Feb2013The 2013 California Health Market in 3D
Fast Tracking Your HSA Sales: Our Annual HSA Survey – Part II
by Leila Morris  •  Welcome to our annual HSA Survey. We asked the top companies in the state essential questions about coverage and services that affect you, the broker. Read on to find out what plans will work best for you and your clients
California’s State ExchangeA Few Words from Covered California
by Michael Lujan, RHU, director of the Small Business Health Options Program for Covered California • Find out how covered California is working on the design and building of an online state exchange in time for the launch on January 1, 2014.
WellnessHow Worksite Health Centers Can Boost Wellness Programs by Jonathan Spero, M.D. •  Corporate wellness programs are hampered by low engagement rates, less than desirable effectiveness, and a lack of integration with medical care delivery. Wellness and medical care need to be integrated for optimal results. And a workplace health center is ideally suited to facilitate this integration.
Individual HealthAdapting to the Individual Market Post Health Reform
by Michael Owens •  Post health reform, nearly all of the largest individual health producers have a major concern about the cost of acquiring each new customer. This article explains how to maximize sales in today’s market.
Self-FundingThe Next Evolution of Cost-Sharing: The Fixed Fee Hybrid Plan
by David Zanze •  Today, any self-funded employer that provides comprehensive medical coverage through a PPO or EPO plan can end up paying more in claims costs, despite the percentage that the network can save on billed charges. Although employers can offset some of these costs by requiring employees to be responsible for higher deductibles, co-pays, and co-insurance, it is sometimes not enough to alleviate the high cost of offering health benefits.
ERISA Compliance – It’s Only the Application of the Law that Counts
by Chris Bettner • Many employers may be out of compliance with ERISA and even not realize it. It’s the application of ERISA that is so important and what will be covered in this article.
Long-Term Care –LTC News
Catch up on these developments in the LTC industry: long-term care insurance prices will increase, especially for women; rising eldercare costs will drive LTC sales; and Americans need guidance to understand LTC insurance.
DentalFour Tips To Remember When Selling Dental Benefits in 2013
by Chris McConathy •  As you gear up for a new year of selling, make sure that you don’t overlook the value that dental coverage can bring to an employer’s benefit package.
DisabilityThe Four Big Small Business Opportunities For Benefit  Brokers
by Donato Monaco •  If you’re looking for a big opportunity to grow your business this year, think small. Industry research shows there’s opportunity for benefit brokers and agents who work with small businesses.
Life Settlement News
Catch up on these developments in the life settlement industry: California considers new rules on provider licensing; a new company is helping individuals invest in life contingent assets; and a company brokers the sale of a large life-settlement portfolio.
Life Insurance–How To Do More Business In 2013
by Kenneth A. Shapiro • The big question for producers is this: As consumer confidence slowly returns, what should we be doing to write more business in 2013? This article offers suggestions for becoming a more effective and successful advisor in the year ahead.
DisabilityIt’s a Tough Pill to Swallow When a High-Earning Physician Loses An Income
by Ted Tafaro •  High income physicians usually have not taken the necessary steps to protect their storybook lifestyles. Having a sudden 75% drop in monthly income is a hard pill to swallow for most highly compensated individuals.HSAs

Fast Tracking Your HSA Sales–Our Annual  Survey, Part II

Following is part II of our annual HSA survey. We asked the top companies in the state essential questions about coverage and services that affect you, the broker. Read on to find out which plans will work best for you and your clients.

15. Are you using a trustee? If so, how long have you been with the trustee?

Aetna: Yes, since May 2004
Anthem Blue Cross: Anthem has partnered with BNY/Mellon FDIC to offer all of your banking needs for your HSA account.
Blue Shield: Blue Shield utilizes our integrated HealthEquity model.
Cigna: JP Morgan Chase has been the trustee for our Cigna Choice Fund HSA product since January 1, 2005.
HealthEquity: HealthEquity is the HSA trustee and has been administering HSA services this way since 2005.
HSA California: Yes, the Bancorp Bank handles HSAs directly; HSA California’s relationship with Bancorp dates back to the start of HSA California, but the bank has been offering services to customers since 2000. The HDHP insurance plans are fully insured products from Health Net, Kaiser Permanente, and Western Health Advantage.

Kaiser Permanente: We first began selling HSA-Qualified Deductible HMO plans with an optional HSA through Wells Fargo in our Colorado, Georgia and Northwest regions in 2005, Mid-Atlantic States in 2006, and California and Ohio in 2007.
Sterling HSA: Sterling does not use a trustee. BNY Mellon Corporation is the custodian of assets of accountholders of health savings accounts administered by Sterling Health Services Inc. and is investment manager of assets in accordance with the Sterling Health Services Inc. Administrative Services Agreement.
UnitedHealth Group: Yes, UnitedHealthcare partners with Optum HealthBank for trustee services. UnitedHealthcare’s parent company, UnitedHealth Group, chartered OptumHealthBank in 2002 to help advance the growing convergence of health care and financial services.

16. What service guarantees do you offer?

Aetna: We do not offer HSA service guarantees.
Anthem Blue Cross: We do not offer performance guarantees in the Small Group market or Individual market.
Blue Shield: In order to ensure our members consistently receive excellent customer service, we have a number of service level agreements in place as part of our relationships with Health Equity (e.g., performance agreements for average speed of telephone response).
Cigna: The standard performance guarantees apply.
HealthEquity: For larger clients, our service guarantee levels are negotiated during the contract phase. We pride ourselves on meeting or exceeding all service guarantee levels.
HSA Bank: We do not offer HSA service guarantees.
HSA California: HSA California’s customer service team is committed to outstanding service and 100% customer satisfaction. Our expert staff is available between 8:00 a.m. and 5:00 p.m., Pacific Time, Monday-Friday, for personal assistance by calling 866-251-4625.
Kaiser Permanente: We do not offer service guarantees to the individual, family or small group markets.
SeeChange Health: We strive to provide excellent service on all of our health plans.
Sterling HSA: Sterling offers a full money back guarantee of up to 12 months of paid monthly maintenance fees if our accountholders are unhappy with our service for any reason. Sterling was the first HSA administrator to offer such a guarantee and made this commitment when the company was founded in 2004.
UnitedHealth Group: Service guarantees will vary based on the scope of the relationship with the customer, but are typically available with respect to administrative service delivered under the plan.

17. What kinds of depositories are desired?

Aetna: Not applicable.
Anthem Blue Cross: There is no minimum balance requirement.
Blue Shield: As members may open their HSAs with the financial institution of their choice, depository guidelines will vary by financial institution.
Cigna: There are no minimum deposit or balance requirements. Contributions to the HSA can be funded through employer facilitated pre-tax payroll contributions (EFT/ACH transactions) or through unscheduled deposits in which participants arrange for an EFT from their personal bank account or send a check with deposit slip to a lockbox for contribution to their HSA.

HealthEquity: HealthEquity is the custodian; we have depository arrangements in place and have used depositories recommended by our health plan partners.
HSA Bank: There is no minimum balance requirement to open an HSA.
HSA California: There is no minimum balance requirement to open an HSA, and no minimum deposit requirement for employer groups.
Kaiser Permanente: Our preferred financial administrator for HSAs, Wells Fargo, does not require minimum deposits for employer groups with payroll deduction. The minimum deposit of $100 is required for individual and family plan members not enrolling through an employer group.
SeeChange Health: This will vary based on the HSA administrator chosen by the member.
Sterling HSA: Sterling accepts cash, checks, and electronic fund transfers through www.sterlinghsa.com in a secure, password protected environment. We recommend an initial deposit of $100 and require a minimum balance of $20 to keep the account open and active.

18. Where is your company headquartered?

Aetna: Hartford, Conn.
Anthem Blue Cross: The headquarters building for Anthem Blue Cross is located at 21555 Oxnard Street, Woodland Hills, Calif.
Blue Shield: Blue Shield is headquartered in San Francisco, California.
Cigna: Cigna is headquartered in Bloomfield, Conn.
HealthEquity: HealthEquity is headquartered in Draper, Utah.
HSA Bank: We are headquartered in Sheboygan, Wisc. HSA Bank is a division of Webster Bank, N.A. headquartered in Waterbury, Connecticut.
HSA California: HSA California is based in Orange, Calif., and does business throughout the state.
Kaiser Permanente: Oakland, Calif.
SeeChange Health: San Francisco, Calif.
Sterling HSA: We are a California-owned company and are headquartered in Oakland, Calif. We serve clients nationwide with personal sales representatives and account management in several regions of the country.
UnitedHealth Group: Minnetonka, Minn.

19.Please provide the phone number and e-mail that brokers can use to find out more about your plan.

Aetna: 877-249-2472, prompt 6.
Anthem Blue Cross: Please reference our online resources or contact the regional sales manager for individual and small group assistance. Large Group representatives should likewise call their group sales manager at the company.
Blue Shield: Brokers can call their Blue Shield sales representative or call Blue Shield Producer Services at 800-559-5905 or visit Producer Connection at www.blueshieldca.com.
Cigna: Please contact your local Cigna HealthCare sales representative at 888-802-4462.
HealthEquity: Brokers who would like more information can contact HealthEquity’s Broker Sales Team at 877-949-6727 or dcoffman@healthequity.com.
HSA Bank: Call HSA Bank’s Business Relations team at (866) 357-5232 or email businessrelations@hsabank.com. Or call David Drzymkowski, regional vice president – California and Hawaii, at (949) 374-2853 or email him at ddrzymkowski@hsabank.com
HSA California: Brokers can call us at (866) 251-4625 between 8 a.m. and 5 p.m., Pacific Time, Monday-Friday, or e-mail us anytime at sales@hsacalifornia.com. Brokers can also visit us online at www.hsacalifornia.com, where they will find free sales training collateral, brochures, and forms to print and share with clients.
Kaiser Permanente: For questions or information about Kaiser Permanente: BrokerNet Website Address: brokernet.kp.org. Individual and Family Broker Sales: 1-800-789-4661, option 6 or 1-800-207-5084 (8:30 a.m. to 5 p.m. PST). Small Business Broker Sales: 1-800-789-4661 (8:30 a.m. to 5:00 p.m. PST). Client Services Unit: 866-752-4737 (8 a.m. to 5 p.m. PST). Employers/Brokers can contact the Wells Fargo Health Benefit Services toll free at 1-866-449-9929 from 5:00 a.m. – 6:00 p.m. PST / 8:00 a.m. – 9:00 p.m. EST, Monday – Friday
SeeChange Health: Brokers can call SeeChange Health’s sales support team at 888-237-6650 or email them at Sales@SeeChangeHealth.com. Brokers can also contact their preferred General Agency to learn more about our HSA and other offerings.
Sterling HSA: Brokers can contact any of our sales representatives. Their names, email addresses, phone numbers and territories are available at www.sterlinghsa.com on the Contact Us page. Brokers can also email broker.support@sterlinghsa.com or customer.service@sterlinghsa.com. Our phone number is 800-617-4729 and we’re available from 8 am – 6 pm Pacific. Personal service and account support is a hallmark of Sterling HSA.
UnitedHealth Group: For more information, please visit www.united-healthcare.com.

20.Which market segment (small/mid/large) do you anticipate these plans will best accommodate?

Aetna: All segments.
Anthem Blue Cross: We are seeing interest and adoption in all market segments.
Blue Shield: HSA-eligible plans continue to generate interest from all market segments, including individual and group markets. Therefore, Blue Shield members enrolled in HSA-eligible plans span across all lines of business, from the individual and small group markets to large employers.
Cigna: We believe that HSAs and consumer directed health plans would be appropriate for all markets.
HealthEquity: HealthEquity’s block of business mirrors the national trends – our customers range from individuals to small mom & pop shops to Fortune 500 companies. Each of these segments has grown rapidly in the last couple years, and we expect this trend to continue.
HSA Bank: HSAs are a great way to save on healthcare costs for employers of all sizes.
HSA California: We believe HSAs are appealing to all market segments; however, HSA California is designed for employers with 2-50 employees.
Kaiser Permanente: Our HSA-Qualified deductible HMO, PPO and EPO plans appeal to all market segments, including individual and family, small, mid and large.
SeeChange Health: HSA-compatible plans have matured greatly in the past several years, becoming popular with all market segments.
Sterling HSA: HDHP/HSAs accommodate all market segments and we serve them all today.
UnitedHealth Group: All segments.

21.What channels have been most effective in selling HSAs?

Aetna: Brokers and general agents, consultants, Aetna sales force
Anthem Blue Cross: Agents and brokers remain our most effective channel for HSA marketing and sales.
Blue Shield: Our HSA-eligible high-deductible health plans are primarily sold via soliciting brokers. To assist brokers in selling our HSA-eligible plans, we’ve provided educational and marketing collateral as valuable resources to ease the plan purchase process.
Cigna: We have found that the broker/consultant channel has been the most effective.
HealthEquity: HealthEquity has a number of distribution channels. We’ve had a lot of success partnering and integrating with health plans as well as working through brokers and consultants.
HSA Bank: We work with brokers, general agencies, consultants, third party administrators, and carriers. However, brokers remain our most effective channel in selling HSAs to date. Results show that over half of our business comes from this channel. As such, we have a strong focus on our broker distribution channel. We offer brokers easy enrollment options to set up their groups and individuals, revenue-sharing opportunities, a dedicated call center and field sales support to help close deals and provide education to groups.
HSA California: All HSA California sales are through licensed independent insurance brokers and authorized general agencies. To make sure brokers understand the unique selling opportunity behind HSA California – that we’re the only small group, fully integrated HSA program with multiple carriers in California — we produce timely communications and brochures that walk them through the program.
Kaiser Permanente: All channels have been successful in selling HSA programs.
SeeChange Health: As with all health insurance products, brokers are the most effective channel when it comes to helping consumers and employers find the medical plans that best fit their needs. Given that our HSA-compatible plans provide value-based benefits that reward members for taking specified health actions, brokers play an extremely valuable role in assuring that our members receive the maximum benefit from their SeeChange Health Insurance plans.
Sterling HSA: We are committed to the broker, agent and consultant channel.
UnitedHealth Group: UnitedHealthcare’s HSA-qualified plans are sold primarily through brokers and consultants, or directly to individuals purchasing insurance policies on their own.

22.Which customer segments have been most receptive to HSAs?

Aetna: All customer segments.
Anthem Blue Cross: All customer segments continue to express interest in and adoption of HSAs.
Blue Shield: HSA-eligible plans appeal to all customer segments, from the individual market to small, midsize, and large groups.
Cigna: We have seen receptivity in all customer segments from the smaller group segment through large national accounts.
HealthEquity: Customers of all sizes, from individuals to large employers, have been receptive to HSAs. The most recent trend, though, is that employers are realizing that an HSA-compatible plan is a good fit for the majority of their employees and are making the decision to go total replacement.
HSA Bank: HSA Bank’s internal research results indicate no statistically significant difference between HSA participants and non-HSA participants in regards to age, income, or overall health.
HSA California: Employers looking to rein in premium increases while at the same time expanding health plan choices to employees have been most receptive. HSA California is also appealing to small-business owners looking to offer medical coverage to employees for the first time, because it is less expensive than traditional coverage and offers unique turnkey savings opportunities.
Kaiser Permanente: We have seen strong growth in all customer segments including the Individual and Family, Small, Mid and Large Group segments.
SeeChange Health: HSAs have evolved beyond being a niche product and have been embraced by all customer segments.
Sterling HSA: Customers who want to contain their healthcare costs and reduce increases continue moving to the HSA market. Areas with high PPO penetration move quickly as well. We believe this trend will continue due to rising health plan premium costs and taxes.
UnitedHealth Group: All segments have been receptive to the HS product.

23.How prone are brokers to support this with reduced commissions on the high deductible health plan side of the equation?

Aetna: We have seen widespread broker support of HSA plans as a viable option for their clients.
Anthem Blue Cross: There is high interest in supporting this product from brokers to date. We continue to believe brokers will promote the appropriate health plans based on their client’s needs, regardless of commission rate.
Blue Shield: We have received positive broker feedback on our HSA-eligible HDHPs, as these plans have proven to be an important option for brokers looking to provide plan benefit designs at more affordable price points for their IFP and group clients. In addition, HSA-eligible HDHPs are also attractive because of the possible tax and personal saving advantages.
Cigna: Brokers have been very supportive of these plans.
HealthEquity: Brokers are looking for solutions for their clients. As we move forward, HSA-qualified plans appear to be a better fit than ever, so brokers are recommending them.
HSA Bank: Brokers are very supportive in doing what is best for the company and employees.
HSA California: In today’s economy, the owners of small businesses are looking to reduce premiums yet still provide quality benefits to employees. HSA California takes HDHPs and HSAs to a new level by not only offering affordable benefits, but also packaging three top California health carriers in one program; each employee can choose a different health carrier and plan – a choice no other program in the state offers. As the market continues to change, we believe brokers will continue to adopt HSA-compatible plans as an applicable solution for many clients.
Kaiser Permanente: Brokers are very supportive of these programs when they meet their customers’ business needs.
SeeChange Health: Professional brokers focus on meeting the needs of their clients. We’ve seen no reluctance to sell our value-based, HSA-compatible plans.
Sterling HSA: Brokers who think this is the right thing to do for their clients place them in an HDHP/HSA. Many brokers use the HSA concept as a marketing advantage to grow their book of business.
UnitedHealth Group: Brokers realize that the CDH plans are experiencing rapid adoption and they are doing their best to offer their customers the product that is right for them.
24. Will high-deductible health plans actually reduce utilization?
Aetna: We see continued positive signs of cost control and consumer  engagement in studies in HSA and HRA results.
Anthem Blue Cross: When members engage in healthy choices and become active in their medical decisions, utilization is affected.
Blue Shield: Preventive care is covered on all Blue Shield HSA-eligible HDHPs with low or no co-payment; members may also take advantage of our core wellness programs. Studies (AHIP, Towers Watson 2012 ABHP) show that HSA-eligible HDHP’s with wellness programs change trend. The very nature of HSA-powered plans ensures that consumers become more aware of their healthcare costs and frugal with their HSA contributions. The result is consumers making wiser healthcare decisions to save their prized HSA dollars. The byproduct is a reduction in utilization.
Cigna: During the past several years, Cigna has compiled empirical data on literally millions of individuals enrolled in our CDHP, HMO and PPO plans based on claims experience that demonstrates that our consumerism products (HRA and HSA), offered as part of a comprehensive package of communication, member customer education and access to reliable and actionable information, substantially reduce the overall employer medical trend.
Moreover, Cigna’s multi-year experience studies of CDHP plans provide evidence demonstrating that our consumer-driven health plans both improve costs and health care quality.
HealthEquity: Properly designed HSA-qualified plans combined with strategic employer funding have proven successful at reducing utilization and, as a result, reducing trend. HealthEquity has a number of case studies showing how some of our larger clients have been successful at saving money with a consumer-directed approach.
HSA Bank: Our data supports evidence of lower claims, which makes sense because consumers shop differently with their own money. They adopt the usual consumer behaviors. They shop on quality and price and even start to adopt healthier behaviors. However, there is a distinction between HDHPs when paired with an HSA vs. HRA. HRAs do not lower claims because the employer, not the employee, owns the money. Without owning the money, there is a use it-or-lose-it mentality, just like with FSAs. In fact, claims for unnecessary visits and procedures can go up, not down, just to use-up the money available. In other words the wide adoption of HRAs with HDHPs has unfortunately voided the HDHPs intended low-utilization premise and actuaries are now pricing HDHPs higher relative to traditional plans to the point that the savings spread has almost disappeared.
HSA California: The goal of an HDHP is to allow employees and their families to control what they spend on healthcare. It’s still too early to tell whether utilization will actually be reduced by offering plans with higher deductibles.
Kaiser Permanente: We are frequently evaluating the impact on utilization. Based on some small samples assessed, we have seen a drop in utilization with our members in HSA-qualified health plans. The lower risk factor behind this population segment may be a contributing factor. Additionally, there are also some small studies that indicate a change in behavior from these members as they become more financially engaged and responsible for their health expense. Preliminary information shows that some members have pursued alternative options, such as emailing their physician. We believe that it is important to have members enrolled in the high deductible health plans to receive care from Kaiser Permanente’s integrated delivery system to ensure engagement extends beyond benefit designs. To achieve sustainable behavior change also requires evidence-based clinical engagement at every care encounter with market leading electronic medical record system.
SeeChange Health: Not only have studies shown that HSA-compatible plans positively impact utilization, but also their relatively lower costs mean more consumers can afford coverage, reducing the number of uninsured Californians.
Sterling HSA: Our experience suggests that our clients are carefully evaluating cost/treatment alternatives, thereby reducing unnecessary medical utilization. Trends on a national level are below that of traditional health plans.

25.How can vendors make HSAs more effective and attractive for brokers?

Aetna: Make the sales process as simple as possible and give brokers  tools that allow them to present these options to employers and  employees effectively.
Anthem Blue Cross: Vendors can make HSAs more effective by streamlining and simplifying the enrollment and communication processes.
Blue Shield: Blue Shield has partnered with HealthEquity, the nation’s oldest and largest dedicated health savings trustee. Together we offer an uncomplicated, integrated HSA solution that is easy for brokers and employers to implement. Benefits include:
•Seamless integration with Blue Shield enrollment and claims data
•Automated account set-up, no wet signatures required
•Dedicated employer support team
•Customized employer portal
•24/7/365 member support
Cigna: By providing information to help brokers understand the consumer advantages of the HSA product, providing products and processes that are easily understood by employers and supporting the member customer education at enrollment and on an ongoing basis.
HealthEquity: HealthEquity strives to make HSAs attractive to brokers by delivering a complete, integrated solution to their clients and providing 24/7/365 customer service.
This improves the member experience and reduces the number of calls the broker receives. HealthEquity also has a Broker Sales Team that can assist with new business and a broker portal where producers can access marketing material, create proposals, and manage their HSA clients.
HSA Bank: From enrollments to answering difficult questions, brokers can count on outstanding customer service dedicated to them and their clients. We provide quality service.
HSA California: Education is the key. It’s important that brokers are comfortable explaining the concept of an HSA and how it can work to completely satisfy the needs of clients, employees, and families. HSA California and The Bancorp Bank provide a number of educational resources for brokers to help them better explain HSAs to clients. For more information on these materials, brokers can call us anytime at (866) 251-4625.
Kaiser Permanente: Vendors can make HSAs more effective and attractive by keeping the sales process simple, supporting good communications, supporting installations and bringing effective online tools to the employer and members.
SeeChange Health: Whether talking about HSA-compatible plans or more traditional policies, at SeeChange Health Insurance we’re extremely broker-centric, providing unique products that actually encourages members to see their doctor, strong training and education, and delivering outstanding service to them and their clients.
Sterling HSA: We support the broker channel with sales representatives who handle their needs personally. We also offer HSA training and education, including CE classes and webinars, analysis tools, PowerPoint presentations, and other sales material. In addition, we support the broker’s employer clients in a similar fashion. This helps our broker partners better satisfy their clients’ needs. We also consistently update clients on regulation changes, important new service benefits, etc. through targeted email campaigns, our blog and Facebook.
UnitedHealth Group: Make quoting, set up, and enrollment as simple as possible for the broker. Provide as much broker training as possible. Provide simple communication materials for HR staff and the enrollees. Leverage the experience and materials of your health plan partner, who can offer communications materials and other tools to provide assistance.

26.Will consumers purchase plans for their traditional health plan features and view the HSA account as a perk to cover short-term medical expenses or will the primary purchase decision focus more on long-term financial planning to cover immediate and long term medical expenses and to reduce tax liability?

Aetna: We see both with the latter being more common.
Anthem Blue Cross: The HSA plans offer choices for all members. The member can choose to save the tax-deferred monies or choose to spend the monies to cover their individual or family medical and pharmacy claims.
Blue Shield: Research indicates that consumers appreciate the lower cost of the actual HSA-eligible HDHP as well as the flexibility offered by HSAs, whether used to cover short-term medical expenses or for longer-term financial planning.
Cigna: This is based on the customer’s choice and their short- and long-term financial goals. We see customers doing both, depending on their individual circumstances.
HealthEquity: HealthEquity strives to make HSAs attractive to brokers by delivering a complete, integrated solution to their clients and providing 24/7/365 customer service.
This improves the member experience and reduces the number of calls the broker receives. HealthEquity also has a broker sales team that can assist with new business and a broker portal where producers can access marketing material, create proposals, and manager their HSA clients.
HSA Bank: That’s the beauty of an HSA — its flexibility. If a consumer needs to cover qualified medical expenses, they can do so tax-free with their HSA funds. The consumer also has the option to grow their funds through self-directed investment options with no minimum balance.
HSA California: It depends on the individual consumer. Having funds available in an HSA for short-term medical expenses is a great feature. However, the long-term advantages are equally important. The ability to save HSA funds and earn interest tax-free year-after-year, provides the unique value inherent in HSAs. An HSA is a perfect savings vehicle to add to a long-term savings portfolio next to a 401(k), IRA, or any retirement medium.
Kaiser Permanente: Consumers purchase Kaiser Permanente HSA-Qualified Deductible HMO plans and open HSAs to cover both immediate and long-term medical expenses, as well as to reduce tax liability.
SeeChange Health: California is a diverse state so it’s not surprising that employers are buying HSA-compatible plans for both reasons.
Sterling HSA: The latter appears to be the case. This is truly a new way to finance the costs related to healthcare. In today’s economic climate, the HSA is a great way to budget for medical, dental and vision expenses as well.
UnitedHealth Group: Based on research from OptumHealthBank released in April 2007, HSA accountholders typically can be categorized into one of three basic patterns of account usage: Spenders, savers and investors. Roughly half of OptumHealthBank 400,000 accountholders are spenders and most of the remaining are savers. While less than 5 percent of today’s HSA population are investors, this may someday be the largest group based on early, accelerating balance trajectories. OptumHealthBank Spenders carry balances that hover between $400 and $600, spend 80 percent of contributions on current medical expenses and contribute an average of $133 per month. OptumHealthBank Savers hold a balance of nearly $1,500 on average and spend less than 10 percent of contributions to their account. OptumHealthBank Investors are the most active contributors with the highest total balances and highest expected tax savings, holding over $2,000 in bank balances and, on average, investing another $3,000 in any combination of OptumHealthBank eight highly regarded non-proprietary mutual funds.

27.Do you envision interest in an HSA-eligible HMO (low-cost) plan?

Anthem Blue Cross: Anthem is reviewing market interest and feasibility of offering an HSA HMO. Aetna: Yes, since January 2006, Aetna has offered an HM
Anthem Blue Cross: Anthem is reviewing market interest and feasibility of offering an HSA HMO.
Aetna: Yes, since January 2006, Aetna has offered an HMO HSA in some markets.
Blue Shield: We are reviewing the HMO/HSA market trends and will be introducing new HDHPs that answer the market’s needs.
Cigna: We have not seen significant interest at this time.
HSA Bank: Yes. And, carriers should not overlook this as an option for California.
HealthEquity: This is not something that we are asked about very often, but there may be some interest in areas where HMOs are still a popular plan option. The interest level would depend in large part on how these products are priced.
HSA California: HSA California offers four HSA-eligible HMO plans. Brokers can call 866-251-4625 between 8:00 a.m. and 5:00 p.m., Pacific Time, for full benefit plan summaries for all HSA California plans.
Kaiser Permanente: Absolutely. Since 2005, Kaiser Permanente HSA-Qualified Deductible HMO plans have appealed to all market segments, including individual and family, small, mid and large groups.
SeeChange Health: We offer only PPO plans, but HSA-eligible HMOs will likely find an audience, although we don’t think it will be nearly as large as HSA-compatible high deductible plans.
Sterling HSA: Several carriers already offer an HMO/HDHP plan or EPO/HDHP plan design.
UnitedHealth Group: Yes.

28. Which geographic areas and consumer demographics are brokers seeing a demand for competitive individual and family plan HSAs?
Aetna: We are not in that market segment, so we cannot respond.
Anthem Blue Cross: Being our HSA plans are consumer centric and come with strong preventive benefits, we are seeing strong demand across all territories and demographics.
Blue Shield: Blue Shield experience indicates that the broker interest in HSAs is statewide.
Cigna: We offer an array of individual and family plans in California, some of which are HSAs. Cigna is price competitive in this market.
HealthEquity: There is a strong demand for competitive individual and family HSA- qualified plans nationwide. How successful brokers are at selling these products, though, depends on the plan design and pricing, which tends to vary from market to market and carrier to carrier.
HSA Bank: N/A
HSA California: We’re seeing growing interest throughout the state.
Kaiser Permanente: We are seeing demand across all geographic areas and demographics.
SeeChange Health: We sell exclusively to groups of 2-to-200 employees or more.
Sterling HSA: We know that the early baby boomer is very interested in choosing a HDHP/HSA product. Areas with high PPO concentration and lower pricing are high sales areas. The individual market has been a PPO market for some time and was the first to migrate to the HSA. Some individuals already have a HDHP and now have a tax-advantaged way to pay for medical expenses or save for retirement. We also see strong interest in certain geographic areas where Sterling has recently expanded, including key markets in the Midwest and the Southwest.
UnitedHealth Group: All.

28. Which geographic areas and consumer demographics are brokers seeing a demand for competitive individual and family plan HSAs?

Aetna: None
Anthem Blue Cross: Many health plans in the California market have had challenges pricing the 100% HSA plans. Anthem made pricing adjustment in 2008 and a pharmacy benefit adjustment in 2009 to reflect the actual utilization we were seeing in these 100% plans. Anthem small group also introduced new 80% plans in 2009 and the market continues to show an interest in HSA plans in all market sizes.
Blue Shield: We have not encountered any issues specifically pertaining to HSA-eligible plans.
Cigna: We have not encountered problems with the administration of the HSA eligible plans. One of the challenges of introducing these plans is to educate the member customer on the value of the plan and the tools to become actively engaged in the management and maintenance of their own health care.
HealthEquity: Price is still a huge issue for most employers and individuals considering an HSA-qualified plan. Some health plans have made a commitment to pricing these products appropriately while others have not.
HSA Bank: N/A
HSA California: We haven’t encountered any problems with our benefit plan designs.
Kaiser Permanente: When there is excellent communication to the employer and employees we do not encounter problems. It is important to provide education on how the deductible plans and the HSA work together. Kaiser Permanente and our preferred financial administrator for HSAs, Wells Fargo, have developed extensive training materials and marketing collateral for brokers, employers, employees and individuals.
SeeChange Health: None.
Sterling HSA: Pricing is imperative in an HSA plan. If the rates are competitive then the plan does not sell well. However, we have recently seen a differential in the traditional PPO and HDHP/HSA compatible plan that is supporting considerable sales of this product.
UnitedHealth Group: The main challenge with the HSA product is educating the consumer to take financial responsibility when receiving health services. Most consumers are used to dealing with a health insurance company or their bank. The HSA product is more than the sum of its parts; it involves educating the members and encouraging them to ask financial questions when seeking and receiving health services.

29.What problems, if any, have you encountered with HSA eligible plans?

etna: None
Anthem Blue Cross: Many health plans in the California market have had challenges pricing the 100% HSA plans. Anthem made pricing adjustment in 2008 and a pharmacy benefit adjustment in 2009 to reflect the actual utilization we were seeing in these 100% plans. Anthem small group also introduced new 80% plans in 2009 and the market continues to show an interest in HSA plans in all market sizes.
Blue Shield: We have not encountered any issues specifically pertaining to HSA-eligible plans.
Cigna: We have not encountered problems with the administration of the HSA eligible plans. One of the challenges of introducing these plans is to educate the member customer on the value of the plan and the tools to become actively engaged in the management and maintenance of their own health care.
HealthEquity: Price is still a huge issue for most employers and individuals considering an HSA-qualified plan. Some health plans have made a commitment to pricing these products appropriately while others have not.
HSA Bank: N/A
HSA California: We haven’t encountered any problems with our benefit plan designs.
Kaiser Permanente: When there is excellent communication to the employer and employees we do not encounter problems. It is important to provide education on how the deductible plans and the HSA work together. Kaiser Permanente and our preferred financial administrator for HSAs, Wells Fargo, have developed extensive training materials and marketing collateral for brokers, employers, employees and individuals.
SeeChange Health: None.
Sterling HSA: Pricing is imperative in an HSA plan. If the rates are competitive then the plan does not sell well. However, we have recently seen a differential in the traditional PPO and HDHP/HSA compatible plan that is supporting considerable sales of this product.
UnitedHealth Group: The main challenge with the HSA product is educating the consumer to take financial responsibility when receiving health services. Most consumers are used to dealing with a health insurance company or their bank. The HSA product is more than the sum of its parts; it involves educating the members and encouraging them to ask financial questions when seeking and receiving health services.

30. How has your plan changed from last year?

Aetna: No significant changes.
Anthem Blue Cross: We have enhanced our online support of resources with our banking partners BNY/Mellon (ACS/Mellon), added Rx copay versus coinsurance and a variety of enhanced deductibles for our HSAs. We have also eliminated several 100% HSA plans from our portfolio due to high cost and poor performance.
Blue Shield: Blue Shield is pleased to now offer our clients an unsurpassed Account Based Health Plan (ABHP) in conjunction with our new partner, HealthEquity. We researched the market extensively before selecting a strategic account based custodial vendor that can service all lines of business. This is a platform and not a banking system and was designed and developed by HealthEquity. HealthEquity’s leading technology supports releases and platform enhancements and updates twice a month and has a speed to market, which is unheard of with our competition. Our new account based platform offers a completely integrated healthcare experience for both members and clients. All accounts are on one platform with integrated enrollment and claims information, and flexible contribution models. We will also provide our clients with an Employer Portal with access in real time to eligibility information, contributions, fee payments, and more. Clients will also be able to have for easy reconciliation.
Cigna: We continue to enhance our online cost and quality comparison tools, to help people make informed choices about where they seek care. We have added enhanced decision support tools. One such tool is our Health Risk Assessment. Cigna has entered into a long-term agreement with the University of Michigan providing access to the use of analytics that help consumers and Cigna identify and address health risks and help employers develop worksite health and wellness programs. We also offer online coaching capability that invites immediate, active participation in online behavior change modules, pushing targeted follow-up based on HRA responses.
HealthEquity: HealthEquity recently introduced an option called Balance Protector, a low-cost, guaranteed-issue product designed to preserve an account holder’s HSA balance in the event of an accident.
HSA Bank: While our HSA hasn’t changed from last year, we are always looking for ways to enhance our product to best serve our accountholders.
HSA California: There were no significant changes to the HSA California program in 2012. For a full listing of benefit plan changes, please contact HSA California sales at 866-251-4625 between 8 a.m. and 5 p.m., Pacific Time.
Kaiser Permanente: Aside from compliance with federal Health Care Reform, we have no significant changes planned for 2011/2012, but we are always exploring ways to make improvements to meet our customers’ needs. We have expanded member support activities including proactive outreach activities to assist with employee understanding of these programs.
SeeChange Health: We introduced what we believe to be the nation’s first value-based benefit HSA-compatible plans in 2010 at the request of our brokers. (Our HSA-compatible plans lower members’ out-of-pocket exposure when they complete specified actions that help them manage their health). We’re constantly listening to our brokers to improve our products. In 2012 we expanded our Employee Option Program, which makes it easier to offer our HSA policies alongside our other PPO plans. Given the broad popularity of our HSA plans in 2012, however, we opted not to fix what isn’t broken.
Sterling HSA: We reduced our HSA set-up fees effective in September 2011. We also offer discounted set-up fees for groups adopting multiple products from Sterling (HSA with HRA, HSA with FSA, COBRA).

The 2013 California Health Market in 3D – California’s State Exchange A Few Words from Covered California

by Michael Lujan, RHU, director of the Small Business Health Options Program (SHOP) for Covered California

There is no shortage of information about state exchanges. A simple Internet search for “state exchanges” will produce thousands of results; some news articles, blogs, or updates from actual state exchanges. As not all state exchanges are the same, the information may be accurate for another state exchange, but not California. Like when shopping for quality produce, California agents should consider getting their information fresh and local (a shameless plug for California’s agri-business).

The California Health Benefits Exchange, now called “Covered California,” is busy with the work of designing and building an online state exchange in time for the October 2013 launch for coverage effective as early as January 1, 2014. California was the first state to in the nation to pass legislation creating a health insurance exchange after the enactment of federal health reform. On September 30, 2010, former Republican Governor Arnold Schwarzenegger signed into law two complementary bills, AB 1602 and SB 900, to establish the California Health Benefit Exchange.

Even with this early lead, Covered California has much work to do in a short time. Throughout this process, we continue to meet with agents, insurance carriers, general agents, and all the various consumer and employer stakeholders throughout this large and diverse state. We hold public board meetings each month and invite feedback, often posting materials in advance for public comment. It’s an inclusive process we are very proud of as the outcome will be one we can truly say represents the broadest interests of all Californians.

One important decision already made through this process has been the role of agents in the exchange. Agents are critical to the success of the exchange and the trusted advisor for many consumers. When the Exchange begins open enrollment in October, agents will likely be busy with questions and requests for enrollment assistance. Remember, the whole market is changing in 2014 and not just in the exchange. Millions of uninsured Californians can now get covered without limitations for pre-existing conditions or complex underwriting rules, which previously denied enrollment in the individual market. If affordability was a barrier to coverage, that too will change as more than two million Californians are estimated to be eligible for subsidies available only in the exchange.

For the small business-owner, the rules change too, just not as dramatically since California already has guarantee issue rules and robust competition compared with many states. The Small Business Health Options Program (SHOP) exchange is also the only place to access small business tax credits for qualified groups. The SHOP will also offer a broader range of employee choice. In the SHOP, the employer may select a level of coverage they can afford and the employee may select any plan offered at this level.

Here’s a summary of what California agents should expect:

• Agent Training – Licensed agents will likely need to complete at least eight hours of agent training provided by Covered California to be “Exchange Certified Agents.” Only Certified agents are allowed to sell and enroll in the exchange. Agent training is expected to start in June.

• Agent Compensation – Agents will receive market competitive commissions in the exchange. In the individual market, agents will be paid directly by the carriers according to their active carrier contracts. In the small group market, the Small Business Health Options Program (SHOP) Exchange, agent commissions will be market competitive and paid by Covered California.

• What plans or products will be available? It’s too early to say which plans or issuers will be participating in the exchange, but we will know more by July, which is plenty of time before the October open enrollment. Plans will be standardized and include the Essential Health Benefits as required by the Affordable Care Act.

• Plan Types – Expect to see PPO, HMO, and high-deductible plans (HSA-eligible) in the Exchange. In addition to some familiar carriers, you may also see some local or regional plans not traditionally offered in the commercial market.

• General Agents – The SHOP will announce the general agents authorized or contracted to represent the SHOP Exchange no later than June.

• Where to get updates and information  – We are launching our Covered California website www.CoveredCalifornia.com and will be updating information as things change in SHOP. You will want to make this a place that you regularly visit for current information.

Agents should get ready for a busy year and stay tuned for more updates.


Michael Lujan, RHU is the director of SHOP for Covered California (Small Business Health Options Program). He is responsible for design, development and implementation of employer group coverage designed for small employers, including those eligible for the federal small business tax credit and their employees and dependents. He has more than 25 years of experience working with small business employee benefits including Director of Small Group Sales for Blue Shield of California as well as Sales Manager for two prominent general agencies. 

The 2013 California Health Market in 3D: Wellness–How Worksite Health Centers Can Boost Wellness Programs

by Jonathan Spero, M.D.

Corporate wellness programs, though very popular, are hampered by low engagement rates, less than desirable effectiveness, and a lack of integration with medical care delivery. Wellness and medical care need to be integrated for optimal results.

And a workplace health center is -ideally suited to facilitate this integration. Incorporating wellness services into a workplace health center has enormous potential to drive a much greater return-on-investment for employers. Below is a summary of the benefits of integration.

Enhancing Engagement Rates

The workplace clinic can drive engagement in wellness initiatives as follows:

1.  Familiarity – Too often employees have no relationship with wellness providers. Wellness programs may involve talking to a health coach over the phone, seeing a nurse once a year at the health fair, or interacting with some other vendor that the employee does not know. In contrast, a workplace clinician who offers wellness services becomes a very well known entity to employees. The practitioner is at the workplace taking care of sick employees everyday, filling prescriptions, giving medical advice, and offering preventative care. Since the employees know and trust the practitioner, they are much more likely to participate in a wellness service that the practitioner offers. This leads to dramatically increased engagement rates; they are typically 30% to 70% higher than with stand-alone wellness vendors.

2.  Internal Referrals – High- and moderate-risk employees who visit the workplace clinic for a medical reason can be identified by the medical staff and referred directly into wellness programs. Practitioners who provide medical care to these employees not only have access to a health risk assessment, but they also have a much richer understanding of the employee’s medical risk factors, which allows them to target appropriate patients for wellness intervention. Also, employees are more likely to engage in a wellness program that their medical care provider has recommended.

3.  Marketing Opportunities – The workplace clinic is ideally suited to deliver wellness enrollment opportunities throughout the year, such as health fairs, biometric screenings, lunch and learns, and other on-site events that can drive engagement into these wellness programs.

Increased Efficacy

Wellness vendors typically offer sporadic events and programs throughout the year and deliver many of their services remotely (such as telephone coaching). This delivery model limits the effectiveness of these programs.

In contrast, workplace health centers offer year round, on-site programming for a continuous, hands on approach with improved results for participants. In addition, program costs are funded directly by medical cost savings of the clinic, which allows for a very cost effective solution for wellness. These features increase effectiveness:

• On-site health coaching (versus by phone).

• In person wellness programs (versus Web based).

• The ability to have regularly scheduled health related events (versus infrequent).

Integration with Medical Care

Unfortunately, most corporate wellness services act in isolation to the care that the employee’s physicians are delivering. This results in enormous lost opportunity costs for many reasons as follows:

• Coordinated Care – It is critical to coordinate the patient’s lifestyle behavioral modifications with the medical care they are receiving. Just consider the impact on pharmaceutical therapeutics for a diabetic patient who is on a weight management program or a hypertensive patient who is undergoing intensive nutritional counseling.

• Amplified Messaging – Healthy lifestyle behavioral changes have been proven to accelerate when the wellness and medical providers send unified communications to the patient.

• Occupational Medicine – As outlined in a Duke study, lifestyle choices have a significant influence on work-related injuries and illnesses. Therefore, integrating wellness into any occupational medicine program is essential to reduce disability and workers compensation claim.


Dr. Spero is an expert in the field of return-on-investment driven worksite health centers and targeted employee wellness programs. InHouse Physicians is a global employee health and wellness provider delivering innovative cost containment solutions to corporations around the world. InHouse Physicians offers cost effective worksite health centers, evidence based pre-disease wellness initiatives, health screenings plus analytics, flu vaccinations, and travel medicine. For more information, visit www.inhousephysicians.com or e-mail Dr. Spero at jspero@ihphysicians.com.

The 2013 California Health Market in 3D: Individual Health – Adapting to the Individual Market Post Health Reform

by Michael Owens

Post health reform, nearly all of the largest individual health producers have a major concern about the cost of acquiring each new customer — also known as cost-per acquisition (CPA). It’s the total cost including leads and marketing costs. The CPA problem comes from a perfect storm created by health reform: major medical premiums are rising while major medical underwriting is tightening.

Also, because of higher premiums and tougher underwriting, most top producers are seeing a substantial drop in their closing ratios and taken rates. When your closing ratios drop, you need to buy more leads, which drives up your CPA and drives down your profitability.

The diagram on the following page demonstrates how the top producers are solving the CPA problem. Savvy producers have moved beyond trying to survive as single product (major medical) producers. They are leveraging both short-term medical and guarantee issue fixed indemnity benefit plans to find a better fit for consumers, especially those who can’t afford or can’t qualify for major medical.

Below are details from some of our top producers who are qualifying and filtering leads to improve their closing ratios dramatically.

50% of all leads: Major Medical

These clients can afford and qualify for major medical insurance. Budget isn’t a concern and they are healthy enough to pass underwriting. Most major medical underwriting will place 65% to 70%. Significant rate ups are becoming very common for major medical carriers post health reform.

The average major medical plan issues 36% preferred rates, 34% standard rates, and 30% higher than standard rates, according to an AHIP survey of major medical carriers. The rate ups are often as high as 50%, and placing one of these cases is nearly impossible.

40% of All Leads: Short-Term Major Medical

Short-term medical plans are typically priced 50% less than guaranteed renewable major medical plans, and the underwriting placement is approximately 30% easier. Clients who might be a good fit for short-term medical are those who can’t afford or can’t qualify for major medical. These consumers have a limited budget or have conditions like bi-polar disorder or a height/weight ratio combined with smoking and blood pressure that prevent them from getting permanent major medical. Short-term medical plans are also a good fit for the following:

• Those in the child-only market (age two and up)

• Those who are in-between jobs

• College students/grads

• Early retirees

As we draw closer to 2014 and the full impact of the mandates in the Affordable Care Act, the risk of buying a short-term medical plan is mitigated by the safety net of guarantee issue coverage for all.

10% of All Leads: Guarantee Issue Limited Medical

The client can’t qualify for short-term medical or major medical and can’t afford the high cost for -COBRA or a high-risk pool plan. For these clients, we recommend limited benefit fixed indemnity with full disclosure of the limitations. These plans are offered as guarantee issue coverage regardless of your client’s pre-existing condition.


Michael Owens is senior vice president of Chicago-based GoHealth, one of the fastest growing health insurance distribution and technology companies in the United States. Prior to moving back to his hometown of Chicago and joining GoHealth, Michael was president of America’s Health Care Plan in Dallas. Owens received an MBA in Finance from the University of Chicago and a B.S. in Marketing from the University of Illinois, Chicago. For more information, visit www.gohealthinsurance.com, or call 877-596-5611.

The 2013 California Health Market in 3D: Self Funding – The Next Evolution of Cost-Sharing: The Fixed Fee Hybrid Plan

by David Zanze

Today, any self-funded employer that provides comprehensive medical coverage through a PPO or EPO plan can end up paying more in claims costs, despite the percentage that the network can save on billed charges. Although employers can offset some of these costs by requiring employees to be responsible for higher deductibles, co-pays, and co-insurance, it is sometimes not enough to alleviate the high cost of offering health benefits.

For one, self-funded employers that elect to provide health benefits are required to provide health coverage that meets the minimum essential benefit requirements and the new regulations as enacted by the Patient Protection and Affordable Care Act (PPACA). As we all know, more benefits translates to more money. Additionally, self-funded employers are likely to be feeling the pinch of higher network access rates and administrative costs as medical expenses climb faster than general inflation. In fact, employers that are now offering limited health benefits to 50+ employees are likely to scrap their health benefit plans all together, opting instead to send employees to the Exchange in trade for the IRS tax penalty; it’s cheaper that way.

But, there are still affordable health plan options to offer, especially to clients with mini-med plans, which provide comprehensive coverage while keeping a client’s bottom line in check. One of these options is a new hybrid plan design that blends the comprehensive coverage and network of a PPO plan with the reimbursement rates of a traditional fixed schedule plan.

We’re calling it the “fixed fee hybrid plan.” The plan is based on a predetermined reimbursement schedule that is used with a select and narrow network of primary care, specialty care, pharmacy, and hospital facilities. This narrow network of facilities is developed to meet the client’s geographic area. The facilities contract directly with the health plan to accept the reimbursement schedule as payment, in full, for all office visits, prescriptions, and procedures.

With a conventional fixed schedule plan, the employee has the flexibility to be treated at any facility, but is responsible for paying the balance minus the set reimbursement rate. But this new breed of fixed fee plans makes complete, comprehensive coverage available. As long as the employee visits a contracted facility in the network, there are no out-of-pocket monies owed for service and no gaps in coverage. Instead, the responsibility as it relates to cost is shifted onto the contracted provider.

A provider that agrees to contract with the health plan also agrees to accept lower reimbursement rates from your client in exchange for an increase in patient volume and a reduction in administrative work relative to balance billing. In order to implement this plan design, the health plan is encouraged to work with its TPA to develop a reimbursement schedule and provider network.

Most TPAs can develop this kind of narrow network on behalf of the client. If this is not the case, there are network development companies available in the marketplace that can assist. The TPA or network development consultant will present the reimbursement fee schedule and negotiate the contract with the selected providers. Once the network is established, it’s the employee’s responsibility to capitalize on their benefits by using providers within the narrow network or finding their own providers to accept the health plan’s fixed fee schedule.

What Concerns Should You Have?

For one, a narrow network is a much smaller version of your client’s traditional PPO plan, representing only about 10% of available providers in the community. Because of this limited network, there may be issues with timely access to care. As a result, employees who get impatient will end up going out of network. These employees will then need to pay any provider costs up front, which can be expensive, and then wait for reimbursement from the plan. Of course, the employee will be responsible for any amount that’s not defined in the fee schedule, and the employer can end up with unsatisfied employees. This is not unusual with plan design changes, especially with network changes. Try as your client might, there will always be some level of disruption to be mitigated for an employee population, so employers will need to be vigilant about educating employees about the change in plan design.

Secondly, fixed scheduled plans have always been akin to mini-med plans. These plans were mostly eliminated by PPACA with the exception of the waivers provided by the Department of Health and Human Services. Any employer that applied for and received a waiver to continue offering mini-med plans is now searching for alternatives as those waivers and plan offerings expire in 2014. The good news with the fixed fee hybrid plan is that it’s an affordable, comparable alternative that also meets the requirements of health care reform: unlimited lifetime maximums, no preexisting conditions, and all the essential benefits required by a health plan at a price your client can afford.

The fixed fee hybrid plan is not trying to mimic an employer’s costs as it relates to the mini-med plan, but puts a cap on their exposure. If the reimbursement schedules are set up appropriately, the fixed fee hybrid plan will cost your client less than the tax penalty associated with not offering health coverage and still meets the requirements established by PPACA.

What Benefit Does It Offer Your Client?

From your client’s perspective, not only does this kind of plan design help to share some of the cost burden with the provider community, but it also allows for deeper discounts while providing employees a better benefit. By contracting with providers directly, the employer has access to reimbursement rates that are usually less than what is found with a traditional PPO network, so there is lower cost responsibility. For example, the employer might have paid 80% of discounted charges with their traditional PPO plan, but they are now only paying a flat, contracted rate. To continue with this example, if the client once paid 80% of a $100 office visit, but is now paying a $50.00 flat fee (contracted rate), there is obviously a savings achieved; this alone can help your client to ratchet down expenses. Additionally, as the plan is set up to pay only a specific amount for each benefit, the health plan can monitor employee data to better forecast its overhead and financial reserves.

With the fixed fee hybrid plan, employers can retain and recruit employees with a comprehensive benefit package while encouraging employees to understand its value. They don’t have to eliminate the option of providing health benefits coverage entirely. Employees learn to make informed decisions before seeking medical attention and make the best use of their money by going to providers that are contracted directly within their health plan. It’s also easier for employees to understand the cost structure of their benefits because of its defined fee schedule, unlike a PPO plan.

There are no deductibles or co-pays to meet, no co-insurance to calculate; just a fixed cost for each service available. As long as the employee visits a contracted provider, there is no cost. The fixed fee hybrid plan promotes plan awareness and encourages the employee not to pay out-of-pocket for treatment they can receive for free at a contracted provider.

Obviously, there are many benefits for both employer and employee that come from transitioning clients on current mini-med plans or major medical PPO or EPO products to a fixed fee hybrid plan. This kind of plan offers a competitive, health care benefit package that shifts more of responsibility for cost and health care delivery onto the provider community. The coverage is comprehensive and robust, meeting the requirements of PPACA while remaining affordable. It also encourages responsible utilization by employees while ensuring access to quality, comprehensive care.


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

The 2013 California Health Market in 3D: ERISA Compliance – It’s Only the Application of the Law that Counts

by Chris Bettner

Many people are aware that the Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that regulates group-sponsored benefits, often called “welfare benefit plans.” Besides requiring the provision of specific plan features and funding information, the law mandates that employers comply with strict requirements for disclosing plan information to all eligible employees. Knowledge of ERISA often ends there for many employers. That’s when it gets downright dangerous for employers that could be out of compliance without realizing it.

It’s the application of ERISA that is so important and what will be covered here. ERISA was meant to provide uniformity and protection to employees. It’s as simple as that. The Department of Labor (DOL) enforces ERISA compliance. There are severe penalties for employers that do not comply with ERISA laws pertaining to welfare plans. Actual court cases, awards, and DOL fines — ranging from tens of thousands of dollars to hundreds of thousands of dollars — have been levied on employers. ERISA trumps state law. If a beneficiary or participant brings a bad faith claim to court, it can be costly for the employer.

Some people assume that only larger employer groups or publicly traded organizations need to comply with ERISA. But the size of the group and the number or employees is irrelevant. Nearly all corporations, partnerships, proprietorships, and many not-for-profit organizations must comply.

Most health and welfare benefit plans, including health reimbursement arrangements (HRAs), flexible spending accounts (FSAs), dental and vision plans, along with many other types of coverage are ERISA plans.

Some people assume that, if a master contract from the insurance carrier, a certificate of coverage, and a summary of benefits are available to employees or participants, then the ERISA requirement for a plan document or summary plan description is fulfilled. This is not the case.

What is the recommended solution for employers to fulfill these compliance requirements? A wrap document that bundles benefits into one plan or supplemental documents can be much easier for the employer. Some employers may want to bundle two or more ERISA benefits into one plan for compliance purposes. This is referred to as a “mega wrap” using a “mega” or “umbrella” document.

This summary plan description has a laundry list of requirements, which are not all found in a single source. Not only must the employer prepare the summary plan description, but must also deliver it to participants following specific ERISA requirements.

Generally speaking, the summary plan description must be delivered within 90 days of the employee or participant being covered, whether or not they request the summary plan description. An updated summary plan description must be provided to all participants every five years. It can be sent via electronic delivery, first-class mail, or be hand delivery.

Participants include covered employees, terminated COBRA participants, parents or guardians of minors covered under court ordered support, and dependents of a deceased retiree under a retiree plan.

Any employer that is sponsoring health or welfare benefits must determine the best way to document benefits for legal compliance and to communicate effectively with employees. Employers that are sponsoring insured benefits must also worry about missing ERISA provisions in their insurance documentation. Using a wrap document to bundle benefits into one plan or into supplement insurance documents can sometimes be much easier for the employer.

It’s important for brokers to encourage their employer groups to be in ERISA compliance and help them find resources to provide the ERISA wrap documents to ensure they that are compliant.


With over 25 years of experience in healthcare sales and management with health insurance carriers, Chris Bettner serves as executive vice president of Business Development for Sterling Health Services Administration (www.sterlinghsa.com). Prior to joining Sterling, Chris was vice president of Sales for Blue Shield of California. She held similar positions at Lifeguard, FHP, Independence Blue Cross and MetLife. Chris is also a national spokesperson on HSAs and consumer directed healthcare programs.

Long-Term Care News

LTC Insurance Prices to Increase, Especially for Women

Consumers can expect higher prices for long-term care insurance thanks to the Federal Reserve’s policy of maintaining historically low interest rates, reports Jesse Slome, executive director of the American Association for Long-Term Care Insurance (AALTCI). The organization also finds that carriers are going to be charging women more than men for the coverage.

LTC insurance rates are about 30% to 50% higher than they were five years ago, according to AALTCI’s annual price index. Insurers tend to invest policyholders’ premiums into more stable and typically interest paying instruments instead of more risky financial instruments like stocks. “The historic low interest rates are great for those buying a house, but impact what people will pay for coverage,” Slome notes.

Forty to 60% of the cost of long-term care insurance is based on anticipated investment return. For every 1% decline in interest rates, an insurer needs about a 10% to 15% rate increase in what the coverage will cost, Slome explains.

However, as a result of the current environment, insurers have developed more affordable policy options. “Inflation rates are significantly lower — a positive result of the Fed’s actions. The older standard five percent inflation growth option has seen the greatest price increases and so more consumers are opting for more affordable options, which have not been as impacted,” he said.

Consumers can start with coverage costing about $100 a month. “You can still buy a considerable amount of protection if you take advantage of discounts and work with someone who takes into account your other retirement savings and assets,” he adds.

In related news, leading carriers are busy re-pricing and filing long-term care insurance products to charge women more than men for coverage. Early product filings reveal that women will pay 20% to 40% more, according to Slome’s analysis.

About two thirds of benefits are paid for claims from women. As the number of claims continues to rise each year, carriers will need to raise their rates to make sure they have the funds to pay future claims, Slome notes.

Until now, insurers have used unisex pricing, which means that women pay the same as men even though their utilization is much higher. “One thing is for sure, women have a closing window of opportunity to take advantage of the current unisex pricing,” Slome explains.


Rising Eldercare Costs to Drive LTC Insurance Sales

Spending on elder care services is expected to grow 5.2% annually, reaching $319.5 billion by 2016. Services include skilled nursing care, home health care, and assisted living, according to a study by the Freedonia Group.

The following are projected revenues:

• Skilled nursing facilities — $126.5 billion in 2016 and $146.5 billion in 2021 up from $106.9 billion in 2011.

• Home health care services — $85.5 billion in 2016 and $120.5 billion in 2021 up from $61.1 billion in 2011.

The aging Baby Boom generation is largely responsible for the growth in eldercare spending. However, states and the federal government are making continuing efforts to curb Medicaid and Medicare expenditures. They will restrain spending growth by limiting reimbursements or directing patients to less expensive forms of care, the study’s authors predict.

Long-term care insurance sales are expected to grow, especially among those in their mid-50s to mid-60s. “That is the age band when long term care insurance is most affordable and when a majority of people can still qualify for health coverage,” said Jesse Slome, executive director of AALTCI. For more information, visit www.freedoniagroup.com


Americans Are in the Dark About LTC Insurance

More than half of the population is not even aware of what long-term care insurance covers, according to a survey by Thrivent Financial for Lutherans. Study respondents say the following:

• 24% are well educated on long-term care insurance.

• 52% have heard about long-term care insurance, but don’t know the specifics about what it covers.

• 25% don’t know what long-term care insurance covers.

The 18- to 24-year olds seem to have a better grasp on the importance of preparing for long-term care needs:

• 15% have long-term care insurance.

• 41% don’t have long-term care insurance, but plan to.

• 44% don’t have long-term care insurance and don’t plan to purchase it.

Among 35-to 54-year olds:

• 15% have long-term care insurance.

• 25% don’t have long-term care insurance, but plan to purchase it.

• 60% don’t have long-term care insurance and don’t plan to purchase it.

Among those 55 and older:

• 17% have long-term care insurance.

• 17% don’t have long-term care insurance, but they plan to purchase it.

• 66% don’t have long-term care insurance and they don’t plan to purchase it.

Respondents said they didn’t purchase LTC insurance for the following reasons:

• 51% say it’s too expensive.

• 24% don’t know what it is.

• 10% say LTC insurance doesn’t apply to them because they can pay for their care without it.

• 8% don’t believe the long-term care insurance provider will actually pay for the care they need.

• 7% say they won’t need it because they have family members that will care for them and help pay for care.


Women Are Less Likely to Purchase Long-Term Care Insurance

Women are more likely than men are to need long-term care insurance. But men are more likely to purchase it or already have it, according to a survey by Thrivent Financial for Lutherans. Survey respondents revealed the following:

• 12% of women have long-term care insurance compared to 19% of men.

• 60% of women don’t intend to buy long-term care insurance.

Respondents said the following about how they would care for their children while caring for parents or another loved one:

• 26% of women would quit their job to be the primary caregiver for a loved one compared to only 14% of men.

• 33% of men would rely on the savings and assets of those needing care and continue working compared to 21% of women.

Respondents revealed the following about long-term care in retirement:

• 10% of women considered the possibility of caring for someone else while retired compared to 6% of men.

• 4% of women plan to retire fully and devote their time to travel, philanthropy, or hobbies compared to 41% of men.

For more information, visit Thrivent.com.


Four Tips To Remember When Selling Dental Benefits in 2013

by Chris McConathy As you gear up for a new year, make sure that you don’t overlook the value that dental coverage can bring to an employer’s benefit package. Not only is dental coverage an affordable benefit for employers to offer, but it is also viewed as a benefit that can attract and retain employees. And employees often request dental benefits, according to the National Association of Dental Plans 2011 Group Purchaser Behavior Study. So, here are some tips to keep in mind as you review the dental plans offered by different carriers. And making recommendations to your employer groups:

1. Understand What You Are Counting and Comparing

When analyzing various dental plans, make sure that you understand how the plan counts its dentists. Access points and unique dentists are two things to compare. An access point is a place where you can access dental care. For example, some dentists work at more than one location, and some are a part of large dental groups with many different offices, but a dentist may not work at each location.

It’s important to remember that each insurance carrier may have a different way of counting access points. Some carriers count each dentist as if they work at each location in a large dental group. But that dentist may work at three of the locations instead of at all 15 locations. Also keep in mind that the dentist can only be at one location at a time. The point to remember is this: Using access points to compare does not always compare apples to apples; it’s more like comparing apples to oranges because the counts may be inflated.

On the other hand, when it comes to looking at unique dentists, each dentist is counted only once. This is a more precise way of comparing dental networks because it lets you know the total number of network dentists who are ready and able to provide dental care under a certain plan.

Another point to remember is how the carrier counts dentists that have offices in more than one county. For example, if a dentist has offices in four counties, some carriers count that dentist only once to get their state totals. Other carriers add the county totals to come up with a state total, which can lead to over counting and inflating the number. So, make sure you know the details behind the way the dentists are counted and compared in each plan you review.

2. Determine The Costs

Most of us know how hard it can be to get a good idea of dental costs if you only look at a fee table with procedure codes. So, you should also consider in-network utilization.

As we all know, when your clients’ employees visit in-network dentists, they usually save money because in-network providers have agreed to discounted rates for various services. So, they can’t charge members more. However, out-of-network dentists don’t have a contract with a carrier. They can bill members for the difference between the total amount the carrier allows to be paid for a service (the maximum allowed amount) and the amount they usually charge for a service. When they bill a member for this difference it’s called “balance billing.”

Your clients and their employees can save money when a member visits an in-network dentist. That’s why it’s important to recommend a carrier that maintains a strong network of dentists who provide good network discounts. You want your clients’ employees to understand the value of going to an in-network dentist.

3. Understand What Your Clients Need and Want When it comes to Cost or Coverage

When you’re counseling and making recommendations to your clients, it’s important to strike a good balance between the benefit coverage and the cost. If coverage is your client’s main concern, just remember that a number of services can be added to a plan that do not cost a lot, but will result in a more robust benefit. However, if cost is the most important factor, you can remove certain services and lower the premium.

Here’s a list of some services to consider adding or removing from the plan:

• Extra cleaning or periodontal maintenance for members who are pregnant or living with diabetes.

• Brush biopsies to help detect oral cancer.

• Composite (tooth-colored) fillings on posterior (back) teeth.

• Dental implants.

4. Look For an Insurance Carrier that Uses Evidence-Based Dentistry

The last point to keep in mind is to make sure the dental insurance carrier you recommend uses the latest clinical research and keeps contracts up-to-date on changes in the dental industry. In short, to provide the best care while being cost effective, evidence-based dentistry matches plan coverage to the services and frequencies that make sense from a clinical perspective.  Here are some examples of changes that have occurred with some dental plans with regards to sealants and full mouth X-rays:

• Sealants are covered once every 24 months instead of once per lifetime – Some carriers have found that it can help reduce future restoration costs when people take care of their sealants so they remain intact over a long period. This change actually helps lower costs for your clients and their employees and helps promote better dental health for the employees.

• Full mouth X-rays covered once every five years– The latest research recommends getting these X-rays once every five years. Some carriers used to cover these more frequently, but they’ve changed their benefits so they are in alignment with the latest research.

Remember, good dental coverage should give employees access to great dental care while protecting them from dentists who order unnecessary tests or treatments that can increase costs for everyone.

Keep these tips in mind. Your clients will benefit from this information, and you will benefit from seeing your dental sales increase throughout the year.


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

Disability – The Four Big Small Business Opportunities For Benefit Brokers

by Donato Monaco

If you’re looking for a big opportunity to grow your business this year, think small. Industry research shows there’s opportunity for benefit brokers and agents who work with small businesses.

Protecting Employees

Small business owners are trying their best to protect their employees in these challenging and uncertain economic times, according to The Hartford’s second annual study of small business owners. Only 24% are shifting the cost of healthcare to employees and even fewer – 17% – are reducing employee benefits.

Small business owners value treating their employees well. Seven in 10 say the ability to pay their employees enough for them to afford a comfortable lifestyle is important to their success. In addition, six out of 10 small business owners also offer their employees some form of benefits.

Adding Benefits

Regarding benefit packages, 6.5% of all small firms plan to add a benefit within the next two years and 8% “possibly” will add a benefit, according to a 2012 LIMRA report. Short- and long-term disability and life insurance are among the top benefits that small business owners are considering adding to their benefit package, according to LIMRA’s report.

And interestingly enough, the newer companies are more likely to add a benefit. LIMRA found that 14% of companies that are one to nine years old plan to add benefits compared to 2% of companies that are more than 20 years old. New and expanding companies are also more likely to add benefits.

Four Opportunities

Taking a look at both studies, here are four key small business sales opportunities:

1. Family-owned companies

2. Small businesses owned by women

3. Minority-owned small businesses

4. Voluntary benefits

In The Family

According to LIMRA’s report, families own 78% of small businesses. These companies are less likely to have group benefits, which creates an opportunity for brokers.

Women Leaders

Today, women-owned firms have an economic impact of $3 trillion, which translates into the creation and/or maintenance of 23 million jobs, according to the Center for Women’s Business Research.

Women own 24% of small businesses, and their numbers have been growing steadily, according to LIMRA’s small business report. While these businesses have fewer employees than other companies, LIMRA calls this an “under-penetrated market.”

Minority Owners

About 14% of small businesses are minority owned, LIMRA found. Minority small business owners say they are more likely to add group or retirement benefits in the next two years. This is also a fast-growing segment of the small business marketplace, having growing at twice the rate of other businesses.

Voluntary Benefits

Voluntary benefits, which are paid by the employee, can be an affordable option for business owners to offer benefits that protect their employees’ financial future without adding to their business expenses. Eastbridge research reveals that more and more companies are offering voluntary benefits. In fact, 77% of employers with 10 or more employees offer at least one voluntary product. The largest increase occurred in the small employer category of 10 to 100 employees.

Your Opportunity

Think small business owners have already discussed benefit plans for their business? You might be surprised by how many haven’t. LIMRA research found only half of small business owners have been contacted by an agent or broker about benefits in the past year.

Given the size of the employee population at small businesses, each person is important to the business. You can help small business owners protect their employees from the impact of an unexpected injury or illness. Consider partnering with a carrier that can help you use these compelling insights with products and services that help employers and their employees take control of their financial future by planning ahead. For example, consider an insurer that does not have eligibility guidelines that restrict the number of family members as employees who are eligible for benefits.

You can see small businesses present a huge opportunity for brokers who focus on benefits. This year, you can build your business while helping your clients build their.
Donato Monaco is vice president of The Hartford Group Benefits’ Small Business, which includes a center with dedicated specialists to assist benefit producers in small business sales. More information can be found at www.thehartford.com/gbsmallbusiness.

Life Settlement News

Life Settlements: Weak Investor Supply Despite Growing Consumer Demand


While consumer demand for life settlements remains strong, capital inflows were weak in 2011, according to a Conning study. Conning analyst Scott Hawkins, explained that the low life settlement market volumes in 2011 reflected weak capital inflows during the past few years. This is due partly to investors’ concerns over standards of underwriting as well as pricing accuracy. “Because of fewer new policies settled, we estimate that the amount of in-force life settlements actually declined for the first time in 2011 based on death claims and lapses on previously settled policies,” he said.

Consumer demand for this product remains strong, but the asset class has been unable to attract the capital to meet that demand. Activity in the market has mainly centered on acquiring distressed portfolios rather than funding new policy purchases.

“But we may be seeing early signs of change,” Hawkins said.

Stephan Christiansen, director of research at Conning said, “In our view, the future of life settlements as an asset class seems to be contingent on developing stronger market structures and confirming pricing accuracy for potential investors. Yet, the life settlement asset class continues to hold interest for investors struggling with today’s low interest rate environment, and work is underway to restructure and to increase attractiveness to investors. In fact,…we are beginning to see early signs of renewed investor interest and commitment in the class for the first time since the financial crisis.”

“Life Settlements: Weak Investor Supply Despite Growing Consumer Demand” is available for purchase from Conning by calling 888-707-1177 or by visiting the company’s Web site at www.conningresearch.com.


SEC Charges Life Settlements Firm

The Securities and Exchange Commission charged Texas-based financial services firm Life Partners Holdings Inc. and three of its senior executives for their involvement in a fraudulent disclosure and accounting scheme involving life settlements. Robert Khuzami, Director of the SEC’s Division of Enforcement said, “Life Partners duped its shareholders by employing an unqualified medical doctor to assign baseless life expectancy estimates to the underlying insurance policies. This deception misled shareholders into thinking that the company’s revenue model was sustainable when in fact it was illusory.”

David Woodcock, director of the SEC’s Fort Worth Regional Office, added, “The senior-most executives at Life Partners concealed significant risks to the business, manipulated financial statements with improper accounting, and knowingly profited from their misconduct by executing insider trades based on information that was not available to the public.”

The SEC alleges that Life Partners chairman and CEO Brian Pardo, president and general counsel Scott Peden, and chief financial officer David Martin misled shareholders by failing to disclose a significant risk to Life Partners’ business: the company was systematically underestimating the life expectancy estimates it used to price transactions. Life expectancy estimates are a critical factor affecting the company’s revenues and profit margins as well as the company’s ability to generate profits for shareholders.

The SEC alleges that Life Partners and the three executives were involved in disclosure violations and improper accounting. The SEC says that Life Partners overvalued assets held on the company’s books and created the appearance of a steady stream of earnings from brokering life settlement transactions.

The SEC also charged Pardo and Peden with insider trading in their shares of Life Partners stock while in possession of material, non-public information indicating that the company had systematically and materially underestimated life expectancy estimates.

Life Partners is a Nasdaq-traded company that generates virtually all of its revenues from brokering life settlements.

According to the SEC’s complaint filed in federal district court in Waco, Texas, Life Partners misrepresented and failed to disclose in public filings with the SEC that the company’s systematic use of materially underestimated life expectancy estimates constituted a material risk to the company’s revenues. Beginning in 1999, the company used life expectancy estimates provided by Dr. Donald T. Cassidy, a Reno, Nev.-based doctor with no actuarial training or prior experience rendering life expectancy estimates. The SEC alleges that Life Partners and Pardo failed to conduct any meaningful due diligence on Cassidy’s qualification to act as a life expectancy underwriter and instructed the doctor to use a life expectancy methodology that was created by the company’s former underwriter, a part-owner of Life Partners. Pardo, Peden, and Martin were aware that the Cassidy-rendered life expectancy estimates were systematically and materially short.

The SEC alleges that Life Partners materially misstated net income from fiscal year 2007 through the third quarter of fiscal year 2011 by prematurely recognizing revenues and understating impairment expense related to its investments in life settlements. Life Partners improperly accelerated revenue recognition from the closing date to the date it obtained a non-binding agreement with the policy owner to sell a life settlement. Life Partners use of Cassidy’s life expectancy estimates as part of its impairment calculations caused the company to understate millions of dollars in impairment expense.

The SEC further alleges that during this time, Pardo and Peden sold approximately $11.5 million and $300,000 respectively of Life Partners stock at inflated prices while in possession of material non-public information about the company’s dependency on short life expectancy estimates to generate revenues.

The SEC’s complaint also seeks repayment to the company of stock sales profits and bonuses received by Pardo and Martin pursuant to Section 304 of the Sarbanes Oxley Act of 2002.


Colva Launches Pricing and Valuation Models

San Diego-based Colva Insurance Services launched its Colva Actuarial Pricing Models. To determine the value of a life settlement policy, the pricing models determine the minimum premiums to pay for a policy. They use a variety of mortality assumptions and advanced risk analytics to measure the risk and value of the investment.

Rajiv Rebello, principal and chief actuary of Colva explained, “Most pricing models…use generic one-size-fits all approaches that often fail to help identify material differences in policy features. Keeping the cash surrender value positive is a waste when the investor only needs to keep the account value positive. The same goes for using account value premiums when you only need to use much lower shadow account premiums. Our model wraps many different life insurance features like these into an easy-to-use model so that clients can quickly identify which policies contain the most value. Optimizing premiums by properly using these features can save investors hundreds of thousands in premiums on just one individual policy and tens of millions on a portfolio level.”

Colva’s Actuarial Pricing Models are licensed to clients on a monthly basis. Clients can also get a pricing analysis for an individual policy without the monthly licensing. For more information, visit http://www.colvaservices.com.

Life Insurance – A Guide for Life Insurance Producers: How To Do More Business In 2013

by Kenneth A. Shapiro

And the beat goes on – with life insurance. We’ve all seen the statistics. One study after another makes the point that a majority of Americans say life insurance is important, even more important than ever. They also say they don’t have enough, although most have never figured out how much life insurance they need.

With such a ringing endorsement, most industries would be logging in record sales, so why are life insurance sales nearly flat year-after-year? Consumers say they have other more pressing priorities. Again, nothing new.

Such survey results are informative and well meaning, but they may hold at least one unintended consequence. Hearing these dismal reports so often, is it possible that we have allowed ourselves to be lulled into believing that only a very few will ever buy life insurance?

It doesn’t need to be this way. The big question for producers is this: As consumer confidence slowly returns, what should they be doing to write more business in 2013? Here are suggestions for becoming a more effective and successful adviser in the year ahead.

Serve As an Adviser

This is different from your role as a life insurance adviser. Consumers buy things they understand, that make sense to them. And that includes life insurance. If you take on the role of adviser, the goal is to help individuals, couples, and business owners do something they don’t do by themselves: talk about how they see their future. Although this is a critical issue, most rarely, if ever, sit down and discuss it.

Producers are better prepared for this adviser role than most might imagine. They’re trained to ask questions and that’s what it takes to be an effective adviser: letting people benefit from self-discovery so they can make better buying decisions. It’s this type of discussion that give prospects and clients the opportunity to express their thoughts while opening the way for an advisor to help them reach their goals.

Broaden Your Horizons

No matter where they’re tethered, life insurance producers tend to work alone. That’s the nature of the business. While it has many advantages, it’s also easier to fall into predictable patterns – the same type of prospects, products and presentations – when everything becomes routine and dull. Start doing something new; take a step in a new direction. It may be adopting a new technology, such as using a tablet for making presentations, working with a new product such as index universal life, or seeking out new influences.

Make Referrals

How to get referrals is one of the most popular subjects with producers. If this is true, it raises this question, “With so much expertise available, why don’t producers get more of them?”

The problem may be putting the cart before the horse. We can be so mentally focused on getting referrals that we fail to take advantage of the many opportunities that we have to give them.  Advisors rightly think of themselves as helping people. I help my clients make sure they will be financially secure and I help growing families make it possible for their kids to go to college. Helping is in an advisor’s DNA.

Producers have an enormous body of information about their clients, prospects, and others they know. All of that is a resource for helping people, whether it’s offering suggestions for a roofer or an accountant. See yourself as a concierge, someone who has resources that have value to others. The more others see us as professionals who give, the more they will want to give to us.

Use Testimonials

It may be more appropriate to start by asking clients for a testimonial. You’ve just solved a problem for a client and delivered the life policy. That’s the moment when a client expresses appreciation for what you’ve done. That’s the right time to ask to use those generous words as a testimonial. Take a moment and write down what the client says and even ask for the person to sign it. And be sure to say a testimonial carries the most weight if it includes a person’s name and the city where they live. If the client is a business owner, ask to use the name of the business, as well. The next time you are meeting with a prospect, have your testimonials ready. What others say about how you helped them creates confidence and enhances your credibility. Both can have a significant influence on your sales.

Educate Endlessly

How often have we been told that the nation’s population is under-insured? LIMRA keeps pointing it out. It’s particularly true for the middle class, but it’s also true for the more affluent who can benefit from understanding the real value of life insurance as an asset.

In the coming years, there will be trillions of dollars of transactions by Baby Boomers of family businesses, which involve a huge need for college planning, estate planning, and retirement planning.

From all indications, consumers across the entire socio-economic spectrum have a huge gap in their financial knowledge, whether it’s knowing how much money they will need to live comfortably in retirement, understanding the income tax code, being prepared for changes in Social Security and healthcare, or knowing how to provide for their heirs.  Advisors who want to make a difference can reach for that goal by making it their mission to educate their clients and prospects.

Share What You Know

More than ever, trust is a huge issue with consumers since it’s their financial well-being that’s at stake. Many would rather do nothing, however, than make a costly mistake.

Others try to dazzle them with seemingly attractive gimmicks, but more consumers are better informed and are aware of what they don’t know.

While life products are the tools for creating a sound financial future for our clients, they are just tools. What consumers are looking for today are advisors whom they can trust to guide them in the right direction. They can buy life products almost anywhere, but they can get sound, thoughtful answers to their questions from you. That’s what makes you trustworthy.

Meet With Clients

From all indications, too few producers meet with their clients regularly, once a year or so, which is a disservice to them and to us. Then, as the years pass, another agent comes along, reviews their policies and discovers that their needs have changed and there are more appropriate solutions that will increase coverage and reduce premiums.

By failing to hold client meetings, we hand business to our competitors and make it appear that we don’t care about those who purchase life insurance from us.

It doesn’t need to be this way. More than any time in the past 75 years, lifestyles change, often quickly and dramatically. Only advisors who are in touch with their clients can meet those changing needs.

Think about what might be included in an agenda for a client meeting:

• Assess the correct amount of coverage – What’s the right amount of coverage for this client or prospect based on their current life situation? This is a question that opens the way for a meaningful discussion.

• Term life policy conversion – By keeping track of conversion dates, you can know when to schedule a client meeting. The chances are that you can increase protection for less money.

• Financial planning – With some clients, particularly those with younger children, you can introduce the concept of planning for college. With just about every client, retirement planning is a serious issue. You may recognize an opportunity for a supplemental income solution. For those who need to think more about their retirement finances, then you can begin working with them. That’s when to schedule the next meeting.

A client meeting can and should be more – much more – than about just what’s discussed. It’s a unique opportunity to enhance your credibility with clients so they look to you as their adviser.

Expand Your Product Knowledge

Most of people find that they go back to the same restaurant time-and-again. It’s comfortable and they know what to expect. It’s much the same with a favorite supermarket where it’s easy to find what you’re looking for. Advisors aren’t much different when it comes to the products they sell. They stay with those they know and understand.

Yet, the life industry, which can be slow to change, isn’t standing still as it creates new products that more adequately answer consumer needs and wants. Index universal life (IUL) is an excellent example. As a result of their losses during the recent recession, consumers want both upside growth and downside protection. IUL is the most dynamic life product to come to market in the past decade. It’s an excellent tool for college planning, supplementing retirement income, all with tax-deferred accumulation. As such, it’s a huge opportunity for advisors who know how to use it.

The enormous positive response to IUL indicates that it’s on target with consumers. Even so, producers who aren’t trained in IUL tend to stay with more comfortable products.  Then, there are the so-called “hybrid life” policies that offer long-term care protection. They, too, are gaining ground fast with consumers who want long-term care coverage, but don’t want to pay for an individual policy that they might not need and that may cost them more over the years.

Just as consumers tend to gravitate to products with the most current technology, they expect their other purchases to be equally current, and that may include life insurance. Only producers who have the proper knowledge and training can deliver what consumers want to buy. They will also be the advisors who prosper.

The challenges facing life insurance advisors are no different than those facing anyone in the business. At the same time, the opportunities are enormous for advisors, including the year ahead, as more and more consumers recognize that the responsibility for their financial security rests squarely on their shoulder.


Kenneth A. Shapiro is president of First American Insurance Underwriters, Inc., a national life insurance brokerage firm based in Needham, Mass. and specializing in coaching growth-oriented producers. He began his career with Northwestern Mutual Life and later worked for The Guardian Life Insurance Company. He can be contacted at 1-800-444-8715 or kshapiro@faiu.com.

Disability – It’s a Tough Pill to Swallow When a High-Earning Physician Loses An Income

by Ted Tafaro
High-income cardiologists, orthopedic surgeons, physicians, and the pricey nip-and-tuck specialists from Beverly Hills to Park Avenue, are all highly trained and highly compensated professionals. They have the skills to put Humpty Dumpty back together again, but what happens when they are the ones who fall off the wall? The results are not like a fairy tale. The injury or illness will affect their ability to do their job and save lives. We find that most physicians have not taken the necessary steps to protect their storybook lifestyles.

A doctor’s ability to earn a sizeable income depends on the ability to see patients, perform surgery, and further their education. A distinguished physician can earn in the $700,000 to $1 million-plus range. But if a heart surgeon becomes disabled, most traditional disability income insurers cap disability income at $15,000 per month. This may sound like hitting the lottery to the Wal-Mart manager. But having a sudden 75% drop in monthly income is a hard pill to swallow for a surgeon who has built a lifestyle that revolves around bringing in over $60,000 a month.

It doesn’t have to be an injury that takes a physician out of the game. It’s more likely that an illness will be the culprit. A good example is the case of a young, healthy cardiac surgeon who loved to ski. Guess again if you think the end-result of this story is a broken leg as a result of a sharp turn gone wrong. After being was diagnosed with stomach cancer, the doctor was eventually unable to trust himself with a scalpel, rendering him unable to earn a living.

So why don’t most high income physicians have adequate coverage to compensate for lost wages if they can’t perform their job due to an injury or illness? You would think that it would be the easiest insurance to sell. After all, who knows more about the frailty of the human body than those charged to mend it?

The primary problem is not one of buying the insurance. In fact, physicians are great believers in and purchasers of disability income protection. The primary problem is underinsurance. It’s like owning a house that has a replacement cost of $2 million, but only insuring it for $500,000. The really scary part is that the greatest asset most high-income surgeons have is their ability to earn sizable income, yet they rarely insure the risk appropriately.

Compounding this problem is a flaw in our insurance distribution system; most traditional insurance brokers don’t realize that there is a viable way to protect high-performing surgeons above and beyond what traditional disability income carriers will underwrite. I can’t tell you how many times highly experienced and successful insurance advisors have said to me, “I didn’t even know this type of coverage exists.” If the advisors don’t know about it, how can their high-income surgeon clients be aware that there is a more comprehensive solution?

We recently worked with an insurance advisor who had an orthopedic surgeon client earning $1.2 million annually. The surgeon’s disability portfolio consisted of five traditional disability income policies with a combined value of $15,250 per month in disability income protection. Although it’s considered a solid disability income insurance program, it represents less than 16% of the surgeon’s income. It would be like insuring a $10 million home for $1.6 million.

Leveraging our cover-holder status, we were able to underwrite an additional $40,000 per month of disability income insurance. This type of specialized disability insurance covered the gap between the surgeon’s primary disability insurance program and his income, so that his family’s lifestyle wouldn’t be affected in the event of a disability.

Furthermore, it doesn’t do any good just to insure one particular part of a physician’s body. It might have been a great idea, back in the 1940s, when Betty Grable had her legs insured for $1 million, but what good is insuring just a surgeon’s hands if the surgeon’s back goes out and they can’t bend over a patient on the operating table? Or the surgeon gets a knee replacement and can’t stand for long periods?

What they need is full-body coverage. This type of coverage can also protect the surgeon’s employer. For instance, we worked with a leading Cancer surgery center that employed an elite surgeon responsible for a significant portion of hospital revenue. Key person life insurance was easily secured to the tune of $10 million. But the center’s corresponding risk of loss to a disability falls on deaf ears with traditional disability carriers. Fortunately, certain carriers are highly proficient at designing and underwriting such large exposures — the result of which was a key person disability policy, which would pay the cancer center $10 million if the surgeon suffered a permanent disability.

The numbers may seem intimidating, but high-income coverage isn’t all that hard to obtain. In fact, the process is pretty straightforward. But it is a specialized coverage that not all traditional insurance advisors can initiate, so you need to find an advisor who works in that particular field. The phrase, “Physician, heal thy self” might be good advice, albeit somewhat impractical. It’s up to you to do the healing by protecting your high-income client to the best of your capabilities.

Edward A. (Ted) Tafaro, president & CEO of Mahwah, New Jersey-based Exceptional Risk Advisors, LLC, is an expert on high-limit specialty life, accident and disability products for clients with extraordinary insurance needs, including physicians, entertainers, athletes, and highly compensated executives and professionals. By partnering with Lloyd’s of London syndicates, their firm has the largest binding authority available in the U.S. for its product portfolio. For more information, contact him at 201-512-0110 or ted.tafaro@exceptionalriskadvisors.com.