What Small Business Owners Don’t Tell Their Brokers

businesssecretsSmall business owners are reluctant to give detailed information to benefit brokers who haven’t earned their trust, according to a white paper by MetLife. Ilka Ramirez of the TIA Group says that clients often withhold salary information, employee counts and job titles. “Sometimes we need to redo their proposal because they didn’t provide enough information,” she said. Kent Schnepp of Bend said,“The age of my employees played a huge role in the cost of health insurance benefits for my last business. So, this time, I didn’t want to talk about age that much.” The white paper recommends that brokers explain that they need complete and accurate information to offer better plan recommendations and prevent surprises and dissatisfaction.

Small business owners may also be reluctant to discuss their business plans and projected growth. But these discussions can create opportunities, such as altering plan designs to fit an evolving workforce, providing valuable new coverage options, and improving services. The report suggests asking clients about their growth plans over the next year or two. Look for issues that may affect the company as it expands, whether it’s having a dispersed team or an older workforce. David Niu founder and CEO of TINYpulse said, “We like to understand what we should be looking out for as we continue to grow aggressively.” Niu wants to know how benefits work for remote workers. This is the kind of issue that a broker may uncover when discussing a company’s plans.

To establish trust, brokers need to offer value. Kelly Riggs, president and founder of Business LockerRoom said, “The last thing business owners need is someone imposing on their time. This is where many sales people fail. They don’t earn the right to sell.” Many clients avoid answering phone calls or taking lunches that don’t offer value. Elicia Putnam, founder of Brand Genie said, “Often, sales people or service providers would offer to take me to lunch just to meet, and I hated that. I would love it if someone came to me and said, ‘Here’s the issues we’ve seen with agencies like yours and here’s how we helped them save money.’”

President of KCD PR, Kevin Dinino says that he is amazed at how many sales professionals don’t visit the business owner’s website or do a quick web search on the challenges facing their industry. “You don’t need to be an expert in the small business or its market, but doing basic research goes a long way. Then you can ask the small business owner about issues. It would be a huge value to connect with a broker who understands your business and your business model. That person becomes a resource that I can turn to as my business grows.”

Riggs said, “If you’ve researched the company and delved into its problems, it’s easy to offer something of value, whether it’s information about best practices or your experience with similar-sized businesses. You want to have a reason for a conversation.” For example, a small-business client may be competing with larger companies for talent, or be looking for a more affordable dental plan.

Many small business owners don’t think of their broker as a resource for ideas on improving their recruitment package or reducing turnover. Brokers can suggest how small business owners can expand their benefits and meet employees’ needs, even with smaller budgets. Karen Carter, an account manager with MHBT said, “Employers are really surprised when they can do things like offer vision on a voluntary basis. They’ll think it’s not important, but then they’ll get 100% participation from employees.” The report suggests asking clients about their recruitment and retention efforts and whether they have high turnover. Show them how offering ancillary benefits, such as vision or dental, could help attract and keep staff. Dinino said, “Good sales professionals follow up after a sale; they genuinely care; and they make it more of a relationship. Not a lot of people actually do that.” For more information, visit https://www.metlife.com/assets/institutional/products/small-business/1604502346_CS_GVWB_3Things_Whitepaper.pdf

Voluntary/Worksite Takeover Sales Rose Again in 2015
In 2015, takeover sales accounted for 53% of new voluntary sales premium, up from 51% in 2014, according to an Eastbridge study. A takeover sale happens when one carrier’s plan is replaced with a similar plan from another carrier. The increase in takeovers is largely a result of the increase in voluntary sales among benefit brokers who were responsible for 60% of voluntary sales in 2015. It’s a standard practice in the traditional group business to replace a plan with one from another carrier that has better benefits or lower premiums. Benefit brokers have brought this sales approach to the voluntary business. Another recent Eastbridge survey finds that 76% of carriers expect the volume of takeover business to increase, and 14% expect a significant increase. For more information, visit eastbridge.com or call 860-676-9633.


Zenefits Offers Insurance Licensing Compliance App
Zenefits has a new application that provides comprehensive licensing controls for its more than 250 insurance brokers and advisors. The company says it will offer the compliance application for free to all insurance brokerages nationwide. Zenefits’ new CEO David Sacks declared, “This is Zenefits taking an industry-leading role in compliance. We want the entire industry to benefit from the technology we’ve built to solve our own licensing issues.” Zenefits was the focus of an industry scandal for having unlicensed employees sell insurance. According to a report by Buzzfeed, Zenefits created a secret software tool that made it appear that aspiring health insurance brokers had completed a mandatory online course while allowing them to spend less than the legally required 52 hours on the training course.

In turning over a new leaf, Sacks pronounced, “We are becoming the compliance company.” Built on the Salesforce App Cloud, Zenefits’ new licensing controls application prevents any current or prospective client account from being assigned to a broker or advisor without a valid insurance license in the correct state. To ensure that employee license information is always up to date within the system, Zenefits integrated this technology with a feed from the National Insurance Producer Registry (NIPR) Producer Database, a central repository of producer licensing information. Zenefits’ new licensing controls application helps the company manage the complex process of license renewals. If a license is not renewed in time, the controls prevent the broker from transacting on related accounts and in-flight deals until the renewal is processed.

Michael Lujan, California Association of Health Underwriters (CAHU) president, offered these comments about Zenefits, “Insurance licensing rules serve as an important consumer protection. The steps taken by Zenefits to ensure staff are properly licensed and in compliance is a smart solution, especially for a large organization with many licensed agents. Using a platform like Salesforce to help validate licensing for system transactions makes sense for agencies that have similar challenges tracking their large staff licensing and compliance.” For more information, visit zenefits.com.

Medicare Supplement Conferences
The Ninth National Medicare Supplement Summit will take place April 11 to 13 at the Sheraton in Dallas. The conference will run along with the First National Short-Term Care Insurance Summit. For more information call 818-597-3205 or visit medicaresupp.org.

Generic Drugs and Multi-Tiers Dominate Employer Plans
Forty-nine percent of employer-sponsored prescription drug plans have three tiers, and 44% have four or more tiers. That’s an increase of 34% from 2014 to 2015 and 58% since 2013, according to a report by United Benefit Advisors (UBA). “The market will continue to adapt. We’re already seeing the advent of six-tier prescription drug plans,” said Scott Deru, president of UBA Partner Firm Fringe Benefit Analysts. The Affordable Care Act will drive changes to plan design. Employers struggle with balancing cost containment and employee retention. The biggest challenges are for employers that are losing their grandmothering or grandfathering protection. To download a copy of the report, visit http://bit.ly/UBA-Rx-Trends.

Prescription Drug Costs Skewed by Hidden Fees
Most independent community pharmacists consistently encounter misleading and confusing fees imposed by prescription drug middlemen. These fees distort medication costs and reimbursement rates, according to a recent survey by the National Community Pharmacists Association (NCPA). The survey documents two relatively recent trends: direct and indirect remuneration (DIR) fees imposed on community pharmacies and increased copay claw-back fees that affect pharmacy patients. NCPA CEO B. Douglas Hoey, RPh, MBA said, “Pharmacy benefit management (PBM) corporations are inserting costs into the system on virtually everyone in order to fuel their profits and reward shareholders. Government officials and health plan sponsors must insist on greater transparency and oversight of these practices to ensure that plan costs and premiums go to their intended purpose: taking care of patients. NCPA will continue to work with Medicare officials, Congress and others toward that end.”

Community pharmacies are assessed DIR fees that can turn a modest profit into a financial loss. Sometimes it takes weeks or months after medication is dispensed until the patient and pharmacy is reimbursed. The survey reveals the following:

  • 67% of pharmacists say they get no information on how much and when DIR fees will be collected or assessed.
  • 53% say DIR fees are assessed quarterly. Many complain that this lag time makes it difficult to operate a small business and impossible to determine if net reimbursement will cover their costs at the time of dispensing.
  • DIR fees started in the Medicare Part D program, but 57% of pharmacists say they now appear in some commercial plans as well.

Eighty-seven percent of pharmacists said that DIR fees significantly affect their pharmacy’s ability to provide patient care and remain in business. Many pharmacists say that DIR fees can be thousands of dollars each month. According to the survey, members report that the Aetna and CVS Caremark drug plans are the most egregious in this area. The survey also disputes claims that DIR fees are actually pay-for-performance incentives. Pharmacists said that PBM corporations were not transparent about their DIR fee criteria and they assessed DIR fees on pharmacies with the highest quality ratings.

Recently, 16 U.S. senators and 30 representatives wrote to the Centers for Medicare & Medicaid Services (CMS) urging implementation of the agency’s proposed “negotiated drug price” guidance. Proponents say that requiring  Part D plans to report these fees consistently would improve transparency, increase accuracy of the Medicare Plan Finder tool that patients use to evaluate drug plans, and give pharmacists more clarity about their true reimbursement rate.

The survey also addresses copay claw backs on patients. PBMs instruct pharmacies to collect elevated copays and recoup the excess amount – and sometimes more – from the pharmacy. “Patients purchase insurance with the presumption that they will save money using the plan’s designated health care providers. Copay claw backs turn that logic on its head. A copay becomes a full pay – and then some,” Hoey added. The survey also reveals the following:

  • 83% of pharmacists have witnessed copay claw backs at least 10 times during the past month.
  • 67% say the practice is limited to certain PBMs.
  • 59% say the practice occurs in Medicare Part D plans and commercial plans.

PBM corporations sometimes impose gag clauses that prohibit community pharmacists from volunteering that a medication may be less expensive if purchased at the cash price rather than through the insurance plan. In other words, the patient has to ask about pricing. Fifty-nine percent of pharmacists say they encountered these restrictions at least 10 times during the past month. Pharmacists sat that United Healthcare/Optum Rx and Aetna appear to employ copay claw backs most often. For more information, visit ncpanet.org.

Can An App Help Reduce Childhood Obesity?
Anthem Blue Cross and San Benito Medical Associates have launched a pilot program with Kurbo Health to offer children and their families expert coaching and a smart phone app. Pediatric members who exceed the 85th percentile for body mass index are offered a 90-day program of instruction and nutrition tracking at no additional cost to participating families. Anthem expects it to take at least a year to have a large enough sample size to determine whether the intervention is successful. Ruth Raskas, who leads Anthem’s Community Health team, said, “Our goal is to demonstrate how evidence-based interventions like Kurbo can improve nutrition, increase physical activity, and decrease weight through mobile-experiences and personal coaching.” Kurbo’s model is licensed from the Stanford Pediatric Weight Control Program at the Lucile Packard Children’s Hospital. Doctors from San Benito Medical Associates, which also partners with Anthem in its Enhanced Personal Health Care Program, will identify eligible patients and families to participate in the special pilot program. For more information, visit facebook.com/AskAnthem.


Accelerated Access Solution (AAS) Now Available in California
AIG member company, American General Life, introduced the AAS Chronic Illness Accelerated Death Benefit Rider in California on two index universal life (IUL) insurance policies: (Max Accumulator+ and Value+ Protector) and Secure Lifetime GUL 3, a guaranteed universal life insurance product. The AAS accelerates a portion of a policy’s death benefit when an insured meets the rider’s health impairment criteria. The condition does not have to be permanent. As an indemnity product, no receipts are required, and there are no restrictions on how the money can be used. Clients can choose from two options for monthly disbursement of benefit payments (2% or 4% of the AAS benefit per month). At the time of claim, the policy holder can choose to receive the accelerated benefit in a lump sum. Care coordination services are available to the insured at the time of claim. A waiver of monthly deduction applies during the benefit-access period. For more details, visit www.retirestronger.com.

Bill Would Eliminate Medicare Advocacy Services
The Senate Appropriations Committee recently approved the FY17 Labor, HHS, Education Appropriations bill, which would eliminate funding for the State Health Insurance Assistance Program (SHIP). It’s called the Health Insurance Counseling and Advocacy Program (HICAP) in California. It is the only program that provides free, unbiased, one-on-one Medicare coverage and benefit counseling for beneficiaries, family members, and caregivers. According to California Health Advocates, “This dangerous bill aims to eliminate this important, effective program that helps millions of beneficiaries nationwide better understand and navigate the increasingly complex Medicare program.” For more information, visit cahealthadvocates.org.

Moving Medi-Cal Forward
California is a national leader in extending Medicaid to low-income people. But the program has not kept pace with dramatic changes in the Medi-Cal population, according to a report by the California Health Care Foundation (CHCF). Medi-Cal is now the largest single source of health insurance in the state. But Medi-Cal has also become a complex patchwork due to the its relationship with the counties, how care is delivered and financed, marketplace developments, and multiple initiatives that have been adopted throughout the years. This patchwork has had mixed results in quality of care, access to care, care coordination, and patient satisfaction. California is looking to reforms to drive timely access to high quality, coordinated, and cost effective care. The Affordable Care Act (ACA) has triggered a shift toward value-based purchasing in the commercial marketplace as well as in Medicare and Medicaid. These reforms are challenging in any environment, but the structural underpinnings of California’s Medicaid program make such changes all the more difficult to address.

Medi-Cal has accomplished a great deal in a short time, including a significant expansion of coverage, and important delivery system innovations in communities throughout the state. With Medi-Cal’s expanded role and the new Medi-Cal 2020 waiver recently launched, there is an extraordinary opportunity to reform the delivery system. To do so, California needs a plan to deliver better care and promote better health. The California Health Care Foundation (CHCF) retained Manatt Health to consider the current state of the Medi-Cal program and delivery reform, focusing particularly on Medi-Cal managed care.

Many states are developing ways to reform their Medicaid care delivery systems. For example, Oregon established locally driven regional coordinated care organizations, which bear full risk and are considered managed care organizations under federal rules. They have flexibility in designing their systems of care and, to some degree, choosing the services they will provide while meeting statewide quality and cost metrics. Massachusetts and New York are moving to require health plans to contract with accountable-care organizations or adopt alternative payment methods with a large portion of their providers. Colorado does not rely on managed care plans, but contracts directly with accountable care organizations. To get the report, “Moving Medi-Cal Forward on the Path to Delivery System,” visit chcf.org.

New Disability Plan for Hollywood Elites
Petersen International Underwriters of Valencia, Calif. Is offering the updated StarCover disability plan. The focus of StarCover is fiduciary security and income protection for the Hollywood elite – the talent in front of the camera and behind the microphone. The new plan touts a true “own-occupation” definition of disability and robust high-limit monthly and lump sum benefit schedules. A disfigurement rider provides primary benefits to a client who has become irreparably maimed or scarred due to an accident or sickness, but is still physically able to work and isn’t considered disabled under traditional industry definitions. For more information, call 800-345-8816 or at piu@piu.org.

Unlicensed Insurance Agent Arrested for Stealing Premiums
California Department of Insurance investigators arrested Robert Meseer, 63, of Westminster on 32 felony counts of grand theft, insurance fraud, and forgery after acting as an insurance agent to allegedly steal more than $140,000 from several business owners. Meseer began illegally managing MRM Insurance after a relative’s license expired in 2009. The relative had been operating the agency, which gave Meseer access to client files and allowed him to implement various schemes to bilk premiums from unsuspecting policyholders. Meseer’s alleged criminal acts exposed victims to thousands of dollars of financial risk and loss, said Commissioner Dave Jones. It is important for consumers and businesses to check on the license status of any agent in order to protect themselves and their finances, he added. The case broke open when a business owner discovered that Meseer had issued a bogus insurance certificate from a nonexistent insurance company. Meseer also issued bogus insurance documents, overcharging several times the amount of the premium, giving inflated billings, not disclosing the true cost of coverage to customers, renewing policies without forwarding’ premium payments, and even soliciting new insurance business, all without a proper license. Meseer was booked into Orange County Jail and bail is set at $100,000. The Orange County District Attorney’s office is prosecuting this case.


An Update on 401(k) Plan Asset Allocations
Sixty-six percent of 401(k) assets were invested in stocks at year-end in 2014, according to a report by the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI). Participants’ assets were invested in equity securities through equity funds, the equity portion of balanced funds, and company stock. Twenty-seven percent of assets were in fixed-income securities, such as stable-value investments, bond funds, and money funds. The reports also reveals the following:

  • More 401(k) plan participants held equities at year-end 2014 than before the financial market crisis (year-end 2007), and most had the majority of their accounts invested in equities. For example, about three-quarters of participants in their 20s had more than 80% of their 401(k) plan accounts invested in equities at year-end 2014, up from less than half of participants in their 20s at year-end 2007. More than 90% of 401(k) participants had at least some investment in equities at year-end 2014.
  • More than 70% of 401(k) plans included target-date funds in their investment lineup at year end 2014. At year-end 2014, 18% of the assets were invested in target-date funds, and 48% of 401(k) participants in the database held target-date funds. Also known as life cycle funds, these funds are designed to offer a diversified portfolio that automatically re-balances to be more focused on income over time.
  • A majority of new or recent hires invested their 401(k) assets in balanced funds, including target-date funds. For example, at year-end 2014, two-thirds of recently hired participants held balanced funds in their 401(k) plan accounts. Balanced funds comprised 42% of the account balances of recently hired 401(k) plan participants. A significant subset of that balanced fund category is invested in target-date funds. Thirty-five percent of the account balances of recently hired participants were invested in target-date funds.
  • 401(k) participants’ investments in company stock continued at historically low levels. Only 7% of 401(k) assets were invested in company stock at year-end 2014, the same share as in 2012 and 2013. This share has fallen by 63% since 1999 when company stock accounted for 19% of assets. Recently hired 401(k) participants are less likely to hold company stock. At year-end 2014, less than 30% of recently hired 401(k) plan participants in plans offering company stock held company stock, compared to about 44% of all 401(k) participants.
  • 401(k) participants were less slightly likely to have loans outstanding at year-end 2014 than at year-end 2013. At year-end 2014, 20% of all 401(k) participants who were eligible for loans had loans outstanding against their 401(k) plan accounts, down from 21% at year-end 2013, although up from 18% at year-end 2008. Loans outstanding amounted to 11% of the remaining account balance, on average, at year-end 2014, down 1% from year-end 2013. Nevertheless, loan amounts edged up a bit in 2014.
  • The year-end 2014 average 401(k) plan account balance in the database was 5.4% higher than the year before, but may not reflect the experience of typical 401(k) participants in 2014.
  • The average 401(k) plan account balance tends to increase with participant age and tenure. For example, participants in their 30s with more than two to five years of tenure had an average 401(k) plan account balance of close to $25,000, compared to an average 401(k) plan account balance of nearly $275,000 among participants in their 60s with more than 30 years of tenure.

For more information, visit ebrig.org.

How Far Are Adult Kids Willing to Go to Help Aging Parents?
A study by Fidelity Investments reveals that adult children have their parents’ backs and far more than parents may think, although 93% of parents say it would be unacceptable to become financially dependent on their children; only 30% of children feel the same. Nearly four in 10 families disagree as to roles and responsibilities as parents get older. Among the other communication gaps:

  • 92% of parents expect one of their children to assume the role of executor of the estate, but 27% of the kids who are expected to be the executor don’t know that they are expected to do so. Fifty-five percent of parents expect the oldest child to be executor.
  • While 72% of parents expect one of their children will assume long-term caregiver responsibilities in retirement if need be, 40% of the kids identified as filling this role didn’t know this. Of those that do, 58% are women. One surprising trend is that a growing number of Millennials are providing care giving support for a parent.
  • While 69% of parents expect one of their children to help manage their investments and retirement finances, 36% of the kids identified as filling this role didn’t know this.

John Sweeney, executive vice president of Retirement and Investing Strategies at Fidelity said, “Many families need to do a better job of being on the same page when it comes to financial planning, as there are real emotional and financial consequences when family conversations don’t happen or lack sufficient depth. At some point every family will face issues related to aging, which is why it’s important to take the time to sort through the details related to care giving responsibilities and estate planning, before declining health forces the issue. Doing so can lead to far better emotional and financial outcomes for everyone.”

Why aren’t these conversations taking place? Part of it seems to be a matter of timing, since only 33% of parents and their children agree when it’s appropriate to initiate these conversations; that is, whether to have them well before retirement, upon entering retirement or closer to when health and finances become an issue. Part of it may be that families don’t realize the importance of talking these topics through: a significant portion of those surveyed have yet to discuss retirement plans (38% of parents, 43% of adult children) say it’s because the subject never comes up! Even if conversations are taking place, the depth and extent of the conversations is often inadequate, as the study uncovered significant gaps in the following areas:

  • Long-term care: 43% of parents say they have not had detailed conversations with family members about long-term care and elder care. An additional 23% have not had any conversations at all. While 72% of children think their parents should be tackling the issue of long-term care/elder care, only 41% of their parents say they actually are. As healthcare costs have risen in the past few years, this has become an increasingly important topic. According to the latest Fidelity Investments Retirement Health Care Cost Estimate, the average couple can expect to spend an estimated $245,000 on health care throughout retirement.
  • Will and estate planning: Sixty-nine percent of parents say they’ve had detailed conversations with their children on this subject, 52% of children say they haven’t.
  • Living expenses in retirement: Thirty-four percent of parents say they have not had detailed conversations with family members about covering their living expenses in retirement. An additional 16% have not had any conversations on the topic at all.
  • Shelter from the Storm: With conversation comes greater peace-of-mind.

One thing is certainly clear: having detailed conversations around finances can help families avoid panic when it matters most. In fact, 93% of children who say they have had any detailed conversation with their parents are significantly more likely to have greater peace-of-mind around these issues. Likewise, 95% of parents reported feeling greater peace of mind as a result of estate planning conversations.

One-third of parents and their children say frank conversations should occur after retirement and when health and finances have become an issue—at which point, it may be too late. These conversations should begin taking place before retirement, and certainly well before any challenges arise. “It’s actually a good idea for conversations about finances to be taking place among families no matter what your age, whether you are in your twenties and looking to build a strong financial foundation or in your sixties and transitioning into retirement,” added Sweeney.

Ask as many detailed questions as you can. Don’t be afraid to ask even the most seemingly obvious questions. Three out of 10 families surveyed disagreed as to whether or not the children knew where to find important family documents such as wills, power of attorney and health care proxies. (For those looking for a safe, electronic storage location, Fidelity recently introduced FidSafe®, a secure digital place to store, access and share all of a families’ most important documents.)

When having discussions, follow the “voice not vote” rule. While family members should have a role in the planning process, make sure the ultimate decisions made are consistent with the wishes of the parents, who are charting the course of the rest of their lives. If a financial advisor is already involved in planning, having these discussions with the advisor can be a good place to start.

Define family roles. Advanced planning can help define roles and choose when and how different people will be involved. For example, who will have power of attorney or be the executor of your estate? It’s important to consider the personalities of each child, as well as their proximity, relationship with parents and other nuances that play into long-term decision making.

Commit to follow-up conversations to keep the dialogue going. These conversations are not “one and done.” Keep the momentum going and schedule as many get-togethers as needed—and revisit those plans at least annually, to make sure they still make sense.

For more information, visit www.fidelity.com/families.


Webinars on the DOL Fiduciary Rule
Nationwide teamed up with two experts on an educational series that helps advisors navigate the new Department of Labor (DOL) Fiduciary Rule. Agents can view a web cast on key components of the rule and how it may affect their business (thinkadvisor.com/webseminars/understanding-the-new-regulatory-landscape?pc=NWF.). Nationwide will hold a second web cast with additional information on the new regulation and its potential effects on September 13, 2016. For more information, visit www.nationwide.com.

LOMA Offers Completes Online Path to ALMI
LOMA launched its latest highly-interactive online educational course, “The Business of Insurance: Applying Financial Concepts (LOMA 308).” It’s the fifth and final course in the Associate, Life Management Institute (ALMI) program to be delivered in the popular interactive format. It takes approximately 8-10 hours to complete and includes examinations at the end of each module. For more information, visit www.loma.org.