability insurance is that Gen Y seems open and willing to accept help when it comes to income protection. Despite the fact that the study found that one half of Gen Y employees lack confidence in their ability to make the right financial decisions, it also found that almost two-thirds of Gen Y workers are looking for advice and guidance from a variety of sources about their personal finances. While this does not mean that they are solely seeking advice from financial professionals – they may be asking friends and family as well. It does suggest that Gen Y may be more receptive than other generations to using workplace financial education programs, online tools, and other resources to obtain the correct amount of protection. In fact, the study found that 51% percent of Gen Y employees who said that their employer offered an online tool, like a disability insurance calculator, used it compared to 36% of Gen X and 15% of Baby Boomers. Fifty-three percent of employees who used an online disability tool found it very effective in helping them determine how much coverage they needed, but about one-third of employees say that their employer doesn’t offer an online tool like a disability insurance calculator.

In addition, the survey found the following:

• 51% of Gen Y employees strongly value having more educational programs in the workplace that cover individual finances and retirement planning.
• 65% are interested in their employer providing a financial advisor sponsored by the employer.
• 59% are interested in their employer providing financial planning/retirement webinars via the Internet.
• 52% are interested in advice and guidance from an expert via telephone from their employer.

Using disability insurance along with other voluntary benefits can help create and strengthen Gen Y’s personal financial safety net. Gen Y is looking for resources to help improve their personal finances. Providing help to Gen Y does not have to cost employers very much. Using inexpensive tools on the company website, as well as providing financial education, are economical ways to provide Gen Y with assistance. Voluntary benefits don’t add to the bottom line of the employers but can add real value to a generation whose ability to earn an income is likely their most valuable asset.


Paul D. Taylor is vice president, Group Disability, for MetLife. Metropolitan Life Insurance Company (MetLife) is a subsidiary of MetLife, Inc., a leading global provider of insurance, annuities and employee benefit programs, serving 90 million customers. Through its subsidiaries and affiliates, MetLife holds leading market positions in the United States, Japan, Latin America, Asia, Europe and the Middle East. For more information, visit

Tips on Self-Reported Symptoms and Record Keeping as They Relate to a Disability Claim

Art Fries

The most flagrant example of self-reported symptoms occurred in a telephone call to me by a physician (internist), “Art, I think I’m going to have a psych claim and I understand you can give me advice to make it work.” My questions are the following:

• Are you seeing a psychiatrist or psychologist in terms of treatment?
• When did your symptoms begin? How long have you had symptoms and what specifically is the diagnosis? How do you feel now and is the treatment helping?
• Have you had to reduce your hours because of the symptoms?

His response, “Art, I’m not seeing any type of therapist. I don’t have any symptoms but practicing medicine is no longer any fun. Because of managed care I’m told what I’ll be paid and how to practice. I’d like to collect on my disability policy and I understand that you’re the guy that can make that happen.” My response, “I don’t do that. If you don’t have a legitimate claim, that’s fraud. Get another job if you no longer like practicing medicine.”

In most individual disability policies the words “self-reported symptoms” are not used. Neither are the words “subjective or objective medical symptoms” included in these policies. Most of the broader worded individual disability policies say, in essence, that you are sick or hurt (accident) and cannot perform the substantial and material duties of your occupation (meaning you can’t do your thing).

Some of the newer individual disability policies and many of the group disability polities do discuss self-reported symptoms for which limited benefits are provided, such as back pain, headaches, etc. (one or two years). There are, of course, exceptions and these are stated in the policy. Often, the word “objective” is used, meaning that there is some evidence in the form of an MRI or x-ray to lend credibility to the claim. Some policies say that you must be under the care of a physician and others specify that you must be under the care of a physician who is appropriate for the condition. It’s always a good idea, anyway, to see the proper specialist for your medical condition.

It’s also a good idea to keep some type of history related to your condition from the beginning. That history should explain how you felt at your worst and how the condition worsened over time. You should also indicate in your history the effect your medical condition (symptom or symptoms) has on your job or profession. When you see medical providers, you should be specific as to your symptoms and how they are affecting your job duties. Don’t hold back your true feelings because you are concerned about what’s on record. Poor record keeping can also influence your disability claim. Even though you say you are a dentist, the insurance company wants proof in the way of tax returns as well as procedure codes.

Tax Returns

You may have been overly aggressive with respect to business expenses shown on your tax return. An insurance company forensic accountant can often find areas in your tax returns in which they feel are not legitimate business expenses. Your accountant might argue these issues but sometimes, you do not have the paperwork to back up the deductions and the insurance company will reduce the amount of business expenses being claimed on your tax return. A threat to go to the IRS will often cause you to back down and accept their findings.

Procedure Codes

These will determine the type of procedures performed and provide information to the insurance company with respect to how active you have been at your profession. Typical will be a request for computer printouts for the entire one-year period prior to your partial or total disability claim. Let’s say that you told the insurance company that you reduced your hours in half because of symptoms related to your cervical area, but your procedure codes show activity typical of one who has cut back only 20% when comparing your prior codes to your post (partial) disability codes. This inconsistency can be the basis for the insurance company to pay a lesser amount on your partial claim.

Self-reported symptoms and record keeping are just two areas of many that can have an influence on the outcome of your disability claim.


Art Fries is a disability claim consultant providing advice on a national basis in the U.S. He is located in Nipomo, Calif.  He can be reached at 800-567-1911,, or friesart@

Worksite Clinics: The Next Generation

by Jonathan Spero, M.D.

The use of worksite clinics is becoming an increasingly popular way to control health care spending and even enhance employee productivity, according to a recent survey from Mercer. Until recently, worksite clinics were largely popular only at Fortune 500 companies, but the trend is now spreading to local governments and mid-size companies of 250 or more employees.

Generally, care at the clinic is free and provides added convenience for employees. Worksite clinics are providing more efficient care compared to paying claims from community physicians. However, the latest clinics offer an even a more compelling value proposition and much greater associated healthcare savings.

The rest of this article will focus on the key concepts of this next generation of worksite clinics and how they will drive significant reductions in healthcare costs for employers.

Concept #1 At Risk Model

Worksite vendors are increasingly willing to deliver these services with some portion of the compensation being at risk. The greater the savings there is to the employer, the greater the potential bonus there is for the vendor. In this model both the client and vendor have incentives that are congruent.

How these vendors are measuring savings or return on investment varies. The most accurate way to determine the saving generated from the on-site clinic is to compare the annual cost of health care for members eligible to use the clinic (study group) vs. members who are not eligible to use the clinic (control group). This provides the employer with a direct comparison of the two groups’ costs and a direct measurement of the savings.

Concept #2 Gaps In Care Analysis

Before the clinic even is launched, the employer benefits from powerful analytic software tools that can filter through the previous year’s claims data to determine gaps in care for individuals and identify high-risk members that require additional intervention. These high-risk members can be invited to visit the clinic and enroll in on-site programs designed to ensure quality care and improved outcomes.

Concept #3 Patient Centered Medical Home

The clinicians at the worksite clinic can build a medical home model program. The medical home model takes into account that chronic diseases require input from multiple providers and specialists, and that these chronic diseases are often difficult to manage for providers as well as for the patient. The worksite clinician can act as a coordinator of care ensuring that quality, cost effective, evidence-based medicine is delivered. In addition to educating the patient on their condition, the coordinator communicates to all physicians involved in the care of the patient.  This program acts as a very effective disease management program with member engagement levels routinely above 80%. The worksite clinic enrolls members who are at high risk based on the analysis of gaps in care mentioned above. Common diseases that are coordinated include diabetes, heart disease, asthma, arthritis, and chronic pain.

Concept #4 Clinical Engineering

Traditionally, employers have relied solely on the carriers to negotiate agreements with providers. But these agreements are not necessarily in the best interest of the employer or the patient. Not only can more favorable pricing be negotiated from quality providers, but also the agreements have no quality guarantees associated with them. Worksite vendors have a unique opportunity to identify high cost procedures and hospitalizations and negotiate case rates directly with providers and hospitals with built in quality performance guarantees. Significant savings for employers and members as well as improved patient outcomes are the results of these arrangements.

Concept #5 Price Transparency and Patient Advocacy

Worksite clinicians, now armed with comprehensive pricing and quality metrics, can effectively act as patient advocates helping members make informed medial decisions. Patients, with the assistance of the worksite clinic, can comfortably choose a cost saving option for a diagnostic or clinical procedure knowing that they are receiving quality healthcare for the right price.

Concept #6 Predictive Modeling

Worksite clinics have the ability to attach current member health risks to future costs allowing the clinics to develop targeted wellness programs that zero in on future cost drivers. In addition, the clinic can provide useful healthcare budget estimates to the employer’s benefits department when planning for next year.

Concept #7 Telemedicine

The worksite clinic is often not available for remote employees and dependents. Telemedicine, which is quickly becoming a mainstream method of care delivery, can address this issue. Telemedicine, via telephone and two way video communication, can allow patients to receive medical evaluation and treatment. Not only can this be offered to members that do not have access to the on-site clinic, but also members with access to the clinic have a resource for after hours care.

Concept #8 Wellness

The clinic offers year round, on-site, integrated wellness programs that can only drive participation, and be very effective in modifying healthy lifestyle behaviors among members. Clinicians are being cross-trained as certified health coaches; up to 15% of the visits to the clinic are for health coaching sessions.

In summary, employers are looking for employee health solutions that offer a one-stop shop for effective healthcare cost containment. The next generation of worksite clinics promises to offer just this. The on-site clinic builds trust and relationships with members, which facilitates engagement in wellness, disease management, and patient advocacy programs driving improved outcomes and lower costs.


Jonathan Spero, MD, is CEO of InHouse Physicians and board certified in Internal Medicine. Dr. Spero is an expert in the field of targeted employee wellness programs with measureable ROIs. InHouse Physicians is a global employee health and wellness provider delivering innovative cost containment solutions to corporations around the world. InHouse Physicians high touch employee health services include a wide range of offerings such as cost effective worksite health centers, evidence-based pre-disease wellness initiatives, health screenings plus analytics, flu vaccinations, and travel medicine. To learn more about InHouse Physicians visit the website at or email Dr. Spero at

Vision Conference – Give Your Clients a Fresh Perspective With Vision Benefits

by Anya Simpson

During the holiday season, clients may still have a big item to check off their wish list – achieve a successful benefit enrollment. This year, you’ve worked hard to streamline the renewal process for one of your oldest clients. You feel really good about the robust 2013 benefit package you’ve put together and you’re pumped that you have the opportunity to talk to employees during their annual enrollment meeting.

However, many employees are probably approaching that annual enrollment meeting with a sense of foreboding. They’re prepared for bad news first; they’re more focused on costs than on how their benefits can help improve their lives. They have no idea that you’re about to offer a fresh perspective that will help them see their benefit package in a more positive light. How? By calling on an undercover ally – their vision benefit. Consider these five steps to educate your clients and help them jump start enrollment on the right foot.

One: Start With a Solution

After participating in the health insurance field for 24 years, I know that this approach really gets employers attention and I assure you it will work with employees as well. Let them know that you’d like to kick off the presentation by talking about a benefit that can help them reduce their medical costs, feel better and more productive at work, and even help their kids perform their best in school. They may be surprised to hear that the big secret is their seemingly inconspicuous vision plan.

Whether they have a voluntary or employee-paid plan, emphasize that this low-cost benefit was tailored to their health needs. Stress that it’s important to consider their vision plan not as a stand-by service, but as an essential part of their yearly wellness routine.

Two: Eye Up on Employee Needs

Hopefully, people are stirring in their seats at this point. But maybe not everyone is sure a vision plan is for them. Ask for a show of hands in response to this question, “How many people feel that good vision is important to do their job well?” Every hand should go up, even from the skeptics! Now ask them to keep their hand raised if they think they can see pretty well. While a lot of hands will probably stay up, tell them the odds are that some of them have an outdated vision correction or don’t even realize that they need vision correction. According to the Center for Disease Control, 34% have trouble seeing up close, even while wearing their eyewear and 17% have trouble seeing far away. Even a slight miscorrection that goes unnoticed by employees can drop productivity by up to 20%, according to a study published in the January 2004 issue of the American Optometric Assn. Journal.

Vision correction is equally important for children. Parents in the room will take notice when you mention that 80% of a child’s learning through age 12 is processed through sight, yet one in four children has a vision problem that can lead to learning problems, according to the Vision Council. Employees can help their kids perform their best in school by using their vision benefit to seek regular eye exams for their children.

Even with a correct prescription, 70% of computer workers experience Computer Vision Syndrome, which can cause eyestrain, headaches, reduced productivity, and lead to absenteeism. Thirty percent of employees say they have to take breaks at work because their eyes hurt or feel tired, according to a recent study by Transitions Optical. That simply doesn’t need to be the case!

A strategy that I have used with employers can work well to educate employees as well: Flag risk factors that can affect their eye health and make regular eye care especially important. For example, employees over 40 are more prone to various vision issues, such as presbyopia and eye disease. Many of these issues are more common in women. And depending on their ethnicity, employees may be at much higher risk for certain eye-related conditions. For example, Hispanics are three times more likely to develop a cataract than are Caucasians or African Americans, according to the American Academy of Ophthalmology.

I like to direct employees to, a free, interactive tool that lets them plug in their demographic information to compare their risk to the national average. You may consider doing a live demonstration of the tool during the meeting, using your own information, as long as you don’t mind divulging your age!

Bring the Eye Exam Back into Focus

I feel very strongly about the importance of promoting the eye exam to employees so they realize the amazing potential it has to be a whole-body screening tool and not just something they seek out when they think that they might need a prescription change.

With a comprehensive eye exam, the eye doctor conducts a painless dilation of the eye. Employees in your audience may be least vaguely aware that a comprehensive exam can detect eye diseases like cataract, glaucoma, or macular degeneration, but they’re less likely to know that the eye doctor can also look for early warning signs of other health conditions. You can pique employees’ interest by asking them to guess some of these conditions. Diabetes, high blood pressure, high cholesterol, colon cancer, lupus, brain tumors, and certain neurological disorders and mental health issues are all on the list.

According to the American Diabetes Assn., 20% of health care dollars are related to diabetes and 50% with those with diabetes don’t know it. So, you can see how important a vision exam is to overall health. Early detection and medical treatment can be a life saver. Imagine how diagnosing, treating, and managing these conditions before they become debilitating and costly would affect health claims for an employee or group.

Make Them Aware of Eyewear

If you stop at the exam part of the vision story, you will miss a really good opportunity to further explain the value of the plan (and make your client look really good). Hopefully, you’ve worked with your client to offer a vision plan or plan tiers that include certain lens options that not only provide basic vision correction, but also enhance vision and protect it for the long term. So make it your mission to ensure that employees are aware of these available products and why they matter.

For instance, I always take a minute to talk about eyewear that protects people from the sun. To start this conversation, I often ask how many people wore glasses as children or knew someone who did. I then ask whether those people switched to sunglasses before they went out to play. Of course, they all say “never.” We have learned that many eye conditions that develop later in life, like cataract and macular degeneration, can be largely prevented by protecting our eyes from damaging UV rays throughout our lifetime. Prescription or non-prescription sunglasses or photochromic lenses are a must for adults and kids. Photochromics provide UV protection and darken outdoors to guard against glare that can cause eyestrain and headaches.

Let’s say your client’s vision plan has a new or existing photochromic discount or coverage for adults or kids. Let employees know their company worked hard to include this feature because they care about the health and comfort of their eyes and those of their families. There is also an advantage to you, as a broker, to offer a plan that covers name brand lenses. Even if a name brand product isn’t fully covered, stirring interest in eyewear options that protect their vision will help spur employees to go visit their eye doctor and begin a dialogue about what eyewear options are appropriate for their lifestyle.

Tie to ROI

Finally, keep in mind that employees care about savings just like your client does, so explain to your audience that any small amount of money spent on a quality vision plan can be one of the best investments they can make by helping them save their vision and avoid costly medical issues and absences. Employees can calculate the time and money they’ll save by using the Healthy Sight Calculator. You can also remind employees that they can use pre-tax funds from an FSA or HSA to help cover any expenses that aren’t covered by their vision plan, such as a lens upgrade, an additional pair of eyeglasses, or contact lenses.

By starting with the good news that your clients can use the vision benefit to enhance the benefit package, you can help create a positive mindset as employees head out to renew or change their enrollment selections. You can pique their interest in a quality vision plan that is too often under-appreciated. You can differentiate yourself from other brokers by coupling employee education with a real solution that can help to improve your client’s bottom line over time.


Anya Simpson is the president of Benefit Plans, Inc. in Norfolk, Va. With 22 years of service in all aspects of the health insurance industry, she is an expert on Medicare Part D products and group health lines.

Life Settlements — Life Changes Lead to Reinvented Retirement and Life Settlements

by Stephen Terrell

Life settlements as a part of the financial planning landscape aren’t new but their use has evolved and is on the rise. In the recent past, settlements were largely viewed as complicated and sophisticated financial transactions for the super wealthy. However, in the wake of the recent financial crisis, life settlements have turned-out to be a tremendous match for many financial situations that plague seniors.

Rising costs of long-term care, a growing social trend of senior divorces, and the just-plain-tough economics of the sandwich generation are driving the life settlement industry. Yes, a settlement can help a senior get out from beneath the burden of rising premiums, but in the following real life examples, seniors used life settlements to solve some increasingly common financial conundrums.

Case study: Finding the Silver Lining in a Silver Divorce

Divorce rate among adults ages 50 and older doubled from 1990 to 2009. Today, roughly one in four divorces occurs among people 50 and older.  The rate rises, by two and half times, for those in remarriages versus first marriages, according to the Bowling Green State University sociologists Susan Brown and I-Fen Lin, co-authors of “The Gray Divorce Revolution.”

The Baby Boomers’ generation is the first generation to divorce and remarry in large numbers. For the life settlement industry, it suggests that more divorced couples will need to figure out how to split life insurance policies, among other marital assets. In one recent example, it turned out positive for both sides of the break-up.

Insured Male 73, Female 72 

Policy Joint Life Insurance Policy

Year Policy Issued 1995

Face Amount $1,000,000

Cash Value $170,000

Surrender Value $48,000

Life Settlement $228,000

Neil and Barbara, in their early 70s, were married for 47 years when they decided to divorce. Still best of friends and sharing their bond of three grown children and eight grandkids, they decided that they wanted to live the rest of their lives independently, traveling alone and pursuing their interests individually. They sold their home and decided to finance their golden years by liquidating many of their joint investments, including a joint life insurance policy they had taken out 17 years ago.

They met with their financial advisor, who researched a life settlement after listening to their goals. Compared to a surrender value of just $48,000, a $228,000 settlement was an easy choice. Today, they are happily doing the things they’ve always wanted individually, using their life settlement money to travel, learn new things and visit their children without worry.

Case Study: Funding Long-Term Care

About 70% of seniors will need some type of long-term care, and most of these costs (nursing home stays, home health aides, etc.) are not covered by Medicare. Today, the average day in a nursing home costs about $180, a figure which will likely rise; and the average stay typically lasts about two and a half years, according to the Natinal Clearinghouse for Long-Term Care Information.

We face a long-term care crisis in the United States, and seniors and Boomers need to start creating a strategy as soon as possible. Baby Boomers, a generation of Americans who are generally healthier than their parents’ generation, are likely to live longer and may have longer interactions with long-term care concerns.

Insured Male 73 

Policy Term Policy Converted to Guaranteed Universal Life Policy

Year Policy Issued 2009

Face Amount $3 million  x3

Cash Value $7,874

Surrender Value $0

Life Settlement $480,000 x 3 = $1,440,000

Lawrence, 73, owned a successful medium-sized import-export company, which he recently sold for less than anticipated due to the recession. In his 40s, he had taken out three term policies, worth $3 million each, face value. Then three years ago, with the terms expiring and his two sons grown, he converted each of them to a guaranteed universal life policy. All three policies have a low cash value and no surrender value.

Recently, at age 71, his wife was diagnosed with rapidly advancing Alzheimer’s. Faced with the prospect of eventually needing long term care for her, he and his financial advisor decided that the best course of action would be to initiate a life settlement.

He received nearly half a million dollars from each of his three policies, resulting in a cash payout of $1,440,000. He put half the money into treasury notes and the other half into a medical savings account with the intent to be used at the time when his wife will need long-term care at home and then eventually when she enters a specialized private facility that’s not covered by Medicare or his private health insurance.

Case Study: Feeding the Sandwich Generation

More than half of Baby Boomers have allowed their adult children to move home and live rent free, and many continue to prioritize their families’ financial needs over their own.  Many people don’t realize that more than one out of eight Americans aged 40 to  60 is raising children while caring for a parent, according to a study by Ameriprise Financial.

Many people don’t realize more than one out of eight Americans aged 40 to 60 is both raising children and caring for a parent. This generation of people, sandwiched between financially needy parents and children, will be reaching retirement age soon but likely without a nest egg of any significance. While the following example doesn’t relate to a Boomer, it does show how life settlements can help individuals assist family members.

Insured Female 93 Year Old

Policy Universal Life Policy

Year Policy Issued 1991

Face Amount $900,000

Cash Value $140,000

Surrender Value $56,000

Lifeline Settlement $420,000


Martha, a 93-year-old widow with four children, 12 grandchildren and five great-great grandchildren, had taken out two universal life policies, with the intention of helping to provide college educations for the youngest members of her family.  But, in 2009, the recession hit full-force and her grandson’s farm on the other side of her state, faced foreclosure. Her grandson, his wife, and their two children were in serious financial jeopardy.

With the rest of her children also experiencing challenges due to the economy, she looked into the possibility of surrendering one of her life insurance policies to save the farm. Unfortunately, the surrender value was just $56,000 on a $900,000 policy that was a safety net for her family.

She met with her agent, who recommended a life settlement, and she soon received a settlement of $420,000. She gave $100,000 dollars to her grandson to pay the bank and pay off some debts. She then put the rest into tax-free municipals and a money market fund in case of further emergencies. Her grandson’s financial outlook has improved greatly, and she “saved the family farm.”

As the Baby boom generation careens toward retirement, expect life settlements to enter the conversation when it comes to solving financial problems. Issues like divorce, long-term care, and the plight of the sandwich generation will liken worsen before they get better. Life settlements offer one new solution.  q


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

California Association of Health Underwriters: The CAHU Show Features Health Reform Trends In California

by Leila Morris

The California Assn. of Health underwriters held its annual Health Care Summit & Expo October 25 in Universal City, Calif. Bruce Benson, NAHU President, stressed how important it is for brokers to stay involved in the healthcare discussion.

Benson said that the real nuts and bolts of the Essential Benefit Mandate are going into effect after the election. Leanne Gassaway, regional vice president of State Advocacy for America’s Health Insurance Plans (AHIP) outlined other important changes coming in California:

Qualified Health Plans

Health care reform created a new federal program, the Consumer Operated and Oriented Plan (CO-OP) program, to foster the creation of qualified non-profit health insurance issuers to offer qualified health plans in the individual and small group markets.  The CO-OP program helps the entities apply to become qualified nonprofit health insurance issuers by providing loans to help them with start-up costs and by proving grants to help them meet state solvency requirements.  Gassaway noted that the state is in the process of developing qualified health plan standards.

Guarantee Issue Regardless of Pre-existing Conditions

A big change in the healthcare landscape will be guaranteed coverage in 2014. From then on, age, family composition, and geography, are the only things that insurers can use for underwriting. In California, 19 community rating regions will be standardized across all health plans. Gassaway noted that AHIP worked with Governor Brown’s administration to keep rating regions down to a manageable number.

The Medical Loss Ratio

Gassaway described some unintended consequences of medical-loss ratio requirements under the ACA: The MLR ignores the main driver of premium increases – soaring medical costs. It also inhibits the carrier’s ability to spend money preventing fraud and improving the quality of service they offer.


The government’s chronic under funding of Medicaid will only get worse as the program becomes further strained by scores of newly eligible members, she noted.

Age Rating Changes

Gassaway warns that a huge cost driver in the individual market will come from changing age-rating bands. Today, health insurance premiums are significantly higher for older health plan members because they tend to use more services than do younger members. Age rating bands spread premium costs over a range of age groups.  For example, in a state with a 5:1 age band, the ratio limits the amount an older individual will pay to no more than five times what a younger individual pays in premium dollars.  Forty-two  states have age rating bands of 5:1 or more. Starting January 1, 2014, the law limits the age rating band to 3:1, causing an overnight increase in premiums for younger individuals (ages 18-49) who live in states that have higher age bands. This increases the likelihood that younger, healthier people will choose to pay the penalty and wait to purchase health insurance until they get sick or injured, thus driving up costs for everyone else. Gassaway noted that a huge issue for NAHU is to request that HHS provide flexibility on when these requirements will go into effect.

The Health Insurance Tax

Under the ACA, health insurance companies will be hit with $87 billion in assessments from 2014 to 2019. The ACA assesses a tax on all health insurance companies based on their “net premiums” written. The tax will raise $8 billion starting in 2014, $14.3 billion in 2018, and more in later years. The larger the insurance company’s market-share, the higher their annual tax will be. Because of these added taxes, health insurance companies will be forced to raise premiums. (For more information, visit

Accountable Care Organizations (ACO) and Medical Homes

Medical homes and ACOs consolidate multiple levels of care for patients. An ACO consists of many coordinated practices while a medical home is a single practice.  Gassaway noted that this coordinated care approach has been successful in reducing hospital admissions. “But we need to not create monopolies, which would drive up costs.”

Provider Shortages

Gassaway said that, after 2014, there will not be enough primary care doctors to serve all of the newly insured people in California. One solution is to expand advanced practice nurses’ scope of practice. “We need to work with doctor extender groups to allow clinicians to practice,” she said.

Rate Review

The industry needs to stay involved to ensure that the rate review process does not become overly politicized or create uncertainty for consumers, she said.

Provider Transparency

Quality reporting will improve the data on doctors.

The Exchange

Gassaway offered the following points on the health exchanges:

• Open Enrollment Period: The Affordable Care Act establishes an initial open enrollment period for the exchanges, starting in January 2014, as well as annual open enrollment periods in subsequent years. As with Medicare Advantage plans, people will be free to sign up for a plan or switch plans during the annual open enrollment, but then they would be locked in for the year. In limited circumstances, people will be able to enroll in or switch plans outside of an open enrollment period. This restriction ensures that individuals and families don’t wait until they get sick to enroll in coverage or switch to more comprehensive coverage when they are about to have an expensive medical procedure.

• A Changing Risk Profile: Don’t expect the exchanges to drive down premiums. People will be coming out of the high-risk programs and going into the individual market so the risk profile of the market will change.

• Choices in the Exchange: Every shop in California is bidding like mad to be in the exchange. But the exchanges are only going to offer three plans. The state already limits what they can put in the plan. Gassaway asks, “Should they also limit which carriers can be in the plan?”

• The Essential Benefits package: In California, the legislature has chosen the Kaiser Small Group HMO 30 Plan as the floor of essential benefits for every individual and small group plan. Also part of the essential benefit package is the Children’s Health Insurance Program dental benefit. The essential health benefit standard will apply to all non-grandfathered plans in the individual and small-group markets. It will apply equally to plans inside and outside the health insurance exchanges. This standard will also apply to the basic health programs that states may establish under the Affordable Care Act and to Medicaid benchmark and benchmark-equivalent plans.

• The Shopping Experience: To get an idea of what shopping in the exchanges will look like, she suggests visiting the Web portal,

The conference also included a panel featuring a representative of the California’s Health Exchange (filling in for Peter Lee) as well as Alan Katz, executive vice president, SeeChange Health, and John Nelson, Co-CEO, Warner Pacific, and Suzie Shupe, executive director, California Coverage and Health Initiative. The following are take-aways:

• The Exchange Board urges brokers come to its meetings and visit the exchange website ( in order to stay updated.

• Brokers and navigators will not be in competition since navigators will focus on lower income people who qualify for public programs. In fact, they can work together to refer individuals and families to each other. The ACA established the Navigator Program to reach individuals and families who are outside the normal health insurance marketing channels. Navigator organizations include community service and multicultural groups, trade associations and unions, faith-based groups, and others. Navigators will be supported through block grants. In California, an individual cannot be a Navigator without an affiliation to an organization receiving a block grant. Covered California established an In-Person Assistance (IPA) program, distinct from the Navigator program, to provide additional enrollment assistance support to consumers. IPAs are paid by Covered California at $58 per enrollee.

Direct Benefits Assisters include licensed health insurance agents who are to be compensated for enrollments in the Exchange by the health plan issuers (insurance companies).

• Brokers will need to get a special certification to sell through in the exchange. Continuing education classes are being developed.

The exchange board only expects a small number of employer groups to move to the exchange. With rates in the individual market expected to go up 40% to 100%, there is a disincentive for employees to leave employer based coverage, according to Nelson,

Agents will certainly have their hands full keeping up with all of the changes coming in 2014. But the central message of the conference is that each and every agent has to become an advocate for their profession – whether that means going to exchange board and other government meetings or being active in their professional organizations. For more information on getting involved, visit


Leila Morris is senior editor of California Broker Magazine.

Prescription Drug — Pharmacy Network Strategies – Which Network is the Right Network?

by Tom Splitt

Are limited, preferred, and exclusive pharmacy networks viable options for employers to reduce their prescription costs? There is no right or wrong way to configure a pharmacy network because it depends on many factors. What is the employer’s or the health plan’s financial situation? Can the employer or the health plan provide appropriate incentives and communicate to members how limited or preferred networks work and the purpose they serve?

The following are the two most common alternate pharmacy network options offered by most pharmacy benefit managers (PBMs):

1. Limited network: A larger pharmacy chain is restricted or removed from the network. The PBM can negotiate deeper discounts with the pharmacies that remain in the network.

2. Exclusive network: The PBM negotiates discounts with a single pharmacy chain to be the exclusive provider for an employer or health plan.

The advantage of a limited or exclusive pharmacy network is the opportunity for increased market share for the pharmacies that remain in the network and deeper negotiated rates with the PBM, which can save money for the employer, health plan, and member.

One disadvantage of limited or exclusive networks is the potential for member disruption and dissatisfaction when a member’s regular pharmacy is removed from the network. Member disruption can be mitigated through effective communication and marketing campaigns, which we’ll discuss later in this article.

The preferred network is a newer design that’s gaining momentum in the industry. A preferred pharmacy network doesn’t exclude a particular pharmacy chain, but creates incentives for members to use select pharmacies. PBMs negotiate deeper discounts with the preferred pharmacy chain in exchange for increased market share and they pass those savings back to the employer or health plan.

The employer or health plan gives members incentives to use the preferred pharmacy chain through co-payment differentials. A member may pay $5 for a generic prescription filled at the preferred pharmacy and $15 for the same prescription filled at a non-preferred pharmacy. In this benefit design, the member chooses their pharmacy, but has a financial incentive to go to the preferred pharmacy. For the employer or health plan to realize savings, the member’s co-payment differential needs to be significant enough to drive the member to the preferred pharmacy.

The specialty pharmacy network is a highly important and emerging area of pharmacy network design, which requires increased scrutiny and strategy. Specialty medications are designed to treat chronic conditions that require careful administration. Specialty medications, which are often incredibly expensive, now comprise almost 50% of the FDA’s current pipeline. They require a separate strategy and network design in order to be managed effectively. Employers and health plans are commonly placing specialty medications in a separate fourth tier on the formulary and assigning a different co-payment. As part of a specialty medication strategy, PBMs are offering the following:

• Exclusive specialty network: A pharmacy network with one primary specialty provider. The primary provider can be supplemented with a limited wraparound retail specialty network to dispense oral drugs and other specialty medications that require less special handling or instruction. This alleviates the issue of accessibility and timeliness for specialty medications that can be dispensed easily at a local retail pharmacy.

There are several reasons for employers and health plans to implement exclusive specialty pharmacy networks. By requiring members to use pharmacies that specialize in the administration of specialty drugs, members and employers receive deeper discounts than they would get through an open retail specialty network Limiting the number of providers in the specialty network reduces headaches for the employer or health plan by providing a comprehensive view of specialty spend, instead of having to pool multiple reporting sources. This improved specialty reporting helps manage specialty spending and improve member outcomes. Most specialty drugs require special handling and delivery methods that are different than what many retail pharmacies or pharmacists are equipped to manage. An exclusive specialty network allows members to receive the hands-on care they need to manage their complex diseases while reducing the waste of high-cost specialty drugs. Exclusive specialty pharmacy networks also allow the PBM to create and manage a specialty drug formulary.

Any changes to a member’s pharmacy network could cause upset and disruption. The key to managing this disruption is having an effective and proactive communication strategy. Employers or health plans that are interested in implementing a limited, exclusive, or preferred pharmacy network should expect support from their PBM in creating effective marketing campaigns and member communications to educate members about the reasons for the change and any potential access or financial impact. Changes to a pharmacy network must be based on the employer’s or the health plan’s membership and geographic location. GeoAccess reports can identify potential member disruption and offer reassurance to employers that their limited networks will still provide reasonable pharmacy access.

The potential for disruption is highest at the outset of a change because members are accustomed to having access to a large network of pharmacies. However, if the employer or health plan communicates the right message, most members will not be concerned about driving an extra half mile to the next pharmacy down the road.

So what is the right answer – open, limited preferred, or exclusive? It depends on the employer’s or health plan’s needs and benefit goals. The savings achieved through limited and preferred networks must be worth it for any added inconvenience and disruption to the member.


Tom Splitt is vice president of Pharmacy Networks & Contracting for US Script, Inc.