Table of Contents

Guest Editor’s Column

Ancillary Close-Up:
Specialty Benefits: Flexible Enough to Help Any Business

by Mark El-Tawil
A majority of American employees are unprepared for medical expenses that aren’t covered by insurance. Specialty benefits, such as vision, dental, life, disability, supplemental health, critical illness and accident insurance, can be used to supplement regular health insurance.

Ancillary Close-Up:
Enhanced Wellness Coaching Can Help Your Clients Face Tough Challenges

by Dr. Charles Nagurka
Employers are discovering that they can reduce healthcare costs by embracing wellness programs.

Ancillary Close-Up:
Five Ways to Help Your Clients See Their Vision Benefit in a New Light

by Robert Pariseau
You’ve just signed up some clients for their first-ever vision benefit, giving their employees access to comprehensive eye exams and numerous eyewear options. Fantastic! Now you can sit back and relax. Not so fast.

Ancillary Close-Up:
See the Light: Lens Treatments Add Value to Vision Plans

by Mark Sachs
Vision plans that go beyond allowances for basic eyeglass lenses can add extra value to a benefit package and foster eye health.

Ancillary Close-Up:
Enhancing Value With Dental Benefits

by Karen Gustin, LLIF, Ameritas Group
Producers have an excellent opportunity to enhance relationships with employers by recommending dental benefits that meet employers’ budget challenges, but still provide employees with valuable dental care.

Ancillary Close-Up:
Why Employers Should Offer Critical Illness Coverage

by Randall C. Finn
Voluntary critical illness plans can soften the blow to employees’ financial safety nets and create appreciation for efforts to help clients manage their increasing financial risks.

Ancillary Close-Up:
Voluntary Legal Plans Gain Popularity
as Employees Take Control of Their Financial Future

by Marcia Bowers
As the economic pendulum shows signs of swinging toward a recovery, Americans are looking to get back on their feet and secure their financial future. Many employees are taking advantage of group legal plans offered by their employers.

Health Reform Spotlighted at the Los Angeles Association of Health Underwriters (LAAHU) Show
by Leila Morris
The conference in Woodland Hills offered some encouraging words about how brokers will fare in the new healthcare system.

Self-Funding In The Era Of Healthcare Reform
For Brokers, it’s a Matter Of Survival

by Mark Reynolds, RHU
How brokers will survive in the era of national healthcare reform and how the concept of self-funding or shared funding will become your new lifeline.

New Healthcare Taxes Leave Health Savings Accounts Untouched (almost)
by Martin Trussell
With all of this taxing and the closing down of tax breaks going on, one tax break that healthcare reformers originally targeted has gone largely untouched: The health savings account.

Long-Term Care…Three Words that Make a Hero
by Dan Nicholas, CLU, CLTC, LUTCF
I make sure no client or prospect gets out of a long-term care insurance appointment without hearing Efrod’s “clear the shaft” story from California’s most famous ghost town, Bodie.

Writing The Large Life Insurance Policy:
How To Increase Your Chances Of Landing The Big Case!

by Dave Donchey, CLU
Writing a large life insurance policy is a lot like fishing. When you finally hook the big one, you still have to land it.

Guest Editor’s Column
Healthcare Reform:
The Individual-Small Group Seesaw

by Alan Katz

One of the most frequent questions I’m asked about healthcare reform is whether the Patient Protection and Affordable Care Act will drive people from group plans to individual plans or vice versa. We have enough information to make some guesses, but not enough to know. And there are reasonable scenarios that can be created for each conclusion.

An individual coverage scenario: No small business owner I’ve met got into business for the thrill of buying health insurance for the company. Now healthcare reform makes it easy for them to get out of the insuring business: give every worker a small raise along with the URL for the state health insurance exchange. The employees benefit; they get to choose their own health plan and some may qualify for premium subsidies. Their coverage isn’t tied to their employment and they can keep their plan if they change jobs. They don’t even need to spend their entire raise on premiums nor are they locked into the exchange. Once the employer decides not to provide coverage, they can obtain individual coverage where they please.

Employers benefit from no longer having to shop for health insurance for their workers (They’ll have to shop for their own families, but that’s a lot less stressful). No more complaints. No more bookkeeping.

A small group coverage scenario: Small business owners aren’t required to purchase coverage today, but there are good reasons for them to do so and those reasons aren’t changed by healthcare reform. Providing health insurance helps small businesses recruit and retain good employees. Employer contributions to health insurance premiums make coverage more affordable for employees. Yes, the Patient Protection and Affordable Care Act provides subsidies to some workers, but only those earning less than 400% of the federal poverty level ($43,320 for an individual and $88,200 for a family of four in 2010). So, depending on their salary, sending employees to the individual market will be perceived as a loss to some employees.

Even if employees receive a small raise to help them with buying their own coverage, employees may see the loss of work-based coverage. How long before that raise is considered just part of their salary? A month? A quarter? The connection between the raise and the coverage is tenuous and easily forgotten. Look at it from an employee’s point of view:

• The employee gets a raise and buys their own coverage: My boss gave me a $200 raise. Coverage costs $250. Wow that’s a lot. Of course, after the raise it’s a net expense of $50. But still, $250 a month for insurance is a lot of money.
• The employee has employer-provided coverage: My share of the health insurance premium is just $50. My neighbor pays $250. I’ve got a good deal.
There are other factors that will affect the movement of consumers among individual and small group plans. -Employers may cover the cost of bronze benefit plans and allow each employee to buy-up to a silver or gold offering. Companies could drop or add ancillary products like dental, life, long-term care, or disability coverage. The exchange could be easier or harder to use than anticipated.

Predicting whether healthcare reform will shift consumers from small group to individual or move them the other way is guesswork at this point. My advice to brokers is to prepare for this seesaw ride, is to get engaged in both the individual and small group markets. They’ll have plenty of customers regardless of which direction the teeter totters. I also suggest they become experts on assorted other benefit plans. That way they’ll have additional opportunities to meet clients’ needs. Success under healthcare reform will go to the nimble and flexible.
Alan Katz is a past president of both the National and the California Associations of Health Underwriters. In 2003 NAHU named Alan the Health Insurance Person of the Year. He was named CAHU Member of the Year in 2000 and 2007. To view his blog, visit

Good Benefits Rise to the Top: Our Ancillary Close-Up Issue
Specialty Benefits: Flexible Enough to Help Any Business

by Mark El-Tawil

In a world of skyrocketing healthcare costs, consumers and businesses can’t afford benefits that don’t get used. According to, it is projected that nearly half of employers will reduce their health benefits in 2010. And as insurance policies are being pared back, employees are finding themselves vulnerable both physically and financially. A majority of American employees are living paycheck to paycheck and are unprepared for medical expenses that aren’t covered by insurance. Fortunately, there is a solution; specialty benefits, such as vision, dental, life, disability, supplemental health, critical illness, and accident insurance, can be used to supplement regular health insurance.

Combining traditional health insurance with specialty benefits allows companies to meet their employees’ needs while gaining a competitive edge in attracting workers. In addition to serving as a recruiting tool, there are other great advantages to companies for offering specialty benefits. Companies can expand benefit options without increasing costs since specialty benefits can be 100% employee paid. Expanded offerings help keep employees productive and loyal. Companies may be able to reduce their payroll taxes for each employee enrolled. There is no hassle since a third-party insurer manages enrollment and administration.

In addition to benefitting employers, specialty benefits provide important protection to employees. Workers can pick and choose the benefits they want and then pay the premiums through payroll deduction, frequently on a pre-tax basis. The cost is typically only a few dollars per month, per plan. They offer convenience since employees can simply manage them through work coverage. In addition, employees can easily enroll at work. Workers can save even more money on premiums by purchasing these policies through a group rather than on their own. Specialty benefits can protect savings in a crisis. Unexpected illnesses and injuries cause 350,000 personal bankruptcies each year, according to the Council for Disability Awareness.

Specialty benefits are highly customizable and can be personalized in two ways. First, the employers can choose from a portfolio of options to offer their employees and select the options that are the best fit for their business. Second, the employees can make their selection from the options their employer offers and choose those that are the best fit for them and their families. Specialty benefits can help a variety of types and sizes of businesses recruit and retain employees. In the following paragraphs, several types of businesses will be highlighted and specific voluntary benefit products will be recommended as a good fit for their needs.

Hospitals and Health Systems

California hospitals employ more than half a million people. According to Trust for America’s Health, California ranks first among states with a nursing shortage. The state is coming up short by -nearly 48,000 nurses. The nursing shortage is only expected to grow as Baby Boomers age and healthcare needs increase. Nursing colleges and universities are unable to educate students quickly enough to keep up with demand. Hospitals and health systems are looking for valuable benefits to retain their good employees.

Hospitals and healthcare systems can leverage specialty benefits to help recruit and retain nurses and other healthcare professionals in these trying times. Specifically, options like accident, critical illness and supplemental health insurance can complement a hospital’s major medical plan. A large number of healthcare employees belong to dual income families. This makes life and disability insurance great options, which can protect a family in case of death or an injury or illness that makes it impossible for a wage earner to work.

Small Businesses

Taken together, small businesses make up the largest employer base in California. The state has over 1 million small businesses that employ over 7.8 million people. But for now, the economic downturn has employers reducing hours, cutting back on benefits, and halting pay increases to make ends meet. Employees are stretched thin and in some cases, they are taking on additional work to keep up with personal expenses. Small business owners are in a difficult position, needing to retain valuable remaining employees without increasing costs.
One way employers are saving money is by offering health insurance plans that cost less because they come with larger deductibles and increased out-of-pocket expenses. However, small businesses can help employees fill in the gaps in coverage, while keeping costs low, with specialty benefits. Accident, critical illness, and supplemental health products are among the most popular products for small businesses.


Big box stores and discount retailers have thrived during the recession and jobs are growing in warehouse and super center stores. Retail jobs typically have very high turnover, with employees frequently looking for greener pastures elsewhere. Retail employees can spend long hours standing in sales rooms and show rooms and work evenings, weekends, and holidays. Salaries in this industry are not high and because many employees work part time, they may not be eligible for standard benefits.

A variety of specialty benefit plans can make sense for retail employees. Due to the turnover in this segment, benefits portability is important. Life, accident, critical illness, and supplemental health benefits packages can provide a solid foundation for retail employees. It is important to offer affordable options that retail employees will maintain over a longer period. Many retail employees live paycheck to paycheck and appropriate specialty benefits can help dramatically with personal budgeting in case of illness or injury.

Of particular interest to retail employees is the fact that even part-time employees can be eligible for specialty benefits. When establishing a specialty benefit program for part-time retail employees, each situation will be unique. The program should be tailored to the business. Many retail businesses will find value in a benefit eligibility-waiting period to help alleviate turnover challenges and associated costs. A waiting period can also help the broker and enrollment firms to administer the plan and manage risks effectively.


Union membership has been trending down since the 1980s. However, in 2007, the labor department reported a spike in membership — the first in 25 years and the largest since 1979. Membership is growing in the service sector, though it is declining for those who work in manufacturing. Most of the gains the U.S. has seen in the service sector have come from West Coast states, including California. In California, union membership stands at nearly 17% while the national average is just 12%. Considering recent declines, it seems clear that unions need to generate fresh interest from potential members and offering specialty benefits might be just the way to do that.

Brokers should work to ensure that specialty benefits offered by unions complement, rather than duplicate, other benefit packages the union may already be offering. Popular specialty benefits options for unions include life, disability, supplemental health, critical illness, and accident insurance. These options are popular because most unions have a sincere interest in helping their membership gain access to adequate coverage. Another important consideration for union work environments is the ability to administer the plan appropriately, communicate its features to members, and collect premiums efficiently.

Many types of businesses have a lot to gain from offering specialty benefits. And with such low costs, it really is a win/win for employees and businesses alike.
Mark El-Tawil is the regional chief executive officer for Humana’s West Region.

Good Benefits Rise to the Top: Our Ancillary Close-Up Issue
Enhanced Wellness Coaching Can Help Your Clients Face Tough Challenges

by Dr. Charles Nagurka

More employers are discovering that they can reduce healthcare costs by embracing wellness programs. A recent study by Hewitt Associates revealed that more than 33% of organizations plan to boost their emphasis on wellness. Unfortunately, many organizations can’t afford to promote programs like they’ve done in the past because harsh economic times have led to slashed budgets.
Wellness coaching programs are designed to help employers increase engagement and enrollment without additional costs. The best programs include innovations, such as claims and on-site screening data feeds to identify at-risk program candidates, a dedicated wellness consultant team, ongoing direct-to-member communications, a coaching model open to all members who are ready to change, and comprehensive reporting with detailed behavior improvement metrics.

New Identifiers

Coaching programs offer unique ways to reach potential enrollees. At-risk individuals can be identified through a technology platform that scans claims for health intervention opportunities or through on-site health screenings. The result is a wellness program that -reaches more employees who can benefit by adopting healthier behaviors, some of whom may be at risk for serious health problems and not even know it.

This innovative approach identifies 10 times more employees than relying on only health assessments and self-referrals. And because this information is not self-reported, it provides a more accurate picture of a person’s health. The combined data sources can identify people who can benefit from lifestyle change, such as people with prehypertension, hypertension, prediabetes, diabetes, or metabolic syndrome – just to name a few. This is important because this allows for health intervention and helps coaches educate at-risk people about “What’s in it for me?” It’s a much more effective way of inspiring behavior change and reducing their future health risk.

Wellness program candidates can also be identified though health assessment, self-referral, or external vendor programs, such as disease management programs and a nurse-line. All of these features work together to help prevent more chronic conditions and more costly events.

Ongoing Communications

A big problem for organizations is how to create awareness and enroll people in appropriate wellness programs. In fact, many organizations say it’s their biggest hurdle and it’s the area that’s in most need of improvement. Very often it’s not the program itself that’s costly; it’s the cost of employee incentives. A wellness coaching program should provide built-in ongoing promotions without additional costs. These include mass communications as well as targeted communications that are based on monthly claims.

Open Coaching

Another enhancement is the use of cross-trained coaches. This is extremely helpful in coaching people as a whole. For example, many people who want to quit smoking are worried about gaining weight. The wellness coach can help the person kick the habit and develop healthy ways to deal with nicotine withdrawal instead of turning to food.

One wellness company is allowing people to enroll more than once a year. Previously, after a member completed a program, they could not enroll again until the following enrollment year. For example, a member who enrolls in a tobacco cessation and is successful in cutting back their smoking, could enroll again without having to wait another year to get help with quitting altogether.
Statistics show that only 8.5% of people who want to quit smoking actually do so without the help of a coach, according to the Dept. of Health and Human Services. In the old model, this person would have to wait until the next benefit year. By then, it’s quite possible they might have lost their confidence and motivation. The coaching program should be open to anyone who wants to be coached, which is essential to preventive care.
Heart disease is the number one cause of death is this country for both men and women. We cannot change our age, sex, or family history, but we can all take steps to reduce our risk of heart disease by making wise nutritional choices, being moderately physically active, and if overweight or obese—achieving a healthier weight. A wellness program should allow anyone who wants to make a lifestyle change do so with the help of trained wellness coaches.

Wellness Consultants

A dedicated consultant should be assigned to each organization to help them plan campaign promotions, understand the reporting, and evaluate their program’s success. If the current campaign strategy is not working, the wellness consultants should be there to help evaluate the situation and get the right promotions in place.

Improved Reporting

Knowing whether a wellness program is truly working has been another challenge for employers. Historically, results could take 12 months or longer to measure. The wellness company you select should have behavior change metrics and extensive monthly reporting. With this feature, employers can determine a program’s effectiveness in months or even weeks, so organizations can make adjustments to get the most out of their investment. By evaluating metrics, it should be possible to determine whether the program should evolve to maximize positive results.
Now the employer can see how their programs are creating healthy employees, and therefore a healthier, happier more productive population.
Dr. Charles Nagurka is national medical director for OptumHealth Wellness programs. OptumHealth’s personalized health advocacy and engagement programs tap a combination of capabilities that encompass public sector solutions, care solutions, behavioral solutions, specialty benefits and financial services. Serving nearly 60 million people, OptumHealth is one of the nation’s largest health and wellness businesses, and is a UnitedHealth Group company. More information about OptumHealth can be found at

Good Benefits Rise to the Top: Our Ancillary Close-Up Issue
Five Ways to Help Your Clients See Their Vision Benefit in a New Light

by Robert Pariseau

You’ve just signed up some clients for their first-ever vision benefit, giving their employees access to comprehensive eye exams and numerous eyewear options. Fantastic! Now you can sit back and relax. Not so fast. We know that nearly half of today’s employees don’t take advantage of their company vision benefit, either by not enrolling or not using it to get an eye exam, according a 2010 survey conducted by Harris Interactive for Transitions Optical.
The disconnect may be a lack of communication since 60% of employers only talk to their employees about their vision benefit during annual enrollment. When employers do talk about vision, they usually stick to basics, like the cost of the plan and how often the employee can get a pair of eyeglasses or box of contact lenses. Only one employer in four includes information on eye health.
You might argue that just offering the vision benefit is a value-add, so why should brokers care whether employees actually take advantage of it? A quality vision benefit can do much more than most people realize. It’s a low cost way for employers to enhance other wellness efforts and improve their bottom line by minimizing medical costs and boosting productivity. But for this to work, employees need to use their plan, which means their employees need to be motivated to push them to do so.
That’s where your expertise comes in. Clients need your help to see the light about the potential behind their vision benefit, and, just as important, help them influence employee enrollment and utilization so they can see results. Consider these five key strategies to adopt with new and existing clients:

1. Introduce Them To a Neighborhood Fortuneteller

To illustrate how a vision benefit can affect the overall health of employers, explain to your clients how eye doctors are like fortunetellers in lab coats. With the eyes serving as a window to the body, a dilated eye exam can serve as a crystal ball, allowing an eye doctor to see the first signs of not only future eye diseases – like glaucoma or macular degeneration – but also medical conditions – like diabetes, hypertension, and even certain cancers that can affect vision and eye health.
It makes sense that early detection allows for early treatment and even prevention, which can have a huge affect on medical costs paid by the employer. For instance, 76% of people who find out they have pre-diabetes take steps to change their lifestyle to prevent the disease, according to CDC research. Taking these steps prevents or delays the development of diabetes by up to 58%, according to the American Diabetes Association. Results like these can mean significant savings, considering that estimated annual healthcare costs for someone with diabetes are about three times that of someone without the disease, according to the American Association of Clinical Endocrinologists.
Regular eye care can be a stepping stone to getting needed medical care, especially for high-risk employees who don’t see their general physicians as often as they should. This is especially true if they don’t realize they are at risk or they already have a medical problem.

2. Help Them Know Their Numbers

A picture may speak 1,000 words, but sometimes it’s the numbers that put the picture in perspective. Most employers would be surprised to learn just how many of their employees are at risk for eye disease or systemic diseases that can be detected through an eye exam. Even fewer probably know the extent of other vision problems in their workforce that can affect productivity.
If clients aren’t able to get eye-related disease information through their medical provider or another source, they can turn to the publicly available Healthy Sight Calculator ( It uses CDC prevalence data and a specific company’s workforce demographics to provide a breakdown of how many employees are likely to have several eye diseases, eye-related medical conditions, and vision issues. It then breaks down the potential medical cost and productivity loss that may be saved through early detection and eyewear options for vision management.

Based on my experience, your clients should be pretty impressed by the results since breaking down the vision-related costs associated with common medical problems really puts matters in perspective. Taking a look at these numbers helps your clients see that they may be throwing away precious dollars by not utilizing a premium vision plan.

While employers are evaluating a wide range of wellness plans based on incremental returns-on-investment, many have no idea that the modest vision plan they may already offer could be a powerful tool just waiting to be utilized.

3. Show Them the – Productivity Power Play

The huge affect that vision issues have on productivity (even among healthy workers) is one aspect of a vision benefit that most often surprises my clients. Research suggests that employees’ productivity can drop by up to 20% when their vision is only slightly miscorrected, so that they don’t even notice it. And even when employees do notice, they often put off seeing their eye doctor to update their eyewear or check for more serious problems. One of my clients even had an employee who walked around for a while with his glasses taped together instead of getting new ones!
Other employees may be wearing the right lens prescription, but still not be seeing well, due to environmental factors. For example, eyestrain is the number one complaint of all workers and 80% of Americans agree glare and bright light outdoors affect eyesight. A study by ISE Ergonomics reveals that employees may lose up to 15 minutes per day due to eye focusing problems, costing employers $2,103 per year for each employee who is suffering from this issue. Imagine that effect across a workforce and over time.

This is where sight-enhancing eyewear options can come in handy, both inside and outside the office. For instance, photochromic lens treatments minimize glare to lessen eyestrain and fatigue while protecting the eyes from UV damage outdoors. Anti-reflective coatings minimize reflections from sunlight or office lighting.

Many vision plan providers offer premium level plans that include full coverage or discounts on sight-enhancing lens options like these. It’s important to consider this when recommending plan options to employers since employers are likely to see the best possible return-on-investment with a comprehensive plan that allows for these important lens options. And interestingly, six out of 10 employees say they’d be more likely to enroll or re-enroll in their vision benefit if it included premium lens options, like Transitions lenses. Just offering the right options in your plans could be part of the key to increasing usage. But if employees don’t know products like these are available or they don’t understand how they can help, the resources will just go to waste and employers will have squandered their productivity power play.

4. Track Down – Real-World Results

People want proof. That’s understandable. So, start building your arsenal. Begin with the anecdotal. Nothing is more powerful than a personal story. Gather feedback from your clients about what’s working or not working with their current vision plan. Did an employee discover an early stage eye disease through a routine vision exam or even something more serious, like cancer? Did a company vision screening reveal that several employees weren’t seeing their best? What happened when they were fitted with the right eyewear?

Depending on their company guidelines, help your clients establish their own metrics to measure success. Many employers don’t even ask for vision plan utilization. They should be comparing data before and after implementing a premium vision plan and educating employees on the plan. Has enrollment and utilization gone up or down? Has there been a change in medical costs related to preventable disease, such as diabetes? What about days out of the office?

Try to incorporate anecdotes or quantitative results based on these kinds of questions when talking to a new or existing client about offering a vision benefit. Don’t forget to emphasize the low cost of even a premium level plan. It’s about $80 annually per employee compared to annual medical premiums (about $4,300 per employee, according to the federal Bureau of Labor Statistics).

5. Help Them Bridge The Gap

Help clients identify why employees may not be enrolling in their vision benefit or are enrolling, but not using it to get regular eye care. You can help them implement an employee survey or conduct individualized outreach to ask questions about eye health, like whether they’ve had a comprehensive eye exam in the last year and why or why not and whether they are aware of the connection between the eyes and body. The results, which may be surprising, will probably suggest that employees just don’t understand all that a vision benefit can do for them.

One of the most common reasons that employees don’t enroll is that they think they don’t have eye or vision problems. But, eye doctors tell us that many eye diseases and problems can develop before people notice any symptoms. This is why comprehensive eye care should be a regular part of their healthcare routine, along with other critical health screenings.

Perhaps your client’s employees don’t like to go to the eye doctor or they feel that their employer did not explain the benefit well enough. Education about the importance of eye care and eyewear can address both of these problems. Your clients may discover that it would better meet their employees’ eye and overall health needs and expectations to upgrade to a more premium level plan, which ensures an eye exam once a year and coverage or discounts on premium lens options.

With the right vision plan in place, brokers can be a real help by offering their clients realistic employee education strategies to help their workforce understand the value they’re getting through their vision plan and why they should be using it as part of their overall healthcare routine. Some of the strategies include the following:

• Promote the vision benefit strategically throughout the year. Some employees are too overwhelmed with making decisions about their medical benefit to fully absorb information about their vision benefit, especially if they’re just automatically -re-enrolling. Upcoming national health observances that link to eye health, such as Eye Safety Awareness Week (June 27-July 5), UV Safety Month (July) or Diabetes Awareness Month (November), can be good opportunities to remind employees about the importance of early disease detection or UV protection for the eyes.
• Point your clients to complimentary educational materials to share with their employees via e-mail, direct mail, or in person. Many resources are available through your vision plan providers or independent organizations that focus on education about the importance of the vision benefit for the workforce.
• Remind employees that they can use their flexible spending accounts to pay for extras like lens option upgrades or an additional pair of glasses. Many employees stockpile their funds unintentionally until the end of the year, so it’s a great time to remind them to get their annual eye exam and to make sure they have the right eyewear to help them see their best.
• Shake things up by arranging for an eye doctor, such as one associated with your vision plan provider, to come to the enrollment meeting. Have the doctor available for individual questions with employees afterwards. It’s a great time to talk about eye and overall health needs of particular employee populations and who better to explain the importance of eye care than an eye care professional? If the enrollment meeting doesn’t lend itself to this approach, schedule a visit right before, to get employees thinking about vision before the barrage of general enrollment materials hit.

Your clients probably already know that employees want a vision plan (more than eight in 10 say they do!). However, they just might be seeing it a little fuzzy. So help your clients bring into focus the aspects of a vision plan that will interest them the most and then help them integrate vision – first into their benefits package and then into their employee communication plan. They’ll have you to thank for the results.

Rob Pariseau is the president of Benefits Solutions Group. He has more than 25 years in the benefits and HR industry, with expertise in technology, plan design, funding, and communication of healthcare and retirement plans through his previous work at Mass Mutual, Cigna, Ceridian and Wachovia. Serving as a consultant to Transitions Optical Inc., he has tested the Healthy Sight Calculator with employer clients, and recently presented their feedback at Transitions Academy 2010. The calculator is available as an educational resource at, along with additional employee education materials, and selling strategies for brokers. Rob holds a Bachelor of Arts in Economics from Colgate University, the CEBS designation awarded by the Wharton School of Business and the International Association of Employee Benefit Plans, and the CLU designation awarded by The American College. He is a frequent speaker at industry functions and conferences. He can be reached at


Good Benefits Rise to the Top: Our Ancillary Close-Up Issue
See the Light: Lens Treatments Add Value to Vision Plans

by Mark Sachs

With summer at our doorstep, we start thinking about warmer weather and outdoor activities. But with vacations, lemonade, and swimming pools, also come dangers to our eyes in the form of ultraviolet (UV) radiation and glare.

In a March 2008 survey of more than 3,400 adults, Harris Interactive found 42% do not wear sunglasses or photochromic lenses to protect their eyes from UV light and glare, leaving their eyes more susceptible to damage, eyestrain, and fatigue. Fortunately, UV light and glare can be managed effectively with proper eyewear choices.

Brokers can offer these eyewear choices through enhanced vision plans. Vision plans that go beyond allowances for basic eyeglass lenses can add extra value to a comprehensive employee benefit package while fostering eye health. -Producers who understand their clients’ work environment when it comes to lighting conditions, exposure to UV, and other variables are especially well positioned to suggest enhanced vision benefits like lens treatments.

The Dangers of Too Much Sun On the Eyes

Most people know that UV rays can harm the skin, but many don’t know that they can also harm the eyes by causing blurred vision, irritation, redness, tearing, temporary vision loss, and blindness in some cases.

UV rays come not only from naturally occurring solar light, but also from artificial sources like welding machines, tanning beds, and lasers, just to name a few. If your clients work around these sources, it may make sense to explore vision benefits that account for this heightened exposure.
A person whose eyes are exposed to excessive UV radiation over a short period is likely to experience photokeratitis. This “sunburn of the eye” is usually temporary and rarely causes permanent damage. What is more serious is long-term exposure to UV light since its effects are cumulative. Exposure to even small amounts of UV radiation, over many years, increases the chance of developing a number of visually debilitating diseases including cataracts, macular degeneration and retinal damage. An estimated 20% of the 20 million cases of cataracts may be due to long-term UV exposure, according to the World Health Organization.

Clients who are outdoors frequently throughout the year or work around ever-present glare may also be receptive to vision plans that include lens enhancements.

UV radiation is not just a concern during summer. It’s always present and can cause damage to the skin and the cornea of the eyes on both sunny and overcast days.

While more obvious in the summer sun, UV rays can be reflected off many surfaces – water, white sand, and snow. Surprisingly, the American Optometric Association (AOA) reports that 85% of the sun’s rays can be reflected off snow compared to 1% or 2% from grass. That means that skiers, snowboarders, snowmobilers, and other winter aficionados are at risk too.

It’s glaringly obvious that, although light is essential to vision, too much light causes glare, which can be distracting and even dangerous. Glare can cause squinting, eyestrain, eye fatigue, and temporary blindness in extreme cases.

Glare can be troublesome when working at the computer, driving, or doing outdoor activities where light reflects off of smooth, shiny surfaces, such as water, sand, snow, roads, and buildings. A National Highway Traffic Safety Administration report showed that nearly seven of 10 drivers said their eyes are sensitive to light, with more than half experiencing glare when driving at night.

Sight-Preserving Lens Options

While UV rays and glare are potential hazards to healthy sight, they can be minimized or eliminated by lenses and lens treatments. Here are some of the most popular that brokers should be familiar with:
• Anti-reflective treatment can reduce distracting reflections dramatically, improving contrast, visual acuity, and comfort in difficult lighting situations. Similar to the coatings found on microscopes and camera lenses, anti-reflective treatments allow more light to pass through the lens and they cut glare from headlights, computer screens, and harsh lighting. They also provide a barely-there look for a more natural appearance to eyes that require corrective treatment.
• Photochromic lenses change from clear to dark when exposed to UV rays. They get darker outdoors automatically while protecting the eyes from the harmful effects of UV. When indoors, they lighten up. They are popular all-purpose lenses and help reduce eyestrain and fatigue.
• Polarized lenses filter out reflected glare from shiny surfaces like water, snow, pavement, and dashboards. They improve contrast and visibility while reducing squinting and eyestrain and are useful for sports and driving.
• Polycarbonate lenses are made from a thermoplastic that’s molded, compressed, and cooled into lenses that are 10 times more impact-resistant than regular plastic lenses. They are a good choice for children and for people who participate regularly in sports and work at a job where safety is an issue.

The Need For Vision Coverage

Clearly, there are opportunities for brokers to promote vision coverage with a range of lens treatments. More than 70% of the workforce and nearly one-third of children wear corrective eyewear. And, according to the Vision Council of America, 36% of Americans use two pairs of eyeglasses or more regularly, many of those selecting lens treatments for outdoor activities, driving, and indoor reading.

Many vision insurance plan options are available today. Brokers who communicate the value of the insurance to help protect employees’ eyes and provide eye care services for their children are more successful in selling the plans as a wellness solution.

The more the employer and employee understand the importance of protecting the eyes from glare and the sun, the more likely they are to buy vision coverage. Producers should look for vision plans that offer a range of eyewear options that maximize the relationship between light and sight, allowing employees to see their best in today’s summer sun or tomorrow’s winter white.

While the ability of eyeglasses to block UV radiation does not depend on the darkness of the lens or the price tag, the quality of the lens and any treatments is paramount. That’s why many eyeglass wearers value prescription vision plan benefits that help them to purchase anti-reflective or photochromic treatments rather than buying sunglasses over-the-counter where optical standards may not be as stringent.

Vision plans that offer an eye exam and lens benefits every 12 months can be particularly valuable because a person can rotate between new indoor and outdoor lenses annually if their prescription hasn’t changed. Also, plans that don’t limit the selection of frames are appealing to those who look to balance functionality with a fashion statement.

Opportunities In Dependent Coverage

Producers should not overlook dependent coverage. There’s a strong case for providing vision coverage for dependent children since nearly a third of children wear corrective lenses, according to the Centers for Disease Control.

The same lens treatments that help adult eyes are important for children too – perhaps more so. Ocular risk from sun exposure and the need for eye protection start in childhood. A child’s eyes allow 70% more UV rays to reach the delicate retina than do an adult’s eyes, according to The Vision Center at Children’s Hospital Los Angeles.

Children generally spend more time outdoors than do adults, particularly during the summer. The average child gets about three times the annual UV dose of the average adult and up to 80% of lifetime UV exposure before age 20, according to Dr. Andrew Truhan in the journal Clinical Pediatrics.

Choosing the Right Carrier

Working with the right carrier can make your job much easier before the sale and at renewal. As you evaluate a group’s vision coverage needs, you may find it easier to work with carriers that have an array of portfolio plans and the ability to design customized solutions for larger groups that have more complex needs and expectations. Some carriers also offer discounts on second pairs of glasses after the plan benefits have been exhausted.

It’s also important to offer coverage from carriers that provide access to a broad network of eye care providers and deliver quality customer service and administrative support.
You have an excellent opportunity to communicate with employers about the health risks of eye exposure to UV radiation and how vision coverage can help employees and their dependents at work, at home, and at play. The purchase of vision insurance becomes more than just a transaction when a broker gets the message out about the value of vision care and vision wear.

Mark Sachs is a product manager for Specialty Benefits at Blue Shield of California, a not-for-profit health plan dedicated to providing Californians with access to high quality care at a reasonable cost. Blue Shield of California has one of the largest provider networks. Mr. Sachs can be contacted at For more information, visit


Good Benefits Rise to the Top: Our Ancillary Close-Up Issue
Enhancing Value With Dental Benefits

by Karen Gustin, LLIF

In their struggle to deal with our sluggish economy, Americans are concerned about getting the most for their money. From the grocery store to the gas station, and on purchases from appliances to travel, people are looking for items that offer the best value.

This concern crosses over into jobs and employee benefit plans. Healthcare benefits are among the top concerns of employers and employees across the country. Employers recognize that benefit packages are still critical to their successful retention and recruitment of quality employees. At the same time, current market conditions make it difficult for them to provide the level of benefits they previously offered and continue to make a profit.

A study by the National Business Group revealed that employees who are content with their benefits generally express strong satisfaction with their jobs. Recent industry articles also underscore the importance that employees place on the quality of their health benefits, including dental insurance. The economic downturn has also caused many younger employees to appreciate the value of their health benefits, with job satisfaction linked to the benefits offered by employers.

Many employers also recognize the value of dental insurance in contributing to the health and productivity of their employees. While they would like to continue to offer comprehensive dental benefits, they are concerned about keeping costs under control. Employers may wonder whether they can continue to offer dental benefits to employees in the future.

Balance Value with Costs

While some employers may not be able to afford a full array of paid benefit choices, they can offer employees access to coverage with voluntary plans, such as dental care. At a time when everything seems to be in an upheaval, employees value the assurance that they can still access benefits, like dental, that are important to meet their personal and family needs.
A Look Back

Numerous employers are returning to plan designs adopted in the 1980s, when employers were also faced with tough financial situations. Twenty years ago, voluntary plans became popular, as well as dual or high-low plans, because these designs enabled employers to offer employees dental options. Employees could choose a basic plan featuring coverage of preventive care and discounts on a few key services or a comprehensive plan providing extensive coverage and care choices. While some employers provided basic dental benefits, at no cost to employees, many shared the premium cost with employees, or offered access to dental benefits through a contracted carrier, with employees paying the monthly premium rate.

Employers Explore New Strategies to Increase Value of Benefits

Employers today are exploring strategies that enable them to provide a quality benefit package, including some options they would never have considered in the past. Many are strengthening their health prevention education and wellness programs to encourage employees to adopt healthy lifestyle habits, and offering incentives to reward them for successful efforts to improve overall health.

Employees Evaluate the Value of Dental Benefits

Like employers, employees are struggling with limited financial resources and they continually look for ways to cut back on expenses. For some, this may mean dropping their dental insurance. They may believe that investing time and money in preventive care is unnecessary, especially when they are not experiencing any oral health problems. They may consider dental benefits a luxury that they just cannot afford right now.

The Importance of Addressing Oral Health Concerns

In any economic situation, it is important for employees and their family members to practice daily oral care habits, including brushing and flossing, as well as investing in their dental health with regular visits to their dentist for checkups. Unfortunately, oral health issues will not resolve themselves on their own. It is cheaper to pay for preventive care than for the more costly care – expensive repairs, tests, surgery or other treatments – that often results from neglect.

The Link between Neglected Oral Care And Heart Disease

Poor oral health habits may lead to other health problems. In recent years, medical researchers have identified a link between gum disease and heart disease. This is a serious concern since heart disease is the leading cause of deaths worldwide.

Researchers noted that many people with heart disease did not have traditional health concerns, such as smoking, obesity or high cholesterol. Instead, they had gum disease. Medical professionals recognized that people with poor oral hygiene and those who do not brush their teeth regularly, frequently have bleeding gums, a symptom of gum disease.

Tests have shown that there are more than 700 different types of bacteria found in the mouth. When bacteria gets into an open blood vessel, created by bleeding gums, the bacteria clings to platelets inside the blood and may eventually cause a partial blockage of blood flowing to the heart and result in a heart attack.

Oral Health Impact On Employee Value And Productivity

Oral health issues are commonly responsible for employees’ lost productivity, change in overall work performance, and increased healthcare costs. Workers who maintain good oral health for themselves and their families tend to be more productive at work, because their focus is not on medical concerns or oral pain and discomfort.

Enhance Benefit Value with the Right Carrier

Current economic and business conditions make it important for producers to look for insurance carriers that offer flexibility in plan design to be able to make adjustments to benefits as employers experience operational changes. Carriers should offer a variety of dental benefit designs at consistent and competitive prices, not just for the upcoming benefit year, but also for two or three years down the road. Carriers that offer outstanding deals one year will likely have to recover their costs the following year with significant premium increases.

Comparing plans can be challenging due to different coverage levels, features, limitations, services, and requirements. Evaluate plan components to ensure the carrier delivers on its promises, in order to meet the employer’s expectations and the needs of employees and their families. This assurance will pay off in the long run, with employer satisfaction and referrals.

Take Advantage of Valuable Opportunities

The economy and a tough business market have prompted many new choices. Producers are often consulted for expert advice on the value of dental insurance to a business, including employee health and productivity, lower health-care costs, and a competitive benefits package to help retain and attract the right mix of employees.

Producers have an excellent opportunity to enhance relationships with employers by recommending dental benefits that meet employers’ budget challenges, but still provide employees with access to valuable dental care.

Look for an experienced dental insurance carrier that will be a long-term partner with employers and maintain quality during market changes as well as offering flexible plans, timely claims processing, and the customer service support that will best serve employers and employees.
Karen M. Gustin, LLIF, is senior vice president – group marketing, managed care and national accounts for Ameritas Group, a division of Ameritas Life Insurance Corp. (a UNIFI company), with headquarters in Lincoln, Neb. A leading provider of dental and eye care products and services, Ameritas Group added hearing care to its product portfolio in 2008. Gustin joined Ameritas Group in 1983. She is vice chair of the National Association of Dental Plans’ board of directors and its statistical task force, and also serves on NADP’s executive committee.


Good Benefits Rise to the Top: Our Ancillary Close-Up Issue
Why Employers Should Offer Critical Illness Coverage

by Randall C. Finn

It’s all over the news. Rising healthcare costs. Increasing health insurance premiums. Larger deductibles and co-pays. These days, more employees are concerned about rising healthcare costs. In fact, a recent Harris Interactive survey reveals that nearly half of U.S. adults are extremely worried or very worried about paying for higher healthcare costs. A growing number of Americans spend more than 10% of their income on out-of-pocket expenses for healthcare services. Those with private health insurance, including many middle-income and higher-income families, had the greatest increases, according to a study by the Center for Studying Health System Change.
What does this mean for your clients and their employees? When clients change their benefit programs to better manage expenses, they need to consider how it will affect their employees’ financial safety nets. Many employees may have to rob their already under-funded savings to pay for out-of-pocket medical expenses. What if an employee has a serious illness, such as a heart attack or stroke? Treatment costs could erase a savings account and maybe even eat into retirement funds. Non-medical expenses, such as home modifications, special medical equipment, caregivers, childcare and income loss, could put your clients’ employees in a bad financial bind.
A Colonial Life/Harris Interactive survey reveals that employees are concerned about the effects of a serious illness on their financial situation:

• 84% of employees, covered by insurance, are concerned about themselves or someone in their family being diagnosed with cancer, heart disease, or another serious illness.
• 71% of employees are interested in buying personal insurance products at work, in addition to their current health insurance policy, to help cover expenses for cancer or other serious illnesses.
Health insurance may not cover all the costs of medical treatment for serious illnesses. As a benefit partner for your clients, make sure you advise clients on the increasing financial risks their employees face. A viable solution to offer your clients is voluntary critical illness insurance.

How Do Critical Insurance Plans Work?

The plan pays a lump-sum benefit to the insured who is diagnosed with a covered disease, such as heart disease, stroke, major organ failure, or cancer. Benefits are paid regardless of the insured’s health insurance coverage. Plus, insureds can use the benefits any way they need. Some plans pay benefits for one covered disease and some cover several disease categories and provide benefits for more than one disease. Some even provide benefits for a recurrence of the same disease or a diagnosis of another covered serious illness. A critical illness plan can help employees protect themselves from the costs associated with a catastrophic illness.

Offer Your Clients the Critical Illness Solution

One employee’s experience with a stroke and the resulting thousands of dollars in non-covered medical expenses can get other employees worried about their own financial risks. Suddenly, the health insurance plan your client pays so much for doesn’t look so good. Your clients invest a tremendous amount in their benefit programs, and it would be a shame if employees didn’t feel comfortable about their health plan’s coverage.
Adding a voluntary critical illness plan can help soften the blow to employees’ financial safety nets and create better appreciation for your clients’ efforts to help them manage their increasing financial risks. Employees who want the additional coverage can purchase it on their own and they can take it with them if they leave the company. Your client can choose to fund some, all, or none of the premiums. A voluntary critical illness plan can help your clients do the following:
• Strengthen the benefit package and offer employees more choices.
• Attract and retain quality employees.
• Ease employee concerns about their increasing financial risks.
• Bring in additional benefits at no direct cost to your clients.
In today’s tough economic times, every dollar your client spends must benefit the company and its employees. A voluntary critical illness plan is a good low-cost to no-cost investment in building a more comprehensive benefit program.

Employees Need Critical Illness Insurance

As employers seek to cut back on their benefit program expenses, employees are realizing health insurance may not cover everything. For negative feelings to spread throughout the company, all it takes is for one employee to experience a serious illness and complain to others about the out-of-pocket expenses. A catastrophic illness could lead to a long, expensive recovery period. An employee who becomes disabled and can’t work might not have a paycheck for a while, which causes even more financial stress. It’s a vicious cycle. However, employees who purchase a good voluntary critical illness plan can use the plan’s benefits to pay for the unexpected medical and non-medical expenses while they concentrate on getting better.

Select the Best Critical Illness Plan

Not so long ago, most critical illness plans only paid benefits for one covered illness. Once the benefits were paid, the policy’s coverage ended. The newest plan designs cover more than one critical illness, giving employees more value. Some plans are even more comprehensive, providing a wider range of covered illnesses and paying benefits for recurrences.
It doesn’t pay to shop price alone when it comes to critical illness plans. Rather, you should shop plan design and compare products by these features:
• A wide range of covered illnesses, such as heart attack, stroke, major organ failure, permanent paralysis caused by a covered accident, coma, and blindness.
• A cancer option that includes a cancer vaccine benefit that provides a lump-sum benefit for the diagnosis of cancer, and the employee doesn’t have to submit bills to receive a benefit.
• Flexible platforms that include an individual, guaranteed renewable product, and for larger, multi-location accounts, a group product, which allows uniformity with benefits and rates, as well as a more robust guaranteed issue offering.
• Options for health-savings-account-compatible coverage for clients who sponsor HSAs.
• Options for other covered illnesses, such as coronary artery bypass graft surgery, coronary artery disease or carcinoma in situ.
• Subsequent diagnosis benefit that pays additional benefits if an insured is diagnosed with the same or a different covered illness.
• Percentage of benefits payouts for covered conditions, such as 100% or 25% of the policy’s face amount.
• Underwriting options, such as guaranteed issue or simplified underwriting.
• Health screening benefits. That includes separate benefits for mammography and cervical cancer screening tests to help with prevention and early detection of diseases. In some plans, employees may receive these benefits without having to be diagnosed with a critical illness.
• Full portability with no increase in premium or change in plan design.
• Policy language on conditions covered, waiting periods and pre-existing conditions.
Want an affordable solution to help your clients strengthen their benefit programs, manage rising healthcare costs, and help provide additional financial protection employees need? You can become a strategic partner in the health of your clients’ businesses by suggesting voluntary critical illness insurance. The greater value you bring to the table, the more your clients will look to you for solutions instead of your competition.

Randall C. Finn, FSA, MAAA, is director of product development at Colonial Life. He is a Fellow of the Society of Actuaries and a Member of the American Academy of Actuaries. Colonial Life & Accident Insurance Company is a market leader in providing insurance benefits for employees and their families through their workplace, along with individual benefit education, advanced yet simple-to-use enrollment technology and quality personal service. Colonial Life is based in Columbia, S.C., and is a subsidiary of Unum Group, a leading provider of employee benefits. For more information, visit For more information about Colonial Life’s products and services or opportunities with the company, contact Finn at (800) 798-7000, e-mail him at or visit


Good Benefits Rise to the Top: Our Ancillary Close-Up Issue
Voluntary Legal Plans

by Marcia Bowers

As the economic pendulum shows signs of swinging toward a recovery, Americans are looking to get back on their feet and secure their financial future. Many employees are taking advantage of group legal plans offered by their employers. Many employers, across the nation, offer group legal plans as a voluntary benefit including more than 160 Fortune 500 companies. In addition to using legal plans for routine legal matters, like traffic tickets, many employees are using them to get the legal assistance they need to turn their financial situation around. Key metrics, such as usage, enrollment, year-to-year enrollment growth and retention, demonstrate the growing popularity of group legal plans.

According to MetLife’s 8th annual Employee Benefits Trends Study, employers’ top three benefits objectives are controlling benefit costs, retaining employees, and increasing employee productivity. As concerns grow about workplace productivity and morale, employers are looking at offering group legal plans as a low cost way to help employees who are facing legal and financial problems.
Group legal plans can help build job satisfaction and help employees focus on their work because they now have an affordable way to avoid costly legal and financial distractions. According to the study, 65% of employers believe that employees are less productive at work when they are worried about personal financial problems and 52% believe that absenteeism increases when employees are dealing with personal financial issues.

Affordable Legal Assistance for Employees

Many employees have a heightened need for legal advice on financial-related issues, such as debt, bankruptcy, foreclosure, mortgage refinancing, identity theft, and landlord problems just when many can ill afford to hire an attorney on their own. Now more than ever, employees are likely to realize the immense value in having an affordable group legal plan to protect their assets in these troubled times. For about $20 a month (typically through the convenience of payroll deduction) an employee can have easy access to legal advice on many different issues throughout the year.
Usage metrics from Hyatt Legal Plans indicate a dramatic increase in usage for financial-related legal matters in 2009 compared to 2008:
• 213% Refinance/home equity loan
• 103% Property tax assessments
• 92% Security deposit assistance
• 62% Personal bankruptcy
• 34% Debt collection defense (including foreclosures and repossession)
• 28% Miscellaneous financial matters

Group legal plan providers that offer comprehensive legal plans cover more than just consultation or advice for participants who are facing serious matters. Participants have access to qualified attorneys who work to resolve their legal issues. For example, when dealing with creditor issues, attorneys will help negotiate repayment schedules and even go to court to defend plan members in any action for personal debt collection, including foreclosure and repossession.

Resolving credit and debt issues is just one of many services that a group legal plan covers. Attorneys will also review mortgages and deeds and attend the closing for plan members who are buying and selling homes. Homeowners who are refinancing or applying for a home equity loan can have the attorney review the financing documents, deeds and mortgages, and provide advice on the matter. Legal plans also cover tenants who are having trouble with landlord problems, including eviction actions and security deposit issues. Some legal plans also cover tax audits and tax collection defense.

Enrollment Surges in Newly Installed Legal Plans

The typical benefit eligible employee enrollment in voluntary group legal plans is about 8% on average, according to the nation’s largest provider of group legal plans. Enrollments surged well above this average for enrollment at many organizations that implemented a group legal plan with a start date of January 2010. While personal finance issues have been attributed to increases in enrollment and usage, employees also appreciate the value of a legal plan for long-term legal needs, such as the preparation of wills and trusts.

Year-to-Year Enrollment Growth Demonstrates Value of Legal Plans

Strong year-to-year enrollment growth demonstrates that plan members value the service they get from the legal plan. Many are re-enrolling year after year and may be sharing their positive experiences with co-workers who then decide to enroll in the legal plan.

Legal Plans are Cost-Effective and Easy to Administer

Group legal plans are a great tool for employers because they are cost-effective as well as being easy to implement and administer. As a voluntary benefit, there is little or no direct cost to employers and employees typically pay about $20 per month, including coverage for a spouse and dependents. According to the American Bar Association, hourly attorney fees range from $60 to $300 or more per hour; therefore, often the first time a plan member uses their legal plan to resolve an important legal matter, the plan typically pays for itself.

As economic indicators point to a brighter future, group legal plans will continue to provide employees cost-effective legal assistance with financial-related and routine legal matters.

Marcia Bowers is marketing director at Hyatt Legal Plans, a MetLife company that provides participants with legal services. She can be contacted at

Los Angeles Association of Health Underwriters
LAAHU Show Features Health Reform

by Leila Morris

John Nelson, co-CEO of Warner Pacific, kicked off the Los Angeles Association of Health Underwriters (LAAHU) conference (April 21st conference in Woodland Hills) with some encouraging words about how brokers will fare in the new healthcare system, “Companies will need us to write a ton of business.” He stressed that the more complex the healthcare systems becomes, the more brokers will be needed. “You are more important than ever. They will continue to need professionals like us. Congress wrote language into the bill to keep the agency distribution system to ensure that agents can sell for the exchanges. The insurance companies are here [at the conference] because they want your business. They know that brokers can best educate customers. Experts like you will need to educate your clients.”

Nelson said commissions on the individual side would be challenged to go down. But, the small group business will be just fine.

He said that something had to give when it came to the old industry model with unsustainable rate increases. “Raising rates by 15% year after year can’t keep going when medical inflation outpaces general inflation by three to one. The end result is a broken system that someone tried to fix.”
Leslie Margolin, president of Anthem Blue Cross said, “There are 2,700 pages of legislation and we expect tens of thousands of new regulations; we will need your help. There will be roles for each of us.”

Magolin described how she has been personally skewered in the press for Athem’s proposal to raise rates on individual plans by 39% just as health reform negotiations were underway in Congress. She said that the individual insurance business is separate from other products and the rates were based on the cost of doing business in that segment. However, the company has withdrawn its proposal for the rate increase.

She announced an initiative in which hospitals will work together to implement best practices to reduce medical errors, which will also bring down costs. “There is work to be done to get at medical costs. We are good at pointing fingers, at doctors, hospitals, and insurance companies, but we are all responsible for some component of those costs.”

She said that the new health reform law focuses on wellness and expands access for the uninsured. And there is a call for transparency. But it does not address an underlying driver of cost, which is $60 billion in waste, fraud, and abuse in the Medicare system.

She called guaranteed issue an exciting element of the law. It is supposed to require people to get coverage, but there is not a strong enough mandate to get people to opt into the system. “That is an area to lobby to change the mandates,” she said.

Tom Priselac, CEO of Cedars Sinai gave a hospital industry perspective on health reform. “We will see a movement to an organized delivery system between doctors and hospitals to deliver coordinated care…we will see a lot of experiments with the network model.” He also expects Medicare to become much more active in penalizing hospitals for care that is not up to par.
The following are some highlights from a breakout session on the large group market. Carrier executives said the following:
• There will be much higher increases in healthcare costs over the next three years.
• For small groups, distribution -channels may change. Small groups may go online to purchase coverage.
• The HMO price is approaching the PPO price .
• The fee-for-service plan is not the place to control costs in the new healthcare environment.
• Kaiser’s ability to control costs has made it a dominant force in Northern California. Brokers and providers are worried about the trend. Providers have become more open to things like wellness to bring down costs and compete with Kaiser. There needs to be a financial reward like a carrier giving a discount for groups that initiated wellness plans.
• Everyone has become more open to narrow networks.
• Physicians who own a lot of equity will fight bundled rates.
• The Medicare Advisory Board will be making medical decisions.
• As a result of health reform, 80% of California’s uninsured will have some healthcare coverage.
• There will be a greater focus on prevention and wellness.
The following is a summary of the new healthcare reform law by Phil Lebherz, CEO of LISI who presented the information at LAAHU and other industry events:
Approaches to Expanding Coverage
• Requires most U.S citizens to have health insurance.
• Creates state-based exchanges for individuals.
• Creates employer exchanges for small businesses.
• New regulations on health plans.
• Expands Medicaid to 133% of federal poverty level
Individual Mandates and Subsidies
Individual Mandate
Those without coverage pay tax penalty with exemptions:
• Financial hardship.
• Religious objections.
• Native Americans.
• Those without coverage less than three months.
• Undocumented immigrants.
• Lowest cost plan option -exceeds 8% of income
Individual Subsidies
• Income limits for subsidies – 133% – 400% of federal poverty level
• Premium credits or cost-sharing subsidies.
Individual Tax Consequences:
• $695 fine for non-compliance
• Exclude OTC Rx in HSA, FSA & HRA
• Increase excise tax on disallowed distributions from HSAs to 20%.
• Limit FSA contributions to $2,500 per year
Employer Mandates
• Employers with 50 or fewer employees are exempt.
Small Business Tax Credits
• For employers with up to 25 employees
• 2010 to 2013, up to 35% tax credit
• 2014 and beyond, up to 50% tax credit
Insurance Exchanges
• Effective 2014.
• Available to individuals and small groups.
• Can allow large groups beginning 2017.
• Five plan types offered.
• Guarantee issue with rating based on age, area, and tobacco use
Changes to Private Insurance
• Temporary high risk pool (2010)
• Insurance exchanges (2014)
• Carriers’ medical loss ratios
• 80% for small group (100 and below)
• 85% for large group.
• Premium increase review process
• Excise tax on “Cadillac” plans.
• No lifetime limits.
• Dependent coverage to age 26.
• No rescinding except in cases of fraud.
• No pre-existing on children (2010), everyone (2014)
• No experience rating.
• Deductibles not to exceed $2,000/$4,000.
• Limit waiting periods to 90 days.
• Allow states to merge individual and small group plans.
• Small group definition changes to two to 100.
Grandfathering Provision
Current plans are unaffected by mandates, the only changes allowed are the following:•
Can add or delete new employees/dependents.
• Part of collective bargaining agreement.
• No waiting periods over 90 days.
• Prohibition on lifetime limits.
• New standard for rescissions.
• Dependent coverage to age 26.
• Certain annual limits (group only)
Changes happening in 2010•
Temporary National High Risk pool created.
• Tax credits for small employers.
• Dependent coverage increased
to age 26.
• Remove lifetime limits & prohibit pre-existing exclusion for children.
• Minimum preventive service level without cost sharing.
• Establish premium increase review process.
• $250 Rebate for Medicare beneficiaries.
To sum up the event, it was the most information-packed LAAHU conference we’ve seen in many years. Organizers revamped the sessions to respond to members who wanted more education sessions.

Self-Funded Plans
Self-Funding In The Era Of Healthcare Reform
For Brokers, it’s a Matter Of Survival

by Mark Reynolds, RHU

This will not be your typical article about self-funding or what is often referred to as “shared funding” for medical plans. I will not try to impress you with defintions for specific, aggregate stop loss, or terminal liability. I will not try to convince you of the cash flow benefits self-funding brings. Those are important features of shared funded plans, but this is not just about those features.
It is more about how brokers will survive in the era of national healthcare reform and how the concept of self-funding or shared funding will become your new lifeline. Let me give you just four phrases included in the actual reform legislation that should send a chill up your broker’s spine, “minimum loss ratio,” “essential benefit package,” “the board,” and “the secretary shall.” What do these mean?

If you define these terms within the language of the Patient Protection and Affordable Care Act, you will start to understand that they mean the end to the way you have delivered and get paid for healthcare financing (i.e. group medical plans) and the beginning of a new paradigm for small to medium size employers. This means that you and I had better start learning how to deliver new products to our customers.

I know some will snicker at that statement as too alarmist. Some brokers may think that the carriers need brokers, so they will look out for brokers as new health plans, expense loads, and minimum loss ratios (MLRs) are developed. However, if you make your living by commission from health insurance carriers then you should take note. The changes reform promises to bring will force health plans to change much of what brokers know about their plans, the cost of benefits employers want, and the manner in which brokers are paid.

You have all attended meetings and seminars at which experts identified the basics of the Reform Act. You heard about the provisions for children, early retirees, and unlimited lifetime maximums, but did anyone explain the provision for minimum-loss ratio. Ouch, this one will hurt as carriers decide how to squeeze the revenues they need from a 20% allowance provided for groups with fewer that 100 employees. Actuaries are predicting that premiums may increase even faster because of the MLR provision. That does make sense if you do the math. If a carrier needs $100 million to operate its plan and pay all expenses, but the 20% expense allowance provides only $75 million, then the carrier needs a much larger premium number against which to multiply 20%. You can solve this with self-funding.

Self-funding traditionally consists of many components two of which are a large deductible on each covered member, called the “specific” deductible, and usually insured protection limiting the employer’s maximum cost, which is called the “aggregate.” These are the building blocks of a traditional self-funded plan. For brokers who are not active in the self-funded market, these plans can appear confusing or overwhelming. Human nature often takes over, which means that we often stay clear of products with which we are not comfortable. That must change.

Starting in the second half of 2010, the market will begin to see new variations for self-funding medical plans. We will see lower specific deductibles. We will also see self-funded plans created especially for the small to mid-size market, which means groups of two to 99. There will be an entirely new way to finance healthcare. This new generation of shared funded plans will be easier to understand and easier to present, yet give small employers flexibility in plan design and lower cost.
TPAs will introduce shared funding plans with specific deductible as low as $10,000, which has not been readily available in this market for years. We are seeing TPAs release plans with the maximum or “aggregate” protection in place with what is being called “spaggregate.” That is a clever name for combining the “specific and aggregate” protection in one product. So, it is becoming very clear that, starting in 2011, brokers will be delivering a new generation of plans created, by necessity, to help employers address the impact of reform.

But, what will happen to broker compensation? Starting in 2011, carriers will operate on just a 20% expense allowance. This means that carriers must squeeze their cost of administration (7% to 9%), marketing/promotion/GA (3% to 4%), state premium tax 2.35%, reserve/profit (5%), commissions (7%), plus a comfort margin to protect against mistakes. The bad news is that all adds up to 24.35%.

So how will carriers trim these costs to be less than 20%? If you answered agent commissions then you are correct. But do not despair because the added benefit of shared funding plans is that broker compensation is both commission and fee based. Brokers will build in a consultant fee, which will be a PEPM value. This will be paid in addition to a broker commission.

Earlier, you read the dreaded phrases of “essential benefit package,” “a Board,” and “the Secretary shall,” all of which can be defined to mean that the federal government will mandate what is to be covered, how it is to be covered, and so forth. The bill requires health plans to start reporting claims data to the Fed in 2011, which means the Fed will see very detailed claims data. If the Fed is provided claims data, it is safe to assume that it will be analyzing that data to determine what an “essential benefit package” should be. In a separate forum, it would be interesting to discuss the impact of providing claims data on American citizens to the government, but that is for another time.
Two key advantages of a shared-funded plans is that it is authorized and regulated by the 1974 legislation known as “ERISA” and it allows employers to create plans especially designed for the employer’s own population. Shared funded plans will be able to comply with directives set forth by the “Boards created by the Secretary,” but do so in the most cost effective way. In short, the employer maintains control of it cost while complying with federal mandates.

Shared-funded plans will keep brokers employed because employers will need a good consultant more than ever. Shared-funded plans will provide brokers a means to maintain their business with compensation that is fair and substantial.

The Patient Protection and Affordable Care Act is going to affect everyone in America, but for brokers and employers, that effect does not have to be completely negative. The Act creates a bigger need for brokers than ever, but brokers must be responsive and proactive. Don’t sit through another carrier or GA seminar about healthcare reform without asking the presenter specific questions that affect you, your agency, and your employer clients. In the next few weeks and months brokers should seek out carriers and TPAs that are preparing the plans that will meet the needs of your agency and clientele.

Finally, do not think, for one minute, that healthcare reform is putting you out of business. If you are a broker with five clients of 500 there is a solution for you and your clients but now is the time to get educated on shared funding.

Mark Reynolds is CEO and president of California based BEN-E-LECT, a leading third party administrator (TPA) and innovator of Employer Driven Health Plans™ that has been providing solutions to brokers since 1996. A registered health underwriter (RHU), he has played an active leadership role in the industry for years, serving as a founding member of the Inland Empire Association of Health Underwriters and past president of the Health Care Administrators Association (HCAA). Ben-e-lect’s corporate office is located in Visalia, California.
Mark can be reached at 559-250-2000.

Will HSAs Play a Big Role in Reform?

by Martin Trussell

Healthcare reform is here along with its rather large price tag. The Congressional Budget Office (CB0) estimates that it will cost $940 billion to subsidize insurance coverage for an additional 32 million people over the next 10 years. But, at the end of those 10 years, the health reform statute will generate enough revenue to offset this spending. In fact, the CBO says the new law will even contribute to reducing the federal deficit to the tune of $143 billion.

To make the math work, Congress has ordered a combination of new taxes and the reduction of some long-standing healthcare related tax breaks. The Cadillac Tax on the most generous and expensive health plans has been well documented. Beginning in 2013, contributions to FSAs will be limited to $2,500 even though employers already set the limit on how much money their employees can set aside for FSAs under the current rule.

With all of this taxing and the closing down of tax breaks going on, one tax break that healthcare reformers originally targeted has gone largely untouched: The health savings account (HSA). The HSA was a part of the George W. Bush healthcare reform bill, which gave us Medicare Part D, the popular Medicare program that provided seniors with prescription drug coverage.

An HSA is a tax-advantaged medical savings account that is available to Americans who are enrolled in a qualified high deductible health plan (HDHP). Funds contributed to the account are not subject to federal income tax at the time of deposit. Interest or any investment income earned on deposits is non-taxable and the funds can be removed from the account tax-free to pay for qualified medical expenses.

Unlike an FSA, HSA funds roll over and accumulate year to year if not spent. Employers own health reimbursement arrangements (HRAs). But, employees own HSAs, which serves as an alternate tax-deductible source of funds paired with HDHPs.

With its triple tax advantage and emphasis on personal responsibility, how did this Bush-era health plan survive the Obama-era healthcare reform? Some insiders say that reformers in the administration and on Capitol Hill came to realize that the low-premium HSA-type health plan, coupled with its triple tax-advantaged savings vehicle, is exactly what’s needed to draw the young and the healthy to the insurance pool alongside the old and the not so healthy.
Spreading risk is critical to the entire health reform scheme. But, let’s face it, the legislation does not set high enough penalties for not being covered to convince the intentionally uninsured to buy health insurance, at least not their father’s insurance plan with the low office visit co-pays and high premiums. But, an offer that’s just too hard to pass up is a low-premium option that supplies Cadillac plan coverage above a little higher deductible along with add tax breaks for the money saved, interest earned, and any distributions used for qualified medical expenses.

One person who knows this subject from the inside is J. Kevin McKechnie, director of the American Bankers Association HSA Council. McKechnie recently told the New York Times that affordable options must be available if companies are ordered to offer insurance or people are made to buy it. He noted that HSA-qualified health plans generally have cheaper premiums while HSAs help people pay for their costs before they hit the deductible.

In a Fox and Friends broadcast, McKechnie said HSAs will have a great role in the success of the healthcare overhaul. He noted that HSA health plans will attract the young and healthy to the insurance pool, which is the group that will help make health insurance affordable for everyone else. “The irony is that they [HSAs] may be the lifeboat for this entire plan,” McKechnie told Fox News.
Chairman Emeritus of the HSA Council, E. Craig Keohan, credits the work of McKechnie and other HSA Council members for bringing lawmakers around to the idea that HSAs can be good for healthcare reform. He said, “Over the past year, we called on each member of Congress at least twice. We left them with the message that Americans are not only benefiting from the lower premiums and tax savings these plans offer, but also from the incentive to make better health decisions.”

New Taxes for Healthcare

Does this mean that HSAs have escaped unfazed from a year’s worth of legislative wrangling? Well, not entirely, but the changes made to them were slight. Here they are:
1. Effective January 1, 2011, tax-free HSA dollars can no longer be used to purchase over-the-counter drugs not prescribed by a doctor.
2. Effective January 1, 2011, the tax on HSA distributions that are not used for qualified medical expenses will increase to 20% from 10%.
That’s it. In a legislative process in which everyone was asked to bear some of the burden, it seems that very little was asked of health savings accounts. Could it be that their real contribution to healthcare reform has yet to be seen?

Martin Trussell is SVP of Business Development & National Accounts at First Horizon Msaver, Inc. Marty has over 25 years of experience in the health benefits industry and writes a well-followed blog covering innovations in healthcare:

Good Benefits Rise to the Top: Our Ancillary Close-Up Issue
Long-Term Care: Three Words that Make a Hero

by Dan Nicholas, CLU, CLTC, LUTCF

A minor named, Efrod Rodger Ryon, was pretty much a nobody until he uttered these three words as he fell to his death February 6th, 1879 – “Clear the shaft!” Efrod’s wooden grave marker does not survive. Yet, the papers preserve his memory. When you’re working at the edge or bottom of a 450 foot mine, it can be lifesaver to get a timely warning that something’s falling down above your head. “Clear the shaft” meant one thing to any miner – move now or you’re a goner.

Death was a daily event in Bodi. Many villains and ne’r do wells walked dirt roads in the gold rush town of Bodi, California. Now an abandoned community a hundred miles south of Reno, Nevada, it once thrived as the third largest city in America sporting 34 bars, a church, a philanthropic madam and two mortuaries.

I have techie friends who know the formula of just how long it takes a 200 pound man to fall 450 feet. Four to five seconds is my guess. I’ve often mused with clients about what might be my last words or deeds in such a crisis or theirs. On a good day, a prayer I guess. On an average day, an expletive, no doubt. But Efrod wasn’t thinking of himself at the end, but of others, which is what made him a hero. With his last breath, he was not even muttering a prayer for his own soul. He was looking out for the well being of those around him.

I walked the Bodi cemetery thinking just why it is I’ve spent a lot of my life as an estate planner and why this occupation has deep meaning for me. I was a preacher and a priest for about 15 years. The last 25 years, I’ve served in the financial services industry. The most recent decade I’ve worked as a specialist helping people with their long-term care planning concerns. I’ve done countless seminars and kitchen table talks on wills and trusts and advance healthcare directives and now long-term care insurance.

Looking back from Bodi, for me it is all the same story, the same life calling. How does a man or a woman go out? Whether or not your final deeds or are chiseled on your grave marker, they play big role in defining what you were made of while you were here. For my friend, Efrod, his life was summed up in those parting words: “Clear the shaft.” Defining the sum of his life on the day of his passing, he wanted at the very least to do minimum harm to others.

In my practice now, I make sure no client or prospect gets out of a long-term care insurance appointment without hearing Efrod’s “clear the shaft” story. With a stroke of a pen and a few dollars a month, I tell my clients that they can have a good shot that less harm will be done on their way out. I call it sputter insurance. I may go out in a flash, but I’m more likely to go out over several months or years chronically disabled and a serious burden on those I love.

Long-term care insurance will pay for in-home care to ease that burden if I sputter some. Even if it’s a modest $80 a day LTC policy to pay for a minimum four-hour shift, it will be a lifesaver for my family. And I can say, with Efrod, that I’ve done what I could to make way, to clear the shaft, and cause minimum harm to those I love as I move on.

So, yes, more than once, I have lifted a glass to this man, Efrod Ryon. He continues to inspire me and to motivate my clients to provide for themselves and their families. He’s my hero. Some say the most powerful three little words in the English language are, “I love you,” Well, maybe. Efrod’s three little words, “Clear the shaft!” said it a little differently. He went out thinking and doing first for others and with not wanting to cause harm. That’s love. Three cheers for the man of three words.

Dan Nicholas, CLU, CLTC, LUTCF is a long-term care solution specialist in Santa Cruz. He can be reached at 831-768-9928 or visit

Life Insurance
Writing the Large Life Insurance Policy:
How To Increase Your Chances Of Landing The Big Case!

by Dave Donchey, CLU

Writing a large life insurance policy is a lot like fishing. When you finally hook the big one, you still have to land it. But, since catch and release practices don’t apply to selling life insurance, you may not get another chance to land that jackpot case if it’s not managed properly.

Getting an insurance carrier to make a competitive offer on a large life insurance policy application is not something you can figure out as you go along. These cases have unique characteristics and they require a comprehensive understanding of how to navigate a case from beginning to end. However, when executed properly, the rewards are well worth it.

Large life insurance policies can easily exceed $30 million of face amount and reach $100 million or more in some cases. But, in this article, we will define a large case as $25,000 or more of annual premium or $5 million or more of face amount.

Most insurance agents don’t have many opportunities to write a large life insurance policy. When the opportunity comes up, they may be out of their comfort zone or they may not be familiar with the ground rules to make it happen after the client says, “Let’s get started.” Mistakes become even more noticeable and significant as the size of the case increases. When a case is mishandled, problems may be difficult or impossible to unwind, or worse, valuable relationships are lost. Whether you are new to this area or you have experience writing large cases, being up-to-date is essential because this industry segment has seen many changes over the past several years.

When an agent has an opportunity to write a large life insurance policy, often, the first impulse is to spreadsheet premiums from multiple carriers and get the client’s signature on formal applications, based primarily on price. But, that may not be the best approach, particularly as the size of the case increases. The key to writing large cases effectively is to understand how life insurance carriers (and their reinsurers) view and underwrite requests for large amounts of coverage. This is especially true when the proposed insured is considered high profile, such as the ultra-wealthy, celebrities, athletes, and other prominent people. The rules change along with the increasing size of the case and prominence of the person. In other words, some cases may have inherent risks that various carriers and reinsurers will underwrite differently.

Large life insurance sales are usually the result of strong relationships between the insurance agent and the clients or others who are well connected to the client, such as a business manager or key advisor. Handling a large case improperly can ruin a relationship that has taken years to develop. Most agents agree that second chances are rare.

On the other hand, a well-orchestrated large case with a positive outcome often leads to substantial residual benefits (besides handsome compensation), such as additional insurance sales, other planning opportunities, and referrals.

A number of discussion topics can open doors to writing large life insurance policies, such as in-force policy reviews, legacy planning concepts for people with large estates, premium financing strategies, and business insurance arrangements.

Many large cases occur as a result of important relationships that have been developed with primary centers of influence, such as CPAs, business managers, attorneys, or key financial advisors. Agents often assume that someone else is handling these large transactions even when no one has discussed these concepts with the client or key advisor.

An effective strategy and strong back-office support can make large cases easier to place. Once a client or key advisor shows an interest in purchasing a large life insurance policy, a number of preliminary steps will increase the chances that a carrier will make a favorable offer of coverage. When navigating the large case, the old adage says it best, “It’s better to measure twice and cut once.”

Pre-Sale Considerations

Many insurance agents start by comparing carriers’ products and premiums to get a rough idea of the premium that’s required to purchase a given face amount. But, it is still too soon to commit to a carrier because premium comparisons don’t address critical issues with large cases. The least expensive carrier may not have the capacity, ability, or desire to underwrite a large face amount even though you can easily use the carrier’s software to illustrate a large face amount. In addition, some insurance carriers need support from reinsurance companies before they can make an initial commitment to coverage. If you overlook these potential obstacles, the insurance carrier you selected can quickly become a dead-end option, wasting of time and energy for you and your client.
An important early step is for the agent to ascertain how much in force and pending (or “applied for”) life insurance coverage the client has. This amount will factor in to how much additional coverage can be written because of individual, carrier, and industry limits. It will also affect which carrier or carriers are eventually selected to write the coverage. There is a process that must be followed in order to maximize the amount needed in lieu of the limits that are set. For example, simply submitting a very large application to a carrier may violate the carrier’s jumbo limit, taking underwriting authority and control away from the carrier and sending the case directly to the reinsurance market.

An effective approach is to first take advantage of a carrier’s automatic binding limit. (An automatic binding limit is a published amount of coverage carriers have the authority to automatically offer, up to certain limits, based on previously agreed-upon reinsurance agreements.)
For the very largest cases, this strategy will reserve carriers that have large retention for back-end capacity. (Retention is an amount of risk a carrier is willing to assume 100% responsibility for without any reinsurance involvement.) Be careful to avoid compromising a carrier’s automatic binding limit, especially when there is existing life insurance coverage or pending applications. These combined amounts of coverage may exceed a carrier’s authority to offer coverage automatically without reinsurance support. If this occurs and the amount exceeds the automatic binding limit, the risk must be submitted to reinsurance for review.

Matching the client to the most suitable insurance carrier is an important step for any life insurance case, especially for the large case. For the largest of the large cases, it may be necessary to look to several insurance carriers to place the total risk because an individual carrier’s Retention plus their automatic binding limit, referred to as an automatic issue limit, may still fall short of the total amount of coverage being sought. In some cases, it may be more effective to initially avoid reinsurance support, which will reserve the opportunity for negotiation at the insurance carrier level. Once individual carrier Retention limits and automatic binding limits have been exhausted, it will be necessary to look to reinsurance support for high-end capacity.
There are many excellent life insurance carriers. But some are more suitable for specific large cases, especially for cases with a face amount above $50 million. Early fact-finding conversations with the client or key advisor should reveal additional risks commonly associated with clients who purchase large amounts of life insurance. Factors such as avocation, aviation, foreign travel, citizenship issues, or other pertinent high-profile risks affect underwriting. Because most large cases involve high profile people, it’s important to consider these issues before proceeding and certainly before leading a client to believe that they will be able to get coverage with the company that offered the lowest premium in the comparison. Measure twice, cut once!


The client will eventually have to submit to an insurance examination for coverage, but there may be appropriate reasons to delay this requirement until other preliminary steps have been taken. Depending on the size of the case and the client’s age, another consideration is to determine the viability of the case early on. You do this by conducting a preliminary assessment before submitting the case to specific insurance carriers. You can do this by getting copies of medical records after obtaining the client’s authorizations on the necessary medical release forms.

Some insurance offices or agencies use in-house underwriters to assess a case. An in-house underwriter gathers, summarizes, and analyzes medical and financial information before a potential large case is ever submitted to an insurance carrier in a formal application. This helps determine whether a life insurance carrier would be willing to offer coverage and if so, at the most likely rate classification that best matches the proposed insured’s medical and financial profile.

This process makes preliminary premium comparisons more accurate although you will not know the ultimate premium until the carrier makes a formal offer of coverage. This process also reduces the likelihood that you will send an application to an insurance carrier only to find out that the carrier was not a suitable match in the first place.

This preliminary assessment helps pinpoint which carriers are most likely to be interested in the risk. It should also reveal whether a carrier would require significant premium surcharges or not offer coverage at all due to the client’s medical history. Determining this information early will save valuable time for you and the client. No client, especially an affluent one, wants to be examined unnecessarily if it’s not going to lead to something they want. Measure twice, cut once.

Large cases are subject to financial underwriting, which is a routine part of any life insurance application process. Life carriers do a lot of due diligence on large cases to make sure that there is an insurable interest for the amount of life insurance that’s being applied for. Stranger owned and investor owned life insurance strategies have led to greater scrutiny of all large life insurance applications. Life insurance carriers are more concerned than ever about material misrepresentation and fraudulent activities used to secure large life insurance policies where no insurable interest exists.

The life carrier’s underwriter is required to determine the legitimacy of the case and whether the large amount of life insurance can be justified financially. As a result, it’s important, early on, to determine whether the amount of life insurance, in question, can be justified financially and to inform the client that they will have to participate in an inspection report, which is required as part of the verification process.

It is appropriate to schedule the insurance examination after addressing premium tolerance and taking preliminary steps to determine whether the proposed insured should qualify for coverage financially and medically (barring any unforeseen problems). Insurance carriers routinely use their own medical doctors to perform insurance examinations from independent paramedical firms for large life cases. But, in some cases, they make exceptions to allow a client’s own physician to conduct the examination. Once the examination has been completed, the insurance carrier can begin to review the case including a review of the exam and lab findings.

In certain instances, an informal inquiry will be appropriate in lieu of a formal application. An informal inquiry, also known as a “trial application,” involves sending a summary of the case to the insurance carrier or carriers for review. The trial application uses medical records, the completed examination, lab results (obtained by the insurance carrier), and a detailed cover letter explaining the purpose of the proposed insurance coverage. A qualified in-house underwriter, who can communicate details of the case to the carrier, often handles this step. If the carrier can offer coverage, a tentative premium rate classification is based on the proposed insured’s health. This step does not require a formally completed application. It simply indicates whether the carrier is interested in issuing coverage. At this point, any coverage offers are considered tentative. These tentative offers are subject to any final outstanding medical or financial requirements as well as administrative requirements, such as a formal application and related paperwork.

The Formal Application

Once the carrier gives tentative approval, a formal application is submitted to the carrier. Along with the completed application, you should include a detailed cover letter that explains the background of the case. Cover letters include information, such as the purpose of the insurance, the client’s income and net worth, the amount of coverage to be placed, whether it is a replacement of existing insurance, and other pertinent information. Cover letters give underwriters valuable insight, often providing them with additional reasons to justify the need for the life insurance. To win the case, it’s important to win the underwriter.

The inspection report is another requirement for large case underwriting that you should discuss with the client or key advisor. The carrier generally orders an inspection report after receiving the formal application. An independent inspection firm usually conducts a detailed phone interview, although some carriers may choose to do an internal inspection report. Inspection reports involve verifying confidential background information including questions about the proposed insured’s health history and questions about business and financial information. These interviews are usually directed to the proposed insured or policy owner, but in some cases, the information can be obtained through third-party sources, such as a CPA or business manager.

In Summary

Finally, managing the client’s expectations is one of the most important, yet overlooked considerations in securing large life insurance policies. Clients and their advisers may have their own ideas about what is required to purchase a large life insurance policy and how long the process should take. Experience in this market segment proves that large cases can be complex and they require a detailed strategy. They generally take longer to process than smaller cases.
Knowing what the client already expects and informing them of what they should expect will reduce the likelihood that they will be disappointed. To help overcome unrealistic expectations, you need to understand and communicate the process early and often throughout the entire case history. This will help you not only meet the client’s expectations, but also exceed expectations in many cases.
Every large life insurance case has unique circumstances that call for a specific strategy and there are many important tactical steps to consider when working in this market. Just as in fishing, good fundamentals generally improve the chances of success. Deliver what the client wants by following a plan that includes a viable, proven approach. By doing so, you will significantly increase the odds of landing that large life insurance policy. =
Dave Donchey, CLU, is the president of Leisure Werden and Terry Agency, a full-service brokerage general agency located in Pasadena and San Francisco, California. LWT represents major life insurance carriers to the insurance professional. Mr. Donchey can be reached at 800-272-2212 x240, or by email,