Table of Contents

Editor’s Column

Giving Clients Solutions to Retirement Dilemmas
by Alan Shenker
Annuities have some tremendous advantages over other types of investments. For the senior market, fixed annuities, multi-year guarantee annuities, and consumer-friendly fixed indexed annuities offer upside potential while eliminating or limiting downside loss. In today’s market, reducing risk is of utmost concern.

Helping Your Clients Choose An Individual Health Plan
by Michael Ginsberg
Many people are looking for individual health insurance coverage, especially those who are unemployed, but not eligible for COBRA benefits or COBRA subsidies due to the many restrictions and deadlines.

Limited Medical Benefit Plans: A Bright Spot for Growth in Otherwise Stagnant Market
by Mark Roberts
The future of limited medical plans will be determined by defining the terms “essential health benefit packages” and “credible coverage” and by how many Americans choose to not abide by the mandates.

Limited Med Group Insurance from a Major Med Perspective
by David Cheek
If someone told me 15 years ago when I became an independent major med broker that the limited medical plans out in the marketplace were a viable alternative to the rising cost of health insurance, I would have laughed.

Finding A Goldmine In The Small Group Rate Table
by John A Middleton
If you dissect the rate tables each small group health insurer publishes in California, you may find some gems of advice that will make the employer glad they picked you over another broker.

Health Savings Accounts – Not Always the Right Remedy
by Mark Reynolds, RHU
HSAs can be a successful funding mechanism for frugal thrifty employees when funded by employees. However HSAs implemented with the employer funding the employee’s HSA is seldom a workable or successful strategy.

Rethinking Rollover Strategies to Create Tax Savings
by Thomas McGirr and Kevin O’Fee
In today’s economy, many Americans are changing jobs, coping with recently losing a job, or looking for a new career path. People don’t always consider how the assets in their company sponsored retirement plans can be put to the best use and how to minimize taxes in retirement.

Reeling In Voluntary Benefit Sales
We Get Below the Surface in our Annual View from the Top
Executives give their take on major changes and opportunities in the voluntary benefits market.
By Leila Morris

What’s In Your Network? Let’s Facebook It, if You’re not Tweeting, You’re Not LinkedIn
by Ken Doyle
Make a commitment to dedicate an hour every other day to engage in social media and folks will begin looking for your next message. Translation: sales opportunity.

Disability Insurance Spotlight: Gaps in Coverage for More Highly Compensated Employees
by Michael Fradkin

The trends in disability insurance for the highly compensated worker present a way for you to open the door to a discussion with your clients about the gap in coverage among their top-earning employees and ways your client can help employees mitigate their financial risks.

Out With the Old, In with the New All Medicare Supplements Will be Changing in June
by Harry P. Thal, MA
President Obama’s healthcare plan has a few silver linings for seniors struggling with the high cost of prescription medication. In 2010, if a senior on Medicare Part D reaches the donut hole, there will be some relief whether the senior is in a stand-alone prescription drug plan (PDP) or a drug benefit integrated in a Medicare Advantage plan (PPO, HMO, PFFS).

Editor’s Column
Who Do Clients Trust?

by Kate Kinkade
As professional consultative advisors, we are facing the best opportunity we have had in our lifetimes because we are the best place for clients to safely put their trust, if not the only place. The past few years have left consumers paranoid –- or smarter, depending on the perspective. The institutions, and eventually, many advisors, that consumers trusted to help them make financial decisions failed them overall.

Their local banks lent, and then sold, loans that no trustworthy lending institution should have qualified for lending. Huge investment banks combined these loans to create a financial product that never existed before, with essentially no scrutiny or fiduciary responsibility. One of the largest insurance institutions insured these new instruments without setting aside reserves or doing any actual risk assessment. Stock in all of these institutions was sold to the general public, to retirement plans, and to other financial institutions with no disclosure of the risk underlying the reported growth. Regulators were well aware of all of these actions and didn’t change ratings accordingly.

As a result, the stock market crashed, the government gave billions of dollars to the institutions involved in these practices, jobs were lost, and homes were foreclosed upon at unprecedented rates.
The stock market is on the way back up, with the largest investors recouping much of their losses already. Most of the institutions are having a great year, with one of the most involved in creating these problems reporting record profits in the first quarter of 2010. A number of the executives and regulators at the heart of the mess are now employed by the current administration.

But unemployment continues in double digits with no sign of recovery. Foreclosures continue at an unheard of pace and no government-encouraged strategy to preserve homeownership is making a dent. Small investors, who are unwilling to take risks due to the last crash, were not in the market for the recovery and don’t know when, or if, to get back in.

It is understandable that the typical consumer doesn’t trust financial institutions today. What just happened looks like a huge scam leaving the common consumer holding the (empty) bag and the executives and institutions holding the bag – of gold.

What about the advisors who held the consumers’ trust before this happened? Conscious financial advisors maneuvered through this in one of three ways: calling the crash “another cycle” and advising clients to hold fast throughout; assuming it was a cycle until things were at the very bottom, then moving out of the market at the worst point to cash; understanding the basis of the boom early on and advising moving out early on. Obviously, the third group won the prize, but the first group doesn’t look too bad today either. The second group was obviously too reactive, but their clients may be fairing O.K. if they went back into financial instruments intelligently thereafter.

The key word in the paragraph above is “conscious.” How many financial advisors avoided client calls and were more interested in denying guilt than solving problems?

I would suggest that it is the financial advisor’s job to know what is going on with financial markets and to know what the basis is of a boom when one occurs and act accordingly. Advisors who didn’t do that have lost the trust of their clients because they didn’t have the competence for which they were hired.
Some financial advisors who didn’t understand these underlying issues retained their client trust anyway. They did so by going through the crash with them and understanding how the client was being affected and what could be done about it. They retained their clients’ trust, not because they were as smart as they might have been, but because they cared and were honest and most of all, because they understood their clients.

The advisor who has retained and gained client trust more than any other in this process is the planner. The life insurance advisor, financial advisor, or any combination, who based (and bases) their advice on the clients’ total personal and financial long-term needs and goals. They don’t have to be omniscient if any recommendation is based on a clear understanding of the client’s situation and an honest, objective evaluation of devices and products that can help them meet their needs. If that recommendation ends up being wrong, the client knows why it was made and understands it was in their interest. In the best case, the various alternatives were discussed and the client and advisor made the decision together, weighing the risks against long term benefits. That’s a planner.

Clients need someone to trust. And today that is an individual. Individual advisors who have proven that they care; who take the time to fully understand their clients long and short term issues; who put client’s interests before their own; and who can be objective about product and implementation.
This is a great opportunity for many of us. Our life insurance products have been commoditized for years, enabling anyone with a ledger and calculator to compete in our markets. The choice in health insurance products has gotten increasingly narrow with service being the last non-commoditized component of choice. Both of those things are going to change; life products are changing radically this year. Over the next few years, health products will change even more radically. We can finally show our true value as something other than a number cruncher. If we can articulate our value, in terms similar to those listed above, and deliver on them, we have a better opportunity today than we have had for years.

Fixed Annuities
Giving Clients Solutions to Retirement Dilemmas

by Alan Shenker
The senior market is struggling. Younger clients have time to ride out the economic downturn, but the downturn can feel catastrophic for more mature clients. The upside potential is gone forever because they need access to funds from accounts that have already been depressed by investment losses. This is also a lack of training in the SPIA area, but things are changing. Asset growth potential has been anemic for many investments with low yields. Nowadays, people are relieved to just break even. In times like these, many brokers have been reevaluating what has been sold in this market. And they sometimes discover that it doesn’t really work for the client.

When talking with seniors, I’ve found that that their insurance contracts must satisfy one or more of three goals: accumulating assets, distributing assets, or transferring assets to heirs efficiently. But most products (and even many insurance carriers) are singularly focused. Plus, clients don’t think in terms of accumulation, distribution, and wealth transfer. A product is often sold based on the sizzle; perhaps it’s a high interest-crediting rate without real regard for the customer goal or long-term performance. For example, an annuity may be a tremendous accumulation vehicle and may be easier to sell, but it may not work well for efficient wealth transfer. A different annuity may be the answer from the distribution perspective.


What’s the best way to accumulate assets on a tax-favored basis? Annuities have some tremendous advantages over other types of investments. For the senior market, fixed annuities, multi-year guarantee annuities, and consumer-friendly fixed indexed annuities offer upside potential while eliminating or limiting downside loss. In today’s market, reducing risk is of utmost concern.

Fixed annuities continue to sell well. Given the low yields of other products, there are no adequate alternatives to building capital on a guaranteed basis. Sure, gone are the days of the 5% multi-year guarantee rates, but annuities just can’t be ignored.

And some annuities are not only very consumer-friendly, but they’re also unique and quite easy for a customer to understand. Consider the following example: You’re playing blackjack in Las Vegas with the usual rules; if you beat the dealer you win; if you tie (push), you receive your bet back; and if you lose to the dealer, you lose your bet. Is this a customer-friendly game? How long would you play?

What if the blackjack rules were changed a bit and you won not only if you beat the dealer, but also if you tied (pushed)? And if the dealer won, what if the dealer gave your bet back and asked if you wanted to play again? How long would you play the game now?

There’s an annuity like that, which is selling tremendously well, as you can imagine. Granted, it has forced some producers into a new direction in selling annuities because it comes with terminology “like performance-triggered accounts.” But it’s extremely customer-friendly and certainly protects downside risk while providing upside potential.


On the variable annuity side, the most important feature over the past few years, has been providing an income stream on a level or increasing basis. While VA sales have sputtered recently, income-for-life type riders have become an important feature on fixed annuity contracts. Clients who are looking for maximum distribution advantages can choose among some tremendous fixed annuities.

Readily available in today’s distribution market are products that offer a customizable solution to fit clients’ needs. They feature guaranteed income, income-for-life, and guaranteed increases based on common price changes, such as the consumer price index (CPI). Be aware, though, that products that are strong on accumulation may not be the contract of choice for distribution. Your customer needs to understand that not all contracts can do everything.

Wealth Transfer

If your client is insurable, life insurance is the perfect vehicle to transfer wealth on a tax-advantaged basis. Products that offer full or simplified underwriting, tax-free death benefits, a guaranteed return of premium, and perhaps even coverage for long-term care expenses, are certainly consumer-friendly.

A single premium life contract, with no bells or whistles, is perfect for maximum wealth transfer. One carrier offers a guaranteed death benefit of just over $353,000 for a 65-year old healthy female who has a $100,000 single premium a guaranteed death benefit (with cash surrender values of about $80,000 for the first 15 years). This is terrific tax-advantaged leverage.

Another approach is to include LTC coverage. Some carriers offer a life/LTC combos for seniors who shy away from a stand-alone LTC contract because they think long-term care insurance is too expensive or they fear they will never receive a benefit for premiums paid. For the same $100,000, one company offers a guaranteed death benefit that isn’t as high as a pure wealth transfer contract ($167,000), but there’s always a 100% guaranteed return-of-premium, and more importantly, almost $500,000 available for qualified long-term care expenses.

Successful producers will be the ones who can offer seniors a choice since one product can’t be the answer for all clients. When you provide a short presentation about meeting accumulation, distribution, and transfer goals, seniors will be able to choose the product that works best for them and your sale will be the one that works for them.

Alan Shenker, vice president at Zenith Marketing. His email is


Health Close-Up
Helping Clients Choose An Individual Health Plan

by Michael Ginsberg

In California, 20% of the population is uninsured, according to the California Healthcare Foundation. Many people are looking for individual health insurance coverage, especially those who are unemployed, but not eligible for COBRA benefits or COBRA subsidies due to the many restrictions and deadlines. Even those who are eligible for COBRA may only be covered for 15 months, so as their benefits expire, they will be looking for individual plans as well.

It’s smart business to give your clients the resources and advice on choosing the individual plan that works best to help them get or continue the health benefits they are accustomed to while maximizing their healthcare dollars.

Help Clients Get Educated About Health Benefit Plans

Many people don’t understand how the complicated health insurance system works; they don’t know their options; and they’re not familiar with the acronyms and vocabulary. A recent CIGNA survey revealed that people spend an average of just 30 minutes to review their healthcare options while they spend eight hours on the purchase of a new car. People should be educated on the details of the available policies so they can make the best possible choice.

Show Clients How to Evaluate Their Insurance Needs

Some of your clients may be approaching retirement. Helping them understand the changes in their insurance needs is critical. In retirement, most people are simply looking to preserve their assets to last through their later years, rather than accumulating and protecting additional assets as they did in earlier years. So, they need to re-evaluate how they approach health insurance requirements. Teaching your clients about their options, such as a qualifying high-deductible health plan with a health savings account (HSA), may help them meet their needs. Using an HSA allows your clients to save for healthcare expenses on a tax-advantaged basis while being protected in the event of a catastrophic health issue so their assets are protected. These plans are generally less expensive than traditional health plans.

Teach Clients How to Take Advantage of Their Plans

Teach your clients how taking advantage of their individual healthcare plan can help preserve or improve their health while saving time and money. Many plans cover regular checkups and screenings, which can help prevent problems or catch conditions early before the cost of treatment skyrockets. Help your clients find out if their plans include a 24-hour health information line staffed by nurses. These hotlines can be the first stop for your clients to find out if they need to go to the doctor or whether they can take an over-the-counter medication to relieve their symptoms. Teach your clients about all of the benefits in their individual plans including discounts on wellness programs, such as smoking cessation or weight management. These programs can reduce the risk of illness and lessen the chance of developing more serious conditions, such as heart disease or cancer.

Encourage Clients to Compare Their Options

When people are looking for health plans, they want to know how the plans worked for others. Help your clients feel confident about choosing the right individual plan by encouraging them to check out the plan’s report card on the National Committee for Quality Assurance’s Web site, available at

Older Americans, with limited income and resources, may not know what options are available, but you can help these clients understand their individual plan choices. Another program to reference is the BenefitsCheckUp, which is sponsored by the National Council on Aging. It’s the nation’s most comprehensive Web-based service to help people find benefit programs. More information is available at

Michael Ginsberg is the sales manager for CIGNA’s individual and small group segment in California. He has 20 years of industry experience reaching across the individual, Medicare, small and large group markets. For more than 125 years, CIGNA has been helping people lead healthier, more secure lives. For information on CIGNA’s individual product offerings, visit


Health Close-Up

Limited Medical Benefit Plans A Bright Spot for Growth in an Otherwise Stagnant Market

by Mark Roberts

In today’s economy, Americans are extremely concerned about paying for healthcare and medical expenses. Over the past decade, costs have risen at a rate outpacing inflation and cost-of-living indices; companies are forced to make drastic cuts in available coverage using a variety of ways to keep healthcare and insurance costs as low as possible and still offer workers reasonable and affordable ways to be covered. A common way for businesses to reduce insurance premiums is to pass more of the costs on to employees, also known as “cost sharing.”

The limited medical benefit plan is one of the more popular vehicles in the marketplace designed to decrease costs. Although these insured plans are not health insurance or major medical insurance, they are structured to pay indemnity benefits for many common medical expenses. And they have become increasingly popular in the employer market.

The limited benefits medical market is growing. Those interested in purchasing limited medical benefits plan have traditionally been younger people with targeted employee contribution rates equivalent to one to two hours of wages per week. Based on market feedback, this appears to be the target price point for employees to afford, especially among organizations, such as food chains, blue collar industries, hotels, nursing, etc.

Limited medical benefit plan policies can cost far less than traditional insurance. But they cap what insurers will pay toward medical care, with the skimpiest plans covering as little as $1,000 a year. Some have daily caps, such as paying a few hundred dollars a day toward hospital coverage. In contrast, traditional insurance generally covers most medical expenses, in a given year, after deductibles and co-payments. Insurers say limited-benefit policies are gaining interest among employers with low-wage, part-time or contract workers. Once, they were mainly sold to the self-employed or others who buy their own insurance. National companies offer such coverage to their workers, as do many smaller businesses.

Proponents say the limited plan is not the solution to the problem of the uninsured, but it is one option to help people get basic medical care. Some patient advocates disagree, saying many of the plans leave policyholders more vulnerable to devastating medical bills than they might think.

Insurers see limited-benefit plans as a bright spot for growth in an otherwise stagnant market, although they are still a tiny part of the insured market — about 2 million policies among the nearly 160 million workers who get their insurance from employers, according to USA Today article.

Insurers are targeting the estimated 39% of employers that don’t offer health insurance. Critics say the plans allow employers to boast that they offer coverage without providing adequate medical protection to workers. But plan proponents say the policies are not deceptive and that, for many people, the only other option is to be uninsured. The reality is that, without the option of limited-benefit plans, many of these people would be without coverage, which means relying on the government tab or racking up a lot of debt.

Americans with incomes above $50,000 generally prefer more traditional, comprehensive coverage and are willing and able to pay higher premiums to get it. They generally have homes and assets and they get insurance so they don’t lose everything for which they’ve worked. Below that line, people live paycheck to paycheck. They want to be able to go to the primary-care doctor with no money out-of-pocket at the time of service and have less taken out of their paycheck for insurance. The policies are not intended to be catastrophic coverage. Limited medical benefit plans are intended to help with day-to-day medical costs.

There are no pre-existing condition limitations (except critical illness), no co-pays or deductibles, and no waiting periods. Flexibility in plan design allows the benefits to fit into almost every situation an employer faces.

The limited medical plan has changed significantly in recent years. Today’s plans are more robust and offer benefit levels that are significant enough to attract more and more employers. Generally speaking, limited medical benefit programs come in two forms, fixed indemnity and expense incurred (sometimes referred to as “coinsurance-based”). Fixed indemnity plans provide a specified benefit for a specified service or occurrence. They are noted for their flexibility, stability, and simplicity. Expense-incurred plans are popular for features, such as a co-pay and similar benefit delivery as found in major medical plans. They offer the affordability of a limited medical benefit plan with many of the traditional features of a medical insurance program, including a wide variety of co-pays, coinsurance and deductible options.

Limited medical benefit plans can be offered to employers and to individuals through trade associations. Such plan designs may be used as primary insurance or supplemental (gap) coverage. Unlike comprehensive major medical insurance, many limited medical benefit plans designs do not base their benefits on actual charges incurred. They pay based on a fixed benefit indemnity amount when various healthcare services are utilized. Limited medical benefit plans vary widely with some having an assignment of benefits, in which the provider bills the insurance company directly. Others require members to pay everything up front and then fill out a claim form and request their benefit.

Limited medical benefit plans also range widely in their levels of coverage both in types of coverage and monetary amounts. The typical limited medical plan includes doctor’s office visits, wellness, outpatient diagnostic lab and x-ray, emergency room for accident, hospital, surgical, and usually a prescription drug benefit most often seen as a discount card. Sometimes, limited medical benefit plans are offered with deductibles or co-payments. These plans may even include PPO networks, vision coverage, and prescription drug coverage, a nurse line for the purpose of reducing visits to healthcare providers, lab programs, and Flex 125 participation.

Limited medical benefit plans are usually very basic. Premiums often range from $20 to $190 for single coverage per month, depending on the level of benefits (family coverage ranges from $100 to $500). Limited medical benefit plans may require pre-existing condition limitations, be guaranteed issue, have no medical questionnaires, and no participation minimum requirements.

Many limited medical benefit plans also have a life insurance benefit. Additionally, choosing the right enrollment company is one of the most important issues to address when implementing a limited medical benefit plan. Limited medical benefit plan design is no longer considered experimental or immature. As companies across the nation are forced to drop major medical plans or ask their employees to absorb huge increases, employers are looking for ways to ease the financial burden of healthcare.

In certain situations, limited medical plans can and should be considered as a primary form of insurance. More and more brokers are being asked to replace major medical with limited medical programs. Fixed indemnity limited medical benefit plans provide intriguing answers to many of these “what if” questions.

Many carriers have made benefit enhancements that allow for plans to increase to rate levels above $200 per month. The corresponding benefits will cover a large amount of an employee’s day-to-day and minor hospital medical expenses.

There is still enormous opportunity for traditional users of limited medical plans, such as seasonal, hourly, and part-time workers. There are great limited medical programs in which individuals can pay $8 to $20 per week and receive valuable benefits that enable them to access America’s healthcare system.

Using a medical network with a limited healthcare plan is often a good option for members seeking extra value through network discounts. With these medical networks, members may receive discounts on both insured and non-insured services. Quality assurance support is available for any provider issue.

Also, using a medical concierge approach simplifies the process for the patient. The concierge case manager can even help the patient make an appointment with a provider. The concierge can contact the provider’s office (referred to as “onboarding”) to explain the member’s plan, provide eligibility verification, explain the responsibilities of provider’s office once the patient comes in for treatment, and confirm that the provider is still active in the plan’s network.

Onboarding is vital to improving provider understanding and acceptance of the limited medical benefits before the member’s office visit. It reduces the number of steps in the registration process and eliminates problems with providers not accepting the plan, members being dissatisfied at the provider’s office.

The medical concierge approach also provides real time eligibility verification, explanation-of-benefits, and claims re-pricing, which reduces confusion for the member and provider. Members only pay the portion they owe at the time they check out of the provider’s office.

In addition to these options, re-pricing letters are usually sent to providers and members after the process to improve member satisfaction and understanding of the savings. The re-pricing letters explain the network saving and direct the members to communicate any questions or concerns back to the concierge unit or plan administrator.

It is time for brokers to give limited medical programs a fresh look and put them in front of certain employers for whom they might be a viable solution. Employers that are fully educated on what limited medical plans will and will not cover are deciding to offer employees something affordable and more sustainable than major medical plans.

Limited medical benefit plans have evolved and should be in the product portfolio you consider recommending to your clients. However, as you discuss limited medical plans with your clients, keep in mind that all the same issues about limited medical plans still exist. Communication to employees is critical. Consumerism among participants must evolve. A proper examination of the level of care provided versus the level of care actually necessary is paramount.

According to the Society of Actuaries, the employer purchasing decision is different for limited benefit plans than with traditional comprehensive medical plans. For traditional medical plans, the employer funds the majority of the cost. However, in limited benefit plans, the employees typically fund the majority, if not all, of the benefits.

Seamless administration is also a critical purchasing requirement since employers implementing a limited medical benefit plan for the first time do not budget for the potential maintenance that may come with these kinds of plans. As a result it is critical to have a partnership with an insurance carrier and its administrator; it can be as important as price for the product.

Employers and insurance carriers should consider some additional strategies when purchasing or entering these product lines. First, communication is key to success. Employers and their members need to understand what is covered and not covered. Covered insureds or members are not great at reviewing their benefits and may not know what they are buying until after the fact.

Companies entering the market should be aware of the regulatory hurdles of these benefits. For example, some state regulators, who may not be comfortable with the benefits due to their limited nature, would want proper communication and documentation highlighting the differences from a comprehensive medical plan. Some states are more advanced in the limited benefits market. Insurance companies entering a market should do their homework about the local state regulatory jurisdiction in which they are interested in offering products. Doing proper due diligence is a key factor in deciding on these plans – for brokers, employers, and insurance companies.

The overall consensus is that limited medical benefit plans are good for consumers who have few other options other than being uninsured. The plans are typically less expensive, in many cases, than major medical policies and they can be used with other types of insured components, such as AD&D with an accident medical plan, critical illness, cancer plans, and other voluntary benefits, such as vision and dental.

A number of great companies offer high quality limited medical benefit plans. Offering these plans is a good way to keep employees from leaving employment when no benefits are available or the cost of major medical is prohibitive. Limited medical benefit plans offer affordable coverage for the cost of dealing with the daily aches and pains of healthcare. Passage of the new healthcare legislation will change the landscape in the insurance world dramatically over the next few years. Many items are still vague in the new legislation. They can only be given substance through the implementation of the law as Congress develops a Blue Book to define legislative intent, which will be the basis for implementation.

The future of limited medical plans will be determined by defining the terms “essential health benefit packages” and “credible coverage” and by how many Americans choose to not abide by the mandates. The cost of premiums for insurance plans that satisfy essential health coverage could continue to rise, forcing some consumers to take their chances with the penalty. This could lead to a market of consumers who decide they cannot afford to abide by the mandates. Other potential clients could be those who make too much for substantial subsidies and not enough to be mandated to get essential health coverage.

Individual plans are very likely to survive, but will be changed to meet new guidelines. The other option that may be a factor in limited medical benefit plans is that pricing may be affected to the point that the indemnity model could evolve into a gap type plan for those with plans that include high deductibles. The issues will be sorted out in the near future as analysts interpret the actual daily effects of the new law. How that translates to the structure of limited medical plans will help determine their marketability and profitability for carriers, brokers, and the healthcare community at large. At least, there are a few good years available to market them, especially to individuals. q

Mark Roberts, Manager of National Accounts Careington International & Munroe Sutton Core Five Solutions (Licensed Agent). For more information, visit


Health Close-Up

Limited Med Group Insurance From a Major Med Perspective

by David Cheek

If someone told me 15 years ago, when I became an independent major med broker, that limited medical plans were a viable alternative to the rising cost of health insurance, I would have laughed. Back then, the notion that a limited medical could be good and affordable alternative was just a claim. In fact, one would have been hard pressed to persuade employers to simply consider the option.

As a guy who has sold major medical, represented it, and even taught seminars about it, I was skeptical about limited med. My attitude has changed dramatically. Simply stated, the more I study and learn about limited med, the more passionate I become because of the opportunities I recognize for employers.

As a broker, you have to ask yourself several questions when deciding whichproducts to market. Is there a need for this product? What are the benefits? What are the differences between mini med and limited med plans? Is it priced right? And can I make some money with it? Well, let’s address some of these.

In August of 2007, the U.S. Census Bureau stated that 40.3% of employees are not covered by a health insurance plan offered by their employer. We’re all aware of the issues surrounding the uninsured population in the United States, and not to mention the impact of our troubled economy. So, is there a need for solutions? Yes, I believe so, more than ever. And with limited med plans we address two of the barriers to insurance: cost and access.

The Henry J. Kaiser Family Foundation, 2006 Employee Health Benefit Survey reveals the following facts since 2000:

• Employees are paying $1,094 more in premiums annually for family coverage, which is probably a lot higher now in 2010.

• Employment-based health insurance premiums have increased 87% compared to a cumulative inflation increase of 18% and cumulative wage growth of 20%.

• Premiums for employer-sponsored health insurance in the United States have been rising four times faster on average than workers’ earnings since 2000.

The USA Today/Kaiser Family Foundation/Harvard School of Public Health Care Costs Survey, conducted April 25-June 9, 2005, reveals the following:

Fewer U.S. employers are offering health benefits

• 23% of Americans have had difficulty paying medical bills in the past year.

• 29% of Americans say that they or a family member skipped recommended medical tests or treatment, not filled a prescription, cut pills or skipped doses of medicine because of the cost (Among those ½ say their condition got worse as a result) .

When considering the options, there are differences between mini med plans and limited med plans. A mini med is commonly called an expense-based design, in which the benefits are paid as a percentage of incurred usual and customary charges, and typically includes deductibles, co-pays and/or co-insurance, paid up front.

Limited med plans have traditionally featured an indemnity design or benefits that are paid according to a clearly defined, fixed schedule of benefits. These plans also typically offer first-dollar coverage and the benefits of a PPO network. They are structured for rate stability. And most carriers can customize the plan to fit the benefit desires of the group or the price points that the group has budgeted. These limited med plans provide employees with limited coverage to help with the everyday expenses they are most likely to incur, such as doctors office visits, prescriptions, lab work and diagnostic tests, hospital confinement, and even surgery.

They can also help pay for the costs of preventive care/wellness, accidents, emergency room visits, ambulance services, and more. For example, let’s say you have a client who needs to go to the doctor. We will assume the retail rate for that doctor visit is $125 and your client has a $60 indemnity benefit with their plan. After the PPO network people do their thing, the office visit is now, approximately $80. Your client owes $20. Now, if they were on a major med plan, with the office visit copays getting higher and higher, they would probably be out of pocket $25 or $30. If you were the client, which would you rather pay?

Another example is one that demonstrates why limited benefit plans are very good options for clients with part-time employees, non-management employees, and even companies interested in an alternative to the rising costs of major med premiums. Suppose an employee’s child breaks an arm playing soccer and goes to the emergency room at the local hospital. The bill is over $1,500. Most major med plans’ ER benefit is subject to deductible and co-insurance, but with the accident rider of most limited med plans, the child’s visit would be covered from the first dollar up to a fixed amount.

Additionally, as we all know, the most commonly used benefit of any medical plan is the prescription card. There are many options that can be paired with most limited med plans, including choices from an almost free discount card to fully insured plans. Most of those fully insured options are very similar to major med with copays and small to no deductibles.

And best of all, most limited medical plans are guaranteed issue with no underwriting. Depending on the state, most cover all pre-existing conditions with no waiting periods. In regards to pricing, they are very affordable. Even if the employer only contributes as little as 25%, the part-time employees can afford it. And, almost all carriers pay a minimum of 10% commission for the lifetime of the policy.

Who are the prospective customers for limited medical plans? They are the companies whose employees are without medical coverage, part time employees, carved out classification not offered a major med plan, and companies with classes of employees who are not eligible for the medical coverage. Some industries that have been receptive to limited med products and services are hospitality, construction, manufacturers, transportation, restaurants, security companies, landscaping, healthcare (assisted living, home healthcare, etc.), service companies, and many more.

In closing, below are a few good reasons why you should add a limited medical product offering to your portfolio:

Differentiate yourself from your other brokers

• Provide your clients with solutions-based insurance plans.

• Provide value-added benefits for your clients.

• Protect your block of business.

• Expand your marketplace.

• Increase your revenues.

The bottom line is that, if you are not offering these plans to your customers or prospects, someone else will.

David Cheek has nearly 15 years experience in the insurance business, as an independent broker specializing in health and life insurance and serving as vice president of Sales for Pan-American Benefits Solutions, a member of The Pan-American Life Insurance Group. The Group is a leading provider of insurance and financial services serving nearly half a million customers throughout the Americas. For more information visit


Health Close-UpFinding a Gold Mine in the Small Group Rate Table

Carefully Dissecting Tables for Prospects May Lead to Some Gems of Advice

by John A Middleton

We’ve all seen the dizzying array of rate tables each small group health insurer publishes in California. If an insurer has nine regions, 30 plans, seven age bands, and four rate tiers, that’s over 7,000 rates. It’s tempting to file the rate guides in your bottom drawer where they remain untouched for months until the next set of rates is published. But, if you dissect them for your prospect, you may find some gems of advice that will make the employer glad they picked you over another broker. Here some examples of what you might find. They are based on actual January 2010 California Small group rates.

Conventional Wisdom Doesn’t Always Lead You to the Correct Answer

Your Sacramento client has 11 employees with Carrier A. The client is tempted to change to Carrier B to save money because conventional wisdom says that Carrier B is cheaper. In this case, the conventional wisdom is correct, but it is a matter of degree. On average, Carrier A is often 25% to 30% higher. But it’s worth taking a closer look because changing networks always runs the risk of damaging employee morale. When an employer is considering changing their $40 co-pay HMO with Carrier A to a comparable plan with Carrier B the cost difference is 31% if their 11 employees are in these age bands and tiers:

Age_Band EO ES EC EF
0 to 29 1 0 1 0
30 to 39 2 2 1 0
40 to 49 1 0 1 1
50 to 54 0 1 0 0
But Carrier A is only 14% higher if their employees are like this:
Age_Band EO ES EC EF
0 to 29 0 0 0 0
30 to 39 2 6 0 0
40 to 49 0 0 0 0
50 to 54 2 3 0 0
In the second case, the best -strategy may not be the one suggested by conventional wisdom. It might be better to consider changing plan design or employer contribution rather than changing to Carrier B. Even if the client still wants to follow the conventional wisdom, you have made a positive impression your competitor may not have. And if they stay with Carrier A it’s more revenue for you!

Employees Over 65 Need To Be Considered Carefully

Until recently, it was unusual to have employees 65 or older. But because of the country’s recent financial difficulties more people are continuing to work because the returns on their retirement investments aren’t what they expected. They have a further incentive to keep working because they can increase their Social Security income by delaying their retirement. However, they are still eligible for Medicare at 65. So we should be expecting to see more active employees age 65 or older.

Some carriers have two rates for employees 65 and older. The lower one applies to employees for whom Medicare is primary. The higher one is for all others. If your client has employees in this age group, give careful consideration to whether a carrier differentiates. For example, Carrier A and Carrier B offer these rates in Los Angeles for a $10 HMO Plan to an employee age 65 or older with a spouse:

Carrier Medicare Status Rate

A Medicare Primary $ 2,051.00

B Medicare or no Medicare $ 2,209.76

A Medicare not Primary $ 2,625.00

So if the 65+ employees have Medicare primary, Carrier A would be the logical choice. If they do not, Carrier B may be the better option.

Review Your Census Carefully Before Recommending an Employer Contribution Level

Without doing the math for each client, you can’t say for sure what the impact is of changing employer contributions. Having an employer contribution level of 100% of the single rate may be a good idea most of the time. But, if your client has an older population or a lot of dependents, contributing 50% of all tiers may result in approximately the same employer dollar contribution being spread around more evenly for all employees. For example, an employer with 15 employees with a $1,000 deductible PPO plan in San Bernardino County is roughly $4,600 in each of these three situations:

Standard Census of 15 Subscribers

Employer Contribution = 100% of the single rate

0 to 29 6
30 to 39 4 1
40 to 49 2 1
50 to 54 1
55 to 59
60 to 64
65+ $5,583.00 Total Plan Cost
$4,652.00 Employer Contribution

Census of 15 subscribers with many dependents

Employer Contribution = 50% of employee and dependent rate

0 to 29 2 2 3 1
30 to 39 1 2 1
40 to 49 1 1
50 to 54 1
55 to 59
60 to 64 $9,331.00 Total Plan Cost
65+ $4,665.50 Employer Contribution

Census of 15 subscribers with many older employees

Employer Contribution = 50% of employee and dependent rate

0 to 29 2 2 1 1
30 to 39 1 1
40 to 49 2 1
50 to 54 1
55 to 59 1 1
60 to 64 1 $9,241.00 Total Plan Cost
65+ $4,620.50 Employer Contribution

What’s True in One Part of The State May Not be True in Another

If you do a lot of business with one carrier, you may get used to one part of the state routinely being a little more expensive than another. But don’t assume it’s the same with a quote from another carrier with which you’re not as familiar.

For example, if you are used to doing business with Carrier A, you may not be surprised to find that the cost in San Francisco is 12% higher than in San Bernardino. But if you try out Carrier B, you may be shocked to find that the cost in San Francisco is 26% higher – more than twice as high as you are used to. Carrier B does offer a limited network in San Bernardino, but not in San Francisco, so the carrier is a really tough sale there:


Network County Premium

Carrier A

standard San Francisco 112%

standard San Bernardino 100%

Carrier B

standard San Francisco 126%

standard San Bernardino 100%

limited San Francisco n/a

limited San Bernardino 88%

Suddenly, you may be remembering why you don’t do much business with Carrier B!

These are just a few examples of what can be found. I find another gem of wisdom in almost every quote I review. So don’t let data overload make you miss an opportunity to show your customer something they (and maybe even you) didn’t know before.

John A Middleton is a Pricing Consultant. He can be reached at


Health Close-Up

Health Savings Accounts Not Always the Right Remedy

by Mark Reynolds, RHU

The Health Savings Account (HSA) concept goes back as far as 1984 and takes its root in the individual retirement account (IRA) and later from Medical Savings Accounts (MSA). Over 25 years, the HSA idea has evolved to what we know today. The HSA was initially intended to be a medical or healthcare savings vehicle for financially frugal people.

But the HSA has become a way for small and large employers to lower or at least control the cost of providing benefits to employees. Health savings accounts can be a successful funding mechanism for frugal thrifty employees when funded by employees. However HSAs implemented with the employer funding the employee’s HSA is seldom a workable or successful strategy.

For many employers, the concept has not met their expectations of allowing them to lower premiums and overall plan cost while providing a rich benefit package to retain employees. It seems like a great concept: An HSA is a tax-sheltered account for people enrolled in a high deductible health plan (HDHPs), which is not a health insurance policy in itself. The HSA is a financial vehicle for HDHP members who may use tax-free HSA dollars to purchase healthcare up to their required deductible.

HSAs and HDHPs are part of a -family of health insurance products often referred to as “consumer-directed healthcare.” Supporters of this type of health insurance reason that a higher deductible will encourage people to be wiser consumers since they will be responsible for the cost of healthcare below the deductibles. So, what’s the problem? To begin with, most employers are funding the HSA for their employees.

It may seem like a reasonable way to lower costs while maintaining a healthy benefit package. But employers have run into a couple of obstacles. An employer that is funding the HSA may not be lowering the costs on the health plan after all. Take a look at chart A. This 17-life group switched from its traditional $500 deductible 70/30 coinsurance plan to a $3,000 HSA. The premium went from $111,192 annually to $73,536. This employer got an instant decrease in cost of $37,656. Those are good results.

However, the employees now have a high deductible health plan with no additional benefits built in. The employees will not enjoy benefits until they pay $3,000 out-of-pocket. That’s not quite the attractive employee retention package we mentioned above. We make it attractive by funding the employee’s deductible. Let’s assume that the employer only funds 50% of the deductible. It would look something like chart B. The employer’s cost is now $99,036 annually because the employer just added $25,500 to its cost. The employee will enjoy $1,500 of benefits paid at 100% by the employer. The employer will see its annual savings drop to $12,156. Now, 50% is on the low end of the scale. Many employers are funding 75% of the deductible for employees.

You read it right if you noticed that the employer is spending more on this health plan than it did with the traditional plan. The employer is now paying $111,786 annually. Costs were increased by $594 and the employees now get a plan that has 100% coverage up to $2,250. That’s a good deal for the employee, but not so good for the employer.

I could stop there, but I will take this one step further and show you the lack of cost reduction for employers that fund the HSA at 100%. The employer is paying $124,536 as opposed to the $111,192 it paid before funding the HSA. The employee has a plan with 100% coverage under the deductible, which means there is no employee accountability and the concept of creating a wiser consumer just went out the door.

What happens when the employer doesn’t fund the account? We experience unhappy providers. Many healthcare providers are seeing a growing trend with unpaid medical claims, under-funded HSA accounts, and additional accounting expenses in trying to collect for unpaid bills. Employees often cannot afford the expense of meeting the higher deductibles. This affects healthcare providers, employers, and employees. The employees don’t value the plan and employers can no longer attract or retain good employees with their company’s medical plans.

Whether employees actually use the plan or not, their out-of-pocket costs go up in two ways. Their payroll contributions and an out-of–pocket maximums increase, which can reach over $10,000 per year on the most popular plans. Many employees go without much needed care because they can’t afford the rising costs.

What’s the end result? Providers have the burden of treating patients with illnesses that could have been prevented with basic preventive care, which the patients overlooked because they didn’t have funds in their HSAs.

The numbers reflected in the charts above are actual rates for the 17-life group shown as of October 1, 2009. However, many of you will be delivering renewals on your client’s HSA Plans with an average increase of 40% to 55%.

If you’re a thrill seeker, you may enjoy the roller coaster we call “HSA premiums,” although I am sure that the majority of us would prefer more stability. We are seeing a plethora of insurance carriers coming into the market with rates that are far below other plans being offered. You may help your clients find the right plan with the most savings only to discover that premiums have increased drastically and you are shopping again one year later. We saw this in 2006, 2008, 2009, and it appears that 2010 is going to be a record year for premium increases on the HSA plans.

Most employers that have been funding the HSA for their employees can’t afford to continue or are unwilling to continue. This leaves the employee with catastrophic coverage when the employee doesn’t fund their HSA account.

We often see employers become disenchanted with their plan or downright angry because the HSA plan premium just went up 40% to 60%. In addition, employers see that some of their employees have stockpiled employer-paid money in their HSA account while the employer is fighting to keep its doors open in this economy.

Education is another major problem. Many members don’t know how the HSA works and don’t recognize its value as a new way of financing healthcare. It is becoming clear that the insurance industry’s short-term solution of having an HDHP and an HSA is creating a long-term problem, which may explode into an even larger problem. It comes down to the employer giving its money to the employees or the employer relying on the employees to fund the account. That’s not a win-win situation for the employer.

Hang in there, you’ve got options. Many employers have not thrown out the HDHP portion of the plan, but have replaced the HSA concept with a health reimbursement arrangement (HRA) or medical expense reimbursement plan (MERP). A standard HRA/MERP tends to save the employer 30% to 50% in its overall plan cost and provides a plan that looks and feels like a traditional plan. The employee and the employer share responsibility up to the deductible increasing accountability and keeping some skin in the game for the employee. The employer saves, the employee values the plan, and providers get paid. The good news is that your HSA employers will welcome the concept and you can be the benefit hero you want to be.

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, he has played a leadership role in the industry, serving as a founding member of the Inland Empire Association of Health Underwriters and past president of the Healthcare Administrators Association (HCAA).


Group Retirement

Rethinking Rollover Strategies to Create Tax Savings

by Thomas McGirr and Kevin O’Fee

Taxes are the greatest expense for high-income retirees, representing about one out of every three dollars, according to research by Lincoln Financial Group and The Spectrem Group. Nearly a quarter of retirees say they do nothing to minimize their taxes and more than 40% of respondents say that taxes turned out to be a greater retirement expense than they anticipated.

In today’s economy, many Americans are changing jobs, coping with recently losing a job, or looking for a new career path. When these life changes happen, people don’t always consider how the assets in their company sponsored retirement plans can be put to the best use and how to minimize taxes in retirement.

With today’s economic climate and tax rates expected to rise, it’s more important than ever to make an informed rollover decision. Traditionally, there have been four options for rolling over defined contribution assets:

1. Stay in the plan.

2. Roll over to an IRA.

3. Take cash distribution.

4. Roll to a new plan.

But, for the first time ever, high-income clients have a fifth option to consider – rolling over defined-contribution assets directly into a Roth IRA. The Tax Increase Prevention and Reconciliation Act of 2005 includes a provision that eliminates income limits on Roth IRA conversions. While taxes will be owed on amounts converted to a Roth IRA, the assets can grow tax-free and they won’t be subject to required minimum distributions.

Advisors may want to consider the following when recommending a Roth IRA rollover from a retirement plan:

• Given that tax rates are historically low, converting at least a portion of eligible retirement assets may be a prudent way to hedge against the potential for higher local, state, and federal income taxes.

• Converting current account balances, which have yet to fully recover from market declines, means having lower conversion taxes. Once assets are converted to a Roth IRA, they have the opportunity to appreciate in an income tax-free account.

• The plan may allow the client to take an in-service, non-hardship withdrawal. This would allow the client to rollover defined contribution assets to a Roth IRA without separating from service. This information can be found by reading the plan document or checking with the plan administrator.

• Roth IRA owners are not subject to required minimum distributions and distributions are generally income tax-free. Non-spousal beneficiaries are subject to required minimum distributions (also generally income tax-free). The distributions can be stretched like a traditional IRA, which can play a major role in estate planning decisions.

• The tax-free aspect of a Roth IRA creates compelling asset allocation opportunities for high-income clients. Advisors need to address whether Roth assets can become part of the client’s tax-exempt income strategy. They need to ask their clients questions, such as “Do income guarantees matter to you?” and “Is long-term growth an objective?”

• If the defined contribution plan offers a Roth feature, help the client determine whether making after-tax contributions to the Roth makes more sense than making traditional pre-tax-contributions. Be sure to do this in the context of the client’s Roth conversion strategy.

• Determine whether the client has after-tax contributions in their traditional IRA before rolling over pre-tax defined contribution assets. After-tax assets cannot be segregated from pre-tax assets and converted tax-free to a Roth IRA. Instead, taxes would be owed on the proportionate share of pretax and after-tax assets converted to a Roth IRA.

Consider Net Unrealized Appreciation

You may want to consider a tax-strategy known as “net unrealized appreciation” for clients who have highly appreciated company stock in their former employer’s retirement plan. With net unrealized appreciation, clients are taxed now on the cost basis of the stock, but the appreciated balance is not taxed until the sale of the stock and then only at the long-term capital gains tax rate. Similar to Roth conversions, paying the taxes from another source of money allows assets to continue growing toward your client’s retirement goals. To exercise net unrealized appreciation, a lump-sum distribution must be taken and the shares of company stock must move in-kind to a non-retirement brokerage account. Non-company stock holdings from the plan can still be rolled to a traditional or Roth IRA in cash or in kind, if available.

The potential advantages of a net unrealized appreciation are magnified based on the appreciation of the underlying stock. Future capital gains tax rates and ordinary income tax rates are unknown. However, you can provide clients with broad tax-diversification when you use a net unrealized appreciation strategy along with a Roth strategy as part of an overall retirement plan. It can also create greater flexibility in retirement for developing a tax-minimizing distribution plan based on federal and state tax laws at that time.

The new Roth conversion rules should be a catalyst to reassess traditional rollover strategies. Regardless of the conversion decision, advisors and their clients will be well served by evaluating the potential benefits of rolling over retirement plan assets to a Roth IRA. It will help differentiate advisors in this increasingly competitive lump-sum market. Furthermore, it’s essential to do so since taxes continue to represent such a significant expense for high-income retirees.


Thomas McGirr is head of Rollover Consulting for Lincoln Financial Group and Kevin O’Fee, vice president of Retirement Strategies, Marketing for Lincoln Financial Group. For additional information visit or contact



Reeling In Voluntary Benefit Sales

We Get Below the Surface in our Annual View from the Top

by Leila Morris

Industry executives tell us that several factors are making 2010 a banner year for the voluntary benefits industry. In today’s economy, many employers simply can’t afford to offer a rich package of fully paid benefits. At the same time, the economy has woken people up to the need to protect their families from financial disaster. Voluntary-employee paid benefits offer a compelling solution. They give employees access to lower group rates while allowing employers to offer coverage at no cost to them. In addition, as today’s workforce becomes increasingly diverse, voluntary benefits allow employers to go above and beyond the one-size-fits-all benefit package to meet the needs of a diverse workforce. The following article lays out the trends and the path to success for brokers.

1) What is a compelling argument for employees to have extra money taken out of their paychecks for voluntary benefits when they are cutting back on all kinds of small expenditures in a tough economy?

Scott R. Llewellyn

Scott R. Llewellyn, Western Regional sales vice president for -Ameritas Group: Insurance can limit your unexpected expenses down the road, so financially it makes sense. I think most people understand how insurance helps pay for the unexpected costs and can in the end save you money. But, when you think about it, what is more important than maintaining your health. Take dental, for example; regular dental check-ups and cleanings, which are normally covered 100% with most dental plans, really help keep teeth and gums healthy. In any economy, you have very little if you don’t have your health. This goes for protecting your family with life insurance or making sure your children can see by having a vision benefit to cover their exam and glasses. What is more important than health and family?

Robert Risk

Robert (Bob) Risk, vice president, Group Protection Sales, Lincoln Financial Group: The importance of income protection becomes even more obvious during a tough economy. Last year helped many realize the impact of being laid-off. For those who remained employed, there was recognition that, while things were tough, it could have been much worse without an income. Paying for voluntary benefits through their employers is a cost-effective way for employees to purchase the income protection (disability insurance) and family protection (life insurance) they need. Additionally, these types of benefits are significantly cheaper than the cost of health insurance. With automatic payroll deduction, employers offered an easy way for employees to elect the coverage.

Brian Vestergaard

Brian Vestergaard, VP Product and Marketing for LifeSecure Insurance Company: A product like long-term care insurance has become even more important in economic conditions like the present. As employees (and retirees) have experienced dwindling returns and negative growth on their retirement savings (401ks or other retirement assets), protecting those remaining values becomes important. More than 60% of Americans over 65 will need some amount of long-term care services during their lives. And long-term care services can be very expensive – ranging from $25,000 per year for basic home care assistance to more than $75,000 per year (average) for care in a nursing home. No other insurance covers these expenses. LTC services can quickly deplete one’s retirement savings.

Elena Wu

Elena Wu. Group Marketing Officer and Steve Toby is director, Worksite Marketing, The Guardian Life Insurance Company of America: As today’s workforce becomes increasingly diverse along age, gender, life stage, and ethnic lines, voluntary benefits provide a great way to customize employee benefits so that businesses don’t have to force a one-size-fits-all benefit package on a diverse workforce. The type of benefits that are important to a 65-year-old employee approaching retirement may not be the same as their 35-year-old colleague with a new family.

Additionally, when an employer sponsors a benefit on a voluntary basis, necessary protection is more accessible from an underwriting and financial standpoint. It boils down to having more benefits and more choices for less than what employees would pay if they had to buy protection on their own, outside of the workplace.

Employees who are living from paycheck-to-paycheck are often the ones who benefit the most from the financial leverage that is created when they buy financial protection products in a group environment. Tough situations like facing a disability or death, or even getting routine dental care are even tougher to manage without insurance.

The extra money to pay for benefits can often be found by shifting priorities. Financial experts often help their clients find money by changing behavior, such as reducing dependence on credit card debt, kicking luxury coffee habits, and taking advantage of free culture and entertainment events. Employees often overestimate the cost of non-medical benefits and they don’t realize that they can secure protection for just a few dollars each month and use money found from cutting back on non-essentials. Enrolling in an employee benefit earlier rather than later can also be advantageous. For example, having voluntary life insurance coverage that increases an insured’s coverage amounts automatically each year, builds up greater coverage than what the initially signed up for. Neither the employee nor employer has to do anything. These increases have no affect to premiums so it pays to enroll early.

Jay Hutchins

Jay Hutchins Vice President, Broker Marketing, Colonial Life & Accident Insurance Company: The economy may be tough, but employees shouldn’t cut back on their insurance plans, especially those that help protect their financial risk, such as life, disability, and critical illness coverage. These products can provide benefits that help employees and their families maintain their lifestyles when they need help the most.

Tim Knott

Tim Knott, SVP, Voluntary — Assurant Employee Benefits: The economy seems to have made people more aware of their financial security or lack thereof. Seeing friends and family lose jobs and fall into debt heightens the awareness to protect our own income from risk, such as job loss, unforeseen illnesses, or accidents.

Shawn Smith, Territory vice president, Transamerica Worksite Marketing: Our overall worksite business was up 40% in 2008. With most of our personal savings and retirement assets reduced significantly over the past year, voluntary insurance products become more valuable to the employee and their families. The most affordable and convenient way to purchase important individual insurance products is through payroll deduction at the workplace.

Mark El-Tawil

Mark El-Tawil, Humana: The economic downturn has most people reassessing their personal financial strategy and, for many, this includes revisiting their employee benefits. As more employers are moving toward consumer-directed health plans, voluntary benefits fill substantial financial gaps in coverage, preventing exposure to uninsured risk.

For instance, according to the American Cancer Society, 59 percent of costs associated with cancer treatment are non-medically related and not typically covered by a medical plan. For just a few dollars a month, cancer insurance can help with those kinds of costs, which might otherwise result in personal financial ruin.

Glenn Petersen

Glenn Petersen, MetLife: For employees, the economic climate has served as a wake-up call that financial protection is a growing priority. MetLife’s 8th annual Employee Benefits Trends Study found that 89% of employees are interested in their employer providing a greater array of employee benefits that they can choose to pay for on their own, and nearly six in ten employees say that payroll deduction is a convenient way to pay their premiums. Payroll deduction not only helps employees with budgeting their premium payments, but depending upon the benefit, this payment method could qualify employees for additional discounts and/or waiving the requirement for down payments.

2) Considering that brokers generally make less commission on voluntary benefits, how can they offer these benefits to clients in an efficient way that provides a good return-on-investment for the broker’s efforts?

Tim Knott, Assurant Employee Benefits: Well, it’s not always the case that brokers make less commission! We offer a higher commission scale because we know more work goes into selling voluntary. We also provide tools and resources to help increase a broker’s return-on-investment, such as personalized enrollment forms or providing enrollers to increase participation. I think the industry understands that selling voluntary can require more work. The industry wants to make it rewarding for brokers.

Elena Wu and Steve Toby, Guardian Life: Voluntary benefits can help close the deal when employers are reluctant to offer a benefit because they are struggling with budget constraints. A voluntary employee benefits solution enables the broker to sell a valued product that will cost an employer little to nothing while helping the employer retain talent and maintain morale. It helps to keep the relationship with an employer intact, which may lead to additional sales opportunities when times are better. The most effective packages often include a combination of voluntary benefits and employer-paid benefits that complement and enhance each other’s value.

It isn’t one versus the other. The supplemental approach bolsters the value that the broker brings to the table. The most successful brokers provide expert enrollment services or they lean on carriers for enrollment support. Experienced carriers even waive minimum participation requirements for many voluntary plans when industry-best enrollment recommendations are followed to ensure offering voluntary is worry-free.

Brian Vestergaard, LifeSecure: Voluntary long-term care insurance is still recognized as a product that requires extensive education of the buyer and good marketing and enrollment worksite campaigns. It is one voluntary product for which insurance companies still tend to compensate the agents at full- or near-full commission structures.

Jay Hutchins, Colonial Life: Find a voluntary benefits carrier that offers your agency a turnkey operation that consists of products, benefits communication, education, and enrollment services. A turnkey carrier can help you determine the best solutions for your clients and then take care of the rest for you. You don’t have to be the expert. It’s like having a free employee for your agency who handles the work and pays you commissions.

Shawn Smith, Transamerica Worksite Marketing: We find that a broker’s percentage of commissions will more than double compared to the core benefit commissions depending upon the voluntary products selected. I’m seeing a stronger broker push towards offering voluntary critical illness, cancer, accident, and term life insurance on an employer sponsored website with call center backup.

Brokers will retain a higher percentage of commissions when offering voluntary products via website. Website employee participation will suffer unless the employee is required to enroll via website and/or call center and the employee must view and take action to opt in or out of the voluntary product offering.

Strong employer support is critical to the ROI for the broker. A good broker will stress to their clients the positive impact of the voluntary benefit program and how imperative employee access or working conditions are for a successful voluntary benefits offering.

Scott Llewellyn, Ameritas Group: With reduced costs, it is now more financially sound for brokers to be involved in voluntary benefits. From Facebook to Twitter, e-mail to Google, everyone is online these days. Many brokers are working with employers to distribute information on voluntary benefits via their intranet — company website or e-mail. Employers post their voluntary products and enrollment procedures right online. Just like returning an e-mail, employees are now able to enroll in benefits in a very economical and easy fashion.

Bob Risk, Lincoln Financial Group: I don’t know that that’s necessarily true; compared to what — employer-funded benefits like Life and DI? They probably make as much if not more on voluntary. Enrollment and communication can be relied upon through the carrier to make sure it goes well. Additionally, offering voluntary benefits can also be an income generator for brokers and a way to retain business. By offering additional benefit options, they can more easily meet the varying needs of employers, which encourages employers to remain with them instead of moving to another broker.

Mark El-Tawil, Humana: This is not necessarily true. Brokers receive highly competitive first-year and renewal commissions on voluntary benefits. Studies show how employers that currently offer voluntary plans appear willing to add additional product lines. Selling voluntary benefits provides the broker the tools to help employers manage their medical plan costs with a multi-year product and funding strategy. These unique strategies can help brokers to win more new customers as well. By selling multiple product lines, brokers can maximize their compensation by providing a comprehensive solution to their clients.

3) How can you tell whether a particular voluntary benefit product will provide real value to your clients?

Shawn Smith, Transamerica Worksite Marketing: I think most insurance professionals agree that medical, disability, and life insurance are the three most valuable individual insurance products that every working person should own. The value is to each employee will differ based on the person’s needs. To be competitive in today’s marketplace, employers should offer a well-rounded benefit program that includes meaningful voluntary benefit products.

Today, most employers have reduced medical benefits by increasing the deductibles and coinsurances to be capable of offering affordable family catastrophic medical coverage.

Offering voluntary products that provide first-dollar benefits paid directly to the employee for unpredictable accidents and illnesses will help offset the employees new financial exposure in their cost-sharing medical plan.

Bob Risk, Lincoln Financial Group: The broker needs to know the overall benefit package being offered to employees. All products provide value; it’s important to match to the underlying program, offered by the employer, to ensure that the offerings make sense together. For example, if the employer already offers a life insurance plan that provides up to three times salary, additional voluntary benefits may not be necessary. However, if the employer only offers a small base amount of life insurance, then it would be of value to offer a complementary voluntary option. It really depends on what the employer offers. However, there is always a need for a long-term disability program.

Jay Hutchins, Colonial Life: Voluntary products add value to the policyholder because they’re designed to help fill gaps in coverage and add additional protection for their financial risks. Different people have different coverage needs. One employee may need more life insurance. One may have a family history of cancer. Every employee can benefit from voluntary benefits.

Scott R. Llewellyn, Ameritas Group: In general, the advantage of offering a variety of voluntary benefits is that members can pick and choose what they need most. What is important to one employee may not be important to another. Term life for a 20-year-old single employee may not be what they are looking for, but maybe this same employee is in the middle of buying his first home and wants the security of having insurance for legal assistance. Because voluntary benefits are often listed on a menu, what might look good to one person may not for another; that is the real value of offering voluntary benefits.

Brian Vestergaard, LifeSecure: Companies that sell long-term care insurance and agents who represent the product, tend to be very strong believers in the value of long-term care protection. This value is often apparent just through their sharing of personal caregiving experiences that take place within their own families. Almost all workers can envision or share a story of a close family member or friend who has been in a long-term care situation. The resulting financial struggle (unless the particular patient qualified for Medicaid) is enough for the individual to take pause and consider the additional financial protection.

Tim Knott, Assurant Employee Benefits: First, look at what’s offered at the group level. There may be some gaps in the overall benefits offered; that’s where voluntary comes in handy. Second, think about the life stages of employees. Many newly married men or women with families may want additional life insurance; on the other hand, young singles may not. Taking those two things into account will help employers offer voluntary benefits that will be most useful to their employees.

Elena Wu and Steve Toby, Guardian Life: Support starts with raising awareness of plan offerings and helping employees through the enrollment process with services like on-site group meetings, enrollment kits personalized to each employee, online enrollment, and phone support. Brokers and employers who follow simple, proven enrollment recommendations have their minimum participation rates waived. Our research shows that consumers often value key benefits through an educational approach when you describe what the coverage will do for them, but they don’t always realize what they are getting based on the name of the product. For example if you say to someone do you value protection that would give you a lump-sum of cash if you are recovering from a major illness most will say, “yes.” But if you ask them if they value critical illness protection, they might not understand the value proposition. Having multi-channel support that helps a diverse workforce understand the benefit package is critical when you are rolling out a voluntary program.

Mark El-Tawil, Humana: Take time to understand the needs of your clients. It’s important to listen to your clients and ask questions to ensure you are providing the solutions that align with their needs. Start by inventorying their current employer sponsored benefits as well as their employee pay all programs. Learn more about the demographics of the employee population. This analysis will show where the employer is providing adequate coverage and other areas of exposure. You can then recommend voluntary benefits that are most appropriate for the employees and will allow them to fill gaps in coverage.

Glenn Petersen, MetLife: Benefits programs can go a long way toward contributing to employee loyalty and retention. MetLife’s 8th annual Employee Benefits Trends Study revealed an increased correlation between benefits satisfaction and job satisfaction, and 69% of employees that were very satisfied with their benefits indicated that benefits were a reason to stay with their current employer (compared to only 12% of employees that reported low benefits satisfaction). Maintaining benefits satisfaction will be imperative once the job market improves as a tool for retaining top talent.

A solid understanding of the benefits trends across a particular industry, and also among employers of similar size and geography, is important in the competition for talent. Also important is understanding the preferences of the employee demographics comprising a client’s workforce. Using MetLife’s Benefits Benchmarking Tool can help brokers and advisors develop a benefits strategy that takes into account the preferences and attitudes of a particular employee population, which in turn enables more strategic discussions with clients. MetLife’s Benefits Benchmarking Tool, available at, provides an easy way to compare and contrast benefits offerings, objectives, strategies and preferences across more than 80 dimensions.

4) Are there certain types of voluntary benefits that go well with different types of employer groups, such as blue collar vs. white collar?

Jay Hutchins, Colonial Life: It depends on a person’s needs. Look for a carrier that has a wide variety of products and flexibility to meet pretty much every employee’s needs.

Bob Risk, Lincoln Financial Group: Dental is essentially a universal coverage. With other coverages, the perception of need is what varies and the lines are getting blurred. Blue-collar groups will likely continue to equate the need for short-term disability (STD) or accident coverage with worker’s compensation coverage; they view worker’s comp as coverage that protects them on the job while accident or STD covers them off the job. However, they may not envision the need for long term disability protection as easily as white-collar workers.

Brian Vestergaard, LifeSecure: Long-term care tends to be more popular among white-collar industries, but still receives good attention from most all upper middle-income ranges. Remember, the very poor can qualify for Medicaid after most personal assets are depleted; the very rich can self-insure for their LTC risks, but the remainder (the whole middle class and upper middle class) really do need to consider the added financial protection of long-term care insurance. They may have saved diligently for comfortable retirement years, but also need to now protect such savings.

Tim Knott, Assurant Employee Benefits: There’s not much of a difference in basic needs for these two groups; it includes any person who wants to make sure they’re protecting their income in the right way. However, as a very broad generalization, white-collar employers may offer more employer-paid benefits whereas blue-collar employees might have a bigger need for voluntary benefits. Being able to offer cost-conscious options would be important there.

Scott R. Llewellyn, Ameritas Group: With the economy affecting nearly every employer, voluntary benefits are important to offer to all employers. With so many carriers offering voluntary benefits, brokers can tailor an offering specific to the needs of the employer regardless of their color of collar.

Elena Wu and Steve Toby, Guardian Life: The appeal of voluntary benefits crosses many employee demographics. According to Guardian research, employee interest in voluntary insurance products is strongest among professional and managerial employees. That’s not surprising since they generally have more income to protect and might have more discretionary income to fund their benefits. But blue collar and clerical workers also express interest in voluntary coverage and the appeal isn’t exclusive to any employee segment. A 2009 Guardian study revealed that nearly half of employees would prefer to have layoffs at their companies as opposed to losing their benefits. Women (60%) were more likely than men (44%) to consider obtaining benefits on a voluntary basis (employee-paid) if their employer did not offer coverage, but made it available at work. Full-time employees (52%) and employees making more than $50,000 (54%) were more inclined to prefer layoffs to benefit reductions than part-time workers (37%) and lower income earners (36%). The survey results consistently show that benefits are important to employees. In fact, nearly 10% of full-time employees said that they were postponing a divorce and another 6% were accelerating a marriage to obtain or keep their benefits coverage. Guardian research also shows that employees tend to overestimate the cost of their group benefits.

As employees take on more financial responsibility for their benefits it becomes increasingly important to educate them about the value and the relative affordability of voluntary benefits. Sometimes there is a perception that voluntary offerings are less robust than employer-paid benefits.

Shawn Smith, Transamerica Worksite Marketing: The need for voluntary benefits is very similar across all employer demographics. The primary difference would be the amount of protection necessary to fulfill ones personal insurance objectives. Based on incomes, I believe individual Long-term care would be one product that I would not offer to a blue-collar group.

Mark El-Tawil, Humana: Voluntary benefits fit all types of employer groups because they meet a variety of employees’ lifestyle and life-stage needs. Disability and life are among the most sought-after benefits and both employers and their employees generally understand how these products work. Accident, critical illness/cancer, and supplemental health coverage are ideal complements to the group medical plan they may already have in place. The American Cancer Association estimates that two-thirds of the total cost of fighting heart-disease, cancer and stroke comes directly out of the patient’s pocket. Also, recent studies have reported that more than 200,000 children go to the emergency room because of playground-related injuries each year.

5) Which voluntary benefits are becoming more or less popular?

Bob Risk, Lincoln Financial Group: It seems like dental is very popular and voluntary (term) life also continues to be one of the most widely sold programs. Voluntary benefits are still popular, overall, as a way for employers to offer quality cost- effective coverage to employees.

Brian Vestergaard, LifeSecure: Long-term care insurance is still finding its exact footing in the worksite arenas, but over the past several years, worksite sales of LTC insurance have experienced much stronger new business growth rates than pure individual (face-to-face) sales. LTC is a perfect alignment with healthcare considerations; it is really a continuum of the healthcare spectrum. An individual with a high deductible health plan and an HSA can use funds from the HSA to pay for long-term care insurance on a pre-tax basis up to certain limits.

Shawn Smith, Transamerica Worksite Marketing: In today’s economy I see bundling of products becoming more popular. Bundling life, long-term care and critical illness can save an employee on average 40% over buying each product on a stand-alone basis. Limited medical plans have gained in popularity over the past year primarily due to economic conditions have forced employers to move full-time employees to part-time status in lieu of layoffs, in-turn hiring more part-time employees as opposed to full-time. In our business, I see cancer insurance losing some traction to critical illness insurance. Critical illness insurance provides lump sum first dollar benefits for diagnosis of several other illnesses besides cancer.

Tim Knott, Assurant Employee Benefits: Voluntary benefits, in general, are becoming more popular. I think we’ve seen vision, term life, accident, and critical illness products increase over the last few years. There may be more awareness for these types of coverages and the growing need to protect income.

Scott R. Llewellyn, Ameritas Group: There are a lot of voluntary benefits on the market today. Worksite programs can offer a huge range of products, including, legal, pet, and cancer insurance — to mention only a few. But during these times of limited available funds, dental, vision, life and disability seem to be the most popular.

Elena Wu and Steve Toby, Guardian Life: A recent Guardian study revealed that disability and vision insurance are top voluntary choices. Since disability and vision insurance have a relatively lower penetration in the workplace, it isn’t surprising that employees said they would be willing to pay for these benefits on a voluntary basis. A lot of employers already pay for dental and life insurance so employees might not be as willing to offer to pay extra for coverage that they already have. But, if an employer can’t afford to maintain dental insurance and it’s a choice between not having it or gaining access on a voluntary basis, employees would most likely choose voluntary dental. Dental insurance is enormously popular as a voluntary benefit. Dental is an affordable highly valued benefit and works well in a voluntary environment. Particularly when the employer previously did not offer dental coverage and now wants to bolster their benefits package without adding to their fixed costs. We are also seeing a lot of employers offer a base line of coverage for disability, life and critical illness and then they give their employees the option to buy-up on a voluntary basis.

Jay Hutchins, Colonial Life: Jay Hutchins, Colonial Life: With the focus around increasing healthcare costs and rising major medial deductibles, we’re seeing a large increase in employees who want to purchase supplemental health plans. Hospital confinement indemnity, cancer and critical illness plans are very popular because they have real value to employees right now. Employees see the headlines about healthcare problems, and they have friends or family members who have been touched by cancer. They realize the financial risks they face. Voluntary dental seems to be less popular. It has been around for a long time and the coverage hasn’t changed that much.

Mark El-Tawil, Humana: Critical Illness, accident and hospital indemnity are very popular. Consumers facing changes to medical plans, including higher deductibles, are often not able to afford the expenses that are associated with an accident or serious illness. Expenses are not limited to actual medical care; many other family and other household expenses are incurred when an employee is injured or needs significant medical care and is unable to work. A majority of American employees are living paycheck to paycheck and are unprepared for these prohibitive expenses. Unexpected illnesses and injuries cause 350,000 personal bankruptcies each year – according to the Council on Disability Awareness, 2008.

Glenn Petersen, MetLife: Voluntary offerings are up across all group products, but particularly for Critical Illness Insurance (CII) and Auto & Home. CII is an ideal offering particularly when employers are making changes to their medical plans, such as switching to a high deductible plan. Of the Critical Illness cases MetLife implemented in 2009, the product has been most successful when it is offered alongside other benefits (especially medical insurance), during open enrollment. CII is an effective complement to medical coverage and disability income protection to help fill in the financial protection gaps that become apparent when major illnesses create a spike in expenses not covered by traditional insurance. Auto & Home is popular as a voluntary benefit because it provides employees with access to group rate savings on coverages they likely already have.

Legal plans are another area of growing interest. Comparing 2009 vs. 2008, employee usage is up 213% for refinancings and home equity loans, 103% for property tax assessments, 62% for personal bankruptcy and 34% for debt collection defense, among other matters. Enrollment in group legal plans is also growing since employees facing financial pressures are unlikely to be able to afford a private attorney on their own. Employees also appreciate the value of the legal plan for long-term legal needs such as wills and trusts. Enrollment at many organizations that implemented a Hyatt Legal Plan through MetLife with a start date of January 2010 surged well above average enrollment figures.

6) How do you choose a carrier?

Bob Risk, Lincoln Financial Group: Based on ease of doing business, the carrier must offer quality products, the strength of enrollment support desired by the employer, and quality administration support with billing, future enrollments, etc.

Shawn Smith, Transamerica Worksite Marketing: As equally, if not more important than the product is the enrollment process. Strong employer support and a strong enrollment team will generally lead to a high employee participation percentage.

Tim Knott, Assurant Employee Benefits: I think there are three things that anyone should think about when selecting a carrier. First, what’s their reputation for service in both claims and administration? Are they going to be easy to work with when you need them? Second, what kind of additional tools and resources do they offer to help you through the enrollment process? And third, look at their financials. You want to do business with someone who will be around to pay your claim in 10 years!

Scott R. Llewellyn, Ameritas Group: I think it is all about relationships; do you know your carrier rep? Have you worked with the company in the past? What is their service like? Are they there when you need them? Keeping your clients happy is job number one, so you need someone that you can trust. Avoid going with the cheapest carrier. Sometimes you get what you pay for. Do you really want your benefits from the lower bidder, especially voluntary benefits that can be a little more work-intensive? I don’t think so. Someone is always trying to buy the business in the first year. Just wait until the renewal comes, yikes. I think you want to take the solid stable company with the reasonable rates.

Elena Wu and Steve Toby, Guardian Life: Brokers should work with carriers that make an ongoing effort to understand the needs of their clients and offer a breadth of products and services that make it easier for brokers to help employers and their employees

Mark El-Tawil, Humana: Look for carriers that have a long tenure offering voluntary benefit plans. Carriers need to have an effective benefit communication strategy and an ability to enroll employers in a wide variety of benefit plans. Carriers must also be able to streamline new case installation, offer a billing process and provide excellent ongoing customer service. They must thoroughly understand employer paid benefits as well as voluntary benefit programs. It is important to offer complementary products that are appropriate for the employer and employees.

Glenn Petersen, MetLife: Look for a carrier that has a long history of offering voluntary benefits and can provide a broad suite of market-leading products and solutions. It is also important for a carrier to offer diverse enrollment options and excellent customer service, while also being financially sound. It is beneficial for the carrier to have a national presence and to have representatives in major cities throughout the U.S. that your clients are in, and to have sales and service teams that work closely together to meet the unique needs of you and your customers. Representatives should specialize in voluntary benefits and have significant experience in designing benefit programs to help provide solutions that meet the needs of your clients.


7) When you are presenting voluntary products, do some types of coverages just naturally sell well together?

Bob Risk, Lincoln Financial Group: Short-term disability and long-term disability make a natural combination for integrated and comprehensively managed benefits. In addition, life insurance, and disability insurance sell well together because they offer income protection (STD/LTD) and long-term, family protection (Life). However, all programs have to make sense in conjunction with the base programs offered by the employer.

Scott R. Llewellyn, Ameritas Group: Yes, I think some coverages are like peanut butter and jelly; they just make sense together. Life and disability, dental and vision — these have always been sold together.

Jay Hutchins, Colonial Life: Voluntary products should be sold based on each employee’s individual needs.

Tim Knott, Assurant Employee Benefits: It really depends on the overall employee benefit package being offered. The most important thing is to make sure that gaps are pointed out and filled in with voluntary benefits. It really depends on the needs of employers and their employees.

Elena Wu and Steve Toby, Guardian Life: At Guardian, we’ve been promoting the advantages of pairing both voluntary and employer-paid critical illness insurance with consumer driven health plans. Critical illness insurance can be bundled with your health plan to provide greater coverage when serious illnesses strike. We also tend to sell dental and vision coverage as a package. Life, disability, critical illness coverage tend to be sold together.

Shawn Smith, Transamerica Worksite Marketing: In a small group market, the combination of guaranteed issue gap plan, critical illness, and accident insurance naturally compliment one another in our high deductible medical plan environment as long as the gap plan does not impact the utilization of the medical plan. For part-time employees, Limited medical with dental, vision and short-term disability work well together from both a pricing and underwriting perspective.

Mark El-Tawil, Humana: Yes, certain products do make sense to sell together. However, this is typically dependent upon the particular situation of the employer. If the employer provides a small amount of life insurance for their employees, it could make sense to offer the group a voluntary term and/or whole life plan.

Glenn Petersen, MetLife: The most prevalent voluntary benefits offerings that are offered at the same time are Group Auto & Home, Legal and Critical Illness Insurance. These products have broad appeal and can help meet the diverse needs of employers and their employees. While these products are often adopted by employers at the same time, in order to maximize employee awareness and understanding of the benefits, it is important to develop a customized communication and enrollment strategy. Of employees that believe their employer’s benefits communications educate them effectively, 78% said they were satisfied with their benefits (according to MetLife’s 8th annual Employee Benefits Trends Study). On the contrary, of those employees that do not believe their employer’s benefits communications educate them effectively, only 13% said they were satisfied with their benefits.

8) How do you present voluntary -benefits in a way that doesn’t overwhelm employees with confusing options?

Tim Knott, Assurant Employee Benefits: Making sure that the products and educational materials are easy to understand is extremely important; people won’t buy what they don’t understand. Offering at most two or three options for each product is also smart, because any more than that can begin to get overwhelming and create confusion.

Bob Risk, Lincoln Financial Group: It’s critical to handle this through the enrollment process. Personalized, simplified enrollment forms offer clear direction and options for employees to minimize confusion and assist in the education and selection process of benefits. Pre-filling the enrollment form with as much personalized information as possible helps clearly outline for employees what the per-pay-period costs and amount of coverage will be, on life as well as disability. Both the employer and broker have to do legwork to help ensure employees are offered a reasonable number of quality choices that address their most important needs.

Jay Hutchins, Colonial Life: This is where I think voluntary benefits carriers fail the most. If a carrier wants to enroll a lot of voluntary benefits products in one enrollment, employees can get very confused. The best way is to offer two or three voluntary products and take the time to help employees understand their coverage gaps and their most pressing needs. Having a benefits counselor conduct a one-to-one benefits session can help employees figure out where they’re most at risk financially and select products to protect their most important risks.

Brian Vestergaard, LifeSecure: Limit the choices when possible, but still provide some basic low-medium-high variations of protection.

Shawn Smith, Transamerica Worksite Marketing: Keep it simple. My experience has been never to offer more than two new voluntary benefit programs annually. It’s best if the two products do not compete for participation and premium, such as offering a separate accident and disability insurance or critical illness and cancer insurance during a first time offering. I have always been a believer in offering the same riders to all employees or employees in a certain employer classification. When offering life insurance, we find that 75% of employees will buy permanent over term due to their long-term life insurance needs and the simple fact that most employees already own some level of term life insurance.

Scott R. Llewellyn, Ameritas Group: This is a critical area and one that is often overlooked. Often, the presentation of voluntary benefits is confusing, overwhelming, and difficult for any person outside the insurance industry. I think this is where the broker has an obligation to offer high quality products that do not have loopholes or missing provisions, or are scaled back to achieve a low price point. Benefits should be straightforward and honest. They should be offered in such a way that you would be OK if your elderly mother selected one of the programs. Offerings should be tested before launched. Create a sample group and see how they respond. Do employees understand the cost benefit?

Mark El-Tawil, Humana: First, talk to the client about an enrollment strategy that works best for their business. Work with the client to determine the most effective benefit communication methods considering the selected product mix, age of employee population, available technologies, and corporate culture. There are a variety of enrollment tools and service models that can be used to effectively communicate and enroll a benefits program. It is important to leverage best practices, which can include group meetings, one-on-one meetings, web based tools, etc. The key is to have a plan that allows educating employees on their voluntary benefit offerings. Once the employees fully understand their voluntary benefit options, you see very positive results: high participation rates and a very happy employer.

9) Do you see more unbundling of voluntary benefit options?

Scott R. Llewellyn, Ameritas Group: Yes, as electronic enrollment, billing, and eligibility become easier and easier to use, we are seeing the need bundling of voluntary benefits declining. Now, carriers that specialize in one product can be selected, rather than an employer selecting life, disability, vision, dental, hearing, and other benefits all from the same one company that may only have expertise in one or two products. There can be an advantage to selecting a company based on their core competency. Wouldn’t you rather have your heart checked by a cardiologist rather than a general practitioner?

Shawn Smith, Transamerica Worksite Marketing: In today’s economy, I’m seeing more bundling than unbundling. I refer to bundling as combining products under one policy. The discounts, preferred underwriting, and benefits are all compelling reasons to bundle products. We can offer products either stand alone or bundled, but I see a much greater value for the employee disposable dollar when bundling products.

Bob Risk, Lincoln Financial Group: No, I see a greater desire to bundle things, for one main reason — simplification. Employers want simplification of administration and enrollment, and integrated benefits management. Bundling can help accomplish this in a consistent way.

Tim Knott, Assurant Employee Benefits: We actually see more voluntary products being offered together because it makes the administration much easier for the employer. However, what we do see is a separation of the medical and voluntary enrollment. It can be overwhelming for an employer to select all of the medical benefits and then turn around and make more decisions; some brokers find it easier to split the sessions up so more attention can be paid to each one.

10) Do you have anything else to add about voluntary benefits?

Bob Risk, Lincoln Financial Group: The trend towards voluntary coverage is continuing. With ongoing uncertainty in healthcare reform, we could see more forms of voluntary benefits taking place over the next five years. There are still a lot of unknowns; there may be new types of products, or increases in simplification of products, and the industry may head more toward employee-paid benefits. The worksite will continue to offer the greatest opportunity for employees to access quality products and carriers.

Shawn Smith, Transamerica Worksite Marketing: The voluntary benefits market is consistently evolving in coordination with the changes to healthcare. Carriers must be aware of the constant change and offer competitive products that fit the needs of our working class. Our target market is the 80% of the employee population that earn an hourly wage. The hourly waged employee is most affected when the cost of healthcare increases, which leads to higher personal financial exposure at the doctor’s office and hospitals. Most of our products include a wellness benefit rider and we are experiencing higher utilization for wellness claims. Hopefully the wellness trend will continue to rise.

• Healthcare Reform will change the voluntary products/distribution model: It has already had an impact on the voluntary market. More health brokers are diversifying and offering voluntary worksite products to their clients. Several worksite carriers have changed their core distribution model to include direct client marketing alongside the traditional health insurance broker marketing.

• Certain worksite products have the highest employee participation: The two most important and popular voluntary benefits are life insurance and short-term disability. When offered together, generally we see a 50/50 split in employee participation between the life insurance and short-term disability. It’s important to offer a voluntary permanent life insurance option alongside a voluntary term life insurance option. Basically, most employees already own term life insurance from their employer, so they will buy permanent life insurance based on their personal post-retirement life insurance needs.

• Technology sells worksite products: Worksite product commissions are the primary source of funding for the HRIS benefit modules for larger employer groups. Some worksite carriers will offer free HRIS benefit modules leave-behind systems if the client purchases just two or more of their voluntary products. When implementing the HRIS benefit module leave behind system, it’s very important to train or coach employees on how to use the system and is always a good time to have a voluntary benefit fact finding conversation.

• Many employers prefer a call center and web based voluntary benefits enrollment over face-to-face: Employee time at work or patient care in a hospital environment is important to the bottom line for most organization. Pulling employees into group or individual meeting at work can create employer production issues. There has been a slow shift from the traditional face-to-face voluntary benefits enrollments to call center and web based enrollments. The phone call can be scheduled during the day or evening with a spouse available. The call and web coaching generally feels more comfortable for the employee to make important benefit decisions. Some employees are reluctant to sit with an enroller/agent based on their fear or embarrassment of what they don’t understand about their own benefits. Generally speaking, a phone call and web appointment is less intrusive than a face-to-face appointment.

• An enrollment firm essentially works as additional personnel for the employers’ benefit department: Core benefit communication is very important part of the retention of the employers’ best employees. An enrollment firm can communicate all employee benefits, provide benefit statements to help the employees understand the real employer cost value of the core benefits, and provide employee dependent eligibility audits to be certain the employer is not overpaying for the expensive benefits they provide for their employees. Most brokerage firms do not have the staff to provide the added services an enrollment firm can provide.

• There are new product marketing ideas that employers and brokers should be aware of in today’s voluntary marketplace: For the small group clients I see bundling of life insurance, critical illness, accident insurance and disability income on a guarantee issue basis down to five employees. Also, bundling GAP insurance with critical illness and accident insurance down to two employees. With the higher-than-normal HSA medical renewals, the GAP insurance provides a strong first-dollar solution and as long as the GAP coverage does not impact utilization of the medical plan, this will minimize the renewal increases.

• Having employer buy-in when offering voluntary benefits is essential: If the employer chooses to offer voluntary products, there must be a reason why management made the decision to offer voluntary products. If management is not properly informed or sold on the voluntary offering, employee access will be difficult and participation will suffer. Leveraging the worksite products underwriting offer with the employer buy-in and employee access is one soft way to approach the employer for buy-in. Most employers will ask for the best possible underwriting offer for their employees without realizing they just sold access to their employees.



What’s In Your Network?

Let’s Facebook It, if You’re not Tweeting, You’re Not LinkedIn

by Ken Doyle

Social media, the buzz of 2009, is the opportunity of 2010. Unless you have been dialed into one of the social networks you’re probably asking yourself what it’s all about. You know your friends are on it; your kids are on it; and most likely your -significant other. Still you ask, “What can it do for me?”

The answer is, more than you can imagine. Just take a look at what it did for President Obama. Seeking to reach out to younger voters (because they are the least likely to vote), Obama employed an aggressive and groundbreaking social media campaign that carried his single-minded message of “hope and change.” Many observers attribute Obama’s victory to just such social media efforts.

Technology is fueling change and the primary change required to do the unusual begins with how we think. One thing is certain; business as usual is out. Business unusual is in.

Social media ranks at the top of new tools to reach current and potential customers. Nielsen reports that unique monthly visitors to Twitter grew nearly 1,400% (February 2008 to February 2009), Facebook is signing up one million new members per day and archetypal online communities like LinkedIn have shown strong growth since their launches.

Social media has become so prevalent that a company that chooses not to utilize it is cast in a negative light. When reports surfaced about Toyota’s problems with unintended acceleration, the automaker had an ideal opportunity to make the most of social platforms, such as Facebook and Twitter, to manage their branding crisis. But, Toyota remained silent. In doing so, it gave up the chance to communicate to its 70,000 fans on Facebook. The Japanese car manufacturer also under-utilized its Twitter account to get the news to its 14,000 followers. Toyota posted a mere six tweets regarding the recall — a shockingly low number for a brand in crisis-management mode.

The emergence of social media gives just about any user, particularly a broker, a powerful communication platform offering almost unmatched immediacy and reach, whereby you can build targeted audiences for your messages organically, virally, and geometrically.

The first step to creating social media value is to understand what it means to be “present in the marketplace.” The marketplace continues to shift online. While you may have an offline presence, the marketplace will not hear or find you unless you are also online. I know this is a difficult proposition for many, but just look at the younger generations who are born with an iPod in their hand. They do not know or care to understand how people got along in the world without a cell phone. In order to compete, we must accept and adapt to this new business culture.

Make yourself available to the market where the market is. Then listen and learn how the market behaves and what influences the behavior. You have to understand before you can be understood. Lastly, think about the market’s intent and how you can exceed expectations by creating sustainable value.

Here are some rules to live by:

• Start slow.

• Keep your message on point.

• Be creative.

• Listen.

• Pull the media in instead of pushing the message.

• Be yourself.

• Use it to actually interact, not sell.

As social media is integrated into the marketing mix, you will understand that it’s about people. Talk less about your products and more about the desires of customers. In nine cases out of 10, they will do the selling for you. Again, it’s about them, not about you. Managing your message is a delicate balance.

So how can you capitalize and grow your business by implementing social media tactics? Where do you begin? Let’s look at a few of the most popular social media sites, LinkedIn, Facebook and Twitter, and how you can use them to communicate to current customers and new prospects.

Are you LinkedIn? Most likely, you are. And maybe you’ve never thought of LinkedIn as a social media site. But it is, in a big way. For most folks, LinkedIn begins with contacting people they know – their friends, colleagues, and AHU-type associates. Then they sit back and glow over all the contacts they have established and wait for hordes of new prospects, all begging to use their services. Let me break the bad news: That’s never going to happen. Never. In order to make LinkedIn work for you, you need to work LinkedIn. Stop and think about it. Why would your associates buy from you when you all sell insurance for a living?

You want to reach out to folks you don’t know and build a relationship. The way to do that is by becoming an active participant. Here are a few suggestions:

• Start a discussion post.

• Post news articles.

• Join groups.

• Ask and answer questions.

• Be diligent about posting status updates.

• Make sure your profile lets people know what you do and more importantly, how you can help them. Don’t just post your resume.

Remember, all of this should be done with the purpose of generating connections to people you don’t know so that you can increase the likelihood of receiving “unexpected opportunities.”

When it comes to posting something, make sure it’s something of value. For example, when it comes to health insurance, many people don’t understand health savings accounts. You might start a discussion post asking “How can an HSA save you money?” Follow that with a list of the benefits and add a link to an interesting article about HSAs. Finally, end it by asking, “What do you think about HSAs?”

The purpose, of course, is to create new opportunities, but first you need to engage people. Then add credibility to yourself by linking what you’ve posted to an informative article you’ve written, one you’ve found on the web, or to your blog.

Facebook. The story of you.

When Facebook opened to the whole world, its reach extended beyond the collegiate set. Facebook is anything but child’s play. Many Facebook -users are senior managers, directors, VPs, and CEOs. In fact, it’s reported that 91% of decision-makers consume social media including blogs, video, and customer reviews. That’s great news for insurance agents.

You can enjoy great success utilizing Facebook provided you follow a few simple rules – post frequently, post consistently, and post engagingly. The format is open-ended and can take the form of a general opinion piece, a perspective on a new study/survey/news item, even a new product announcement. An article, if written well and conversationally, can be far more engaging than say, a formal e-Newsletter. Keep in mind that your messages need to be short, succinct and delivered with your personality. Don’t post some white paper; remember, we live in a sound bite society.

Deploying a Facebook account also sends a message that you are a forward-thinking, progressive broker that knows how to leverage media and technology.

One of the things that sets Facebook apart from other social media sites is that it offers users the ability to post video and live streaming video.

I tweet, therefore I am. Twitter’s stated reason for being is to give you the ability to let people know what you are doing at that very moment. Communicating with family, friends, associates, and the greater viral world in pithy 140 character “tweets” has obvious use and value.

There is no one right or wrong way to use Twitter, only the way that works best for you. That said, avoid selling, pushing a message over and over and focusing only on yourself. Most people who are successful in the world of any social medium will tell you that engagement is key. You have to give before you ever get (just as in real life) and, typically, you reap what you sow. Translation: The more you give, the more you get.

Now you’re ready to supercharge your message.

LinkedIn, Facebook, and Twitter are all important and increasingly effective tools, but exponentially so when combined with traditional media. Social media functions like an extended echo chamber where messages are conveyed, sustained, and amplified; to borrow a phrase, marketing messages are, for the most part, platform-agnostic. They may first appear between the pages of a magazine or on a mainstream website, and then get propagated through social media channels or they may flow in the reverse direction.

When social media is used strategically and is integrated with your over-arching sales and marketing communications, your message is amplified and your reach extended. That’s why it’s imperative you give your social media initiatives the same thought, consistency, and creativity that you do your traditional sales and marketing communications.

Keep three things in mind when you are using social networking sites:

1. It takes time.

2. It requires trust.

3. It must exemplify knowledge.

Being sociable is easy, but being social is hard work. As anyone who has ever attended a business function will attest, the trick is making it look easy. Like all things, the more you practice the better you become. Make a commitment to dedicate an hour every other day to engage in this exciting new medium and folks will begin anticipating and looking for your next message. Translation: sales opportunity.

This is part one of a two-part article. Part two will focus on developing a successful social media strategy.

Ken Doyle has over 25 years of experience in the health insurance industry and serves as Director of Marketing for Warner Pacific, a top producing General Agency for many of the nation’s largest insurance carriers. He is the Immediate Past President of the Los Angeles Association of Health Underwriters, a frequent presenter at industry forums and is prolific in keeping the agent front and center in the healthcare reform debate. You can connect with him on Facebook, follow him on Twitter (kendoyle62) or send him an email at



Disability Insurance Spotlight

Closing Coverage Gaps

by Michael Fradkin

In today’s economy, employees have an even greater need to secure a financial safety net. At the same time, employers are trying to trim expenses while retaining their high-performing employees who may also be highly compensated. Benefits offered through the workplace can play a major role in retaining key talent, which is a top benefit objective among employers.

Forty-seven percent of employees earning $100,000 or more a year say their workplace benefits form the foundation of their financial safety net, according to MetLife’s eighth annual Employee Benefits Trends Study. However, many highly compensated employees lack a critical component of their safety net — adequate disability insurance.

About one-third of highly compensated workers who have disability income protection do not feel they have enough coverage or they are unsure whether they have enough. These findings clearly point to the need for education and guidance for employees at every level of the workforce. Since employees rely on the workplace for financial protection products, employers have an opportunity to provide access to this much-needed guidance.

Gaps in Coverage Exist, but Employees Are Taking Steps

The economic conditions have brought home to employees their need to secure a financial safety net, but the importance of disability income insurance transcends the current financial climate. Trying to keep up with expenses without a steady paycheck can erode even the most substantial safety net. Even in times of economic prosperity, the ability to earn an income is often a person’s most important asset. Disability income insurance can give employees much-needed peace of mind and security. The economy has given consumers a wake-up call about the need for several financial protection products, including disability coverage, but people need help to move from awareness to action.

According to the MetLife study, 57% of people earning $100,000 or more a year are very concerned about how the family would be affected financially if the principal wage earner suffered a disability. More than half are also very concerned about having enough money to pay their bills during a period of sudden income loss. Despite these concerns, about 20% of employees who earn $100,000 or more a year don’t know how much of their income is protected. Even among those who know how much of their income is protected, 31% don’t know if that protection is adequate. About one-third say they are covered for less than 60% of their salary. In the event of a disability, that proportion would most likely prohibit them from meeting their financial obligations.

Higher wage earners may recognize the importance of evaluating their financial needs, but education and targeted communications from employers are necessary to move employees to action.

New Options Abound

Fortunately, employees have more options than ever to protect their income against a disability-related absence. Since the majority of higher-income employees get disability insurance through the workplace, now is an opportune time to give them the tools, insight, and knowledge they need to shore up their financial safety nets.

Providing group short-term disability (STD) and long-term disability (LTD) insurance through the workplace is an excellent start, but employees need to understand some limitations. Short-term disability plans are just that, short-term, with most paying benefits for less than six months. Long-term disability plans do pay benefits for a longer period, but they usually only cover up to 60% of an employee’s salary. Most plans don’t cover bonuses and commissions. In addition, if the employer is paying the premium, any benefits received will be taxable. Finally, since most LTD plans have a maximum monthly benefit, higher income earners may receive a lower percentage of income replacement. With more income to protect, high earners may want to take a closer look at their disability coverage.

Individual disability income (IDI) insurance – offered in the workplace – is a great option for highly compensated employees to supplement their current coverage. The addition of an IDI policy will increase the level of coverage, which will result in a more appropriate income replacement in the event of a disability. A supplemental IDI policy covers total income (not just salary); the benefits paid will be tax free if the employee pays the premium with post-tax dollars. Since it is an individual policy, the employee maintains the coverage even when they leave the company and go to work for another employer. In addition, some employers may qualify for a guaranteed standard issue (GSI) program, which will offer simplified underwriting, premium discounts and streamlined enrollment to their highly compensated employees.

An example of how group LTD coverage can be enhanced when there is a supplemental IDI policy in place might prove useful: “Joe Smith” has a base gross salary of $100,000 and earns an additional bonus of $15,000 for the year. Assuming a 28% tax rate, his net income is $83,000. If his LTD covers his salary only up to a maximum of $5,000 a month, his gross LTD benefit would be $60,000. Since his employer sponsors the benefits, taxability would reduce the group disability benefit to $43,000 or 52% of his net income. Joe also has an IDI policy, which provides $26,000 in coverage over the course of the year. The coverage is tax-free because the employee paid for it was with post-tax dollars. By working along with his group LTD coverage, Joe’s IDI coverage now brings his total disability income replacement to $69,000 or 83% of his net income – bringing him closer to his pre-disability net earnings.

New, flexible options include the following:

• Future increase riders

• Riders that allow individuals to receive benefits even if they are prevented from performing the duties of their regular occupation, due to a disability, but are gainfully employed in another occupation.

• Spousal catastrophic disability riders that provide additional benefits to the primary insured in the event the insured’s unemployed or part-time employed spouse becomes catastrophically disabled.

These riders allow employers and brokers to tailor coverage to high-income employees. In many cases, employees will be able to purchase supplemental disability income coverage on a voluntary basis, which allows them to add an important benefit without adding to the overall cost of their benefit programs. Considering the diverse needs of an employee population is critical when designing a disability benefits program.

The trends in disability insurance for the highly compensated worker present a way for you to open the door to a discussion with your clients about the gap in coverage among their top-earning employees and ways your client can help employees mitigate their financial risks. The key to the conversation is to help employees and employers see how disability insurance can be the foundation of a sound safety net and help employers understand the importance of devoting resources to workforce education.

Michael Fradkin is VP, Disability, LTC and Critical Illness Products for MetLife. MetLife has been providing employers with disability products and services for over 50 years and is among the largest disability carriers in the industry. Michael can be reached at


Prescription Drug

Out with the Old, In with the New – All Medicare Supplements Will Be Changing in June

by Harry P. Thal, MA

President Obama’s healthcare plan has a few silver linings for seniors struggling with the high cost of prescription medication. In 2010, if a senior on Medicare Part D reaches the donut hole, there will be some relief whether the senior is in a stand-alone prescription drug plan (PDP) or a drug benefit integrated in a Medicare Advantage plan (PPO, HMO, PFFS).

A person reaches the donut hole in 2010 with $2,830 in medication. These are the dollars the consumer spends in the form of deductibles and co-pays and what the insurance plan spends. Once reached, the consumer pays the full-negotiated rate for the medication. Under the new legislation, any Medicare beneficiary with Part D prescription coverage, who is in this donut hole (also known as the “coverage gap”), will receive a check for $250. Checks are slated to be sent out March 15, 2011.

The legislation will be even more helpful in 2011 since the cost of the brand name medication in the gap will cost only 50% of the negotiated rate. This discount came out of negotiations between the Obama Administration and the pharmaceutical industry. Also, the gap will begin to close under the new regulations. Starting in 2013, the coverage gap will begin decreasing and will get smaller each year until it reaches 25% by 2020.

Medicare prescription coverage will continue to be a blessing for low income people, providing lower co-pays for generic and brand name medications, and no deductible or coverage gap expenses.

In 2003 the conference report of the Medicare, Prescription drug and Improvement and Modernization Act (MMA) included language to encourage the National Association of Insurance Commissioners (NAIC) to review and modernize the standardized Medicare supplement plans. Furthermore, the Generic Information Nondiscrimination Act of 2008’s (GINA) passage in May 21, 2008 also called for revisions to the supplement models. This was completed by the NIAC plenary September 24, 2008.

To agents, this simply means that all that we know about Medicare supplement plans will be discontinued this May and beginning the effective date of June 1, 2010, we will have all new products to sell — maybe.

While the old plans will definitely be finished, new plans must be first filed and approved by the State. This should not have been a problem, but on January 28th, NAIC determined that even though the plans were all new, the rates must be blended with the old rates, causing carriers to re-file all their plans. This may create a bottleneck with some state regulators as many states have had cutbacks in their insurance department staffing due to finances.

If all goes well, we will have 11 standardized plans available for sale from the current 14. Hopefully, applications and marketing material will be approved and printed. This may cause problems for people retiring or aging in this June. I urge agents to check with their carriers to determine when supplies will be available for the new plans. I noticed that AARP/United Health plans are available in most states. AARP will also be changing underwriting and will make its new F plan, a select version available in California.

The plans that will be sold on and after June 1 will be called “Modernized” or “2010 plans” while the standardized plans we are selling will be identified as “1990 plans.” The plans sold prior to the Omnibus Budget and Reconciliation Act of 1990 will be identified as ‘pre-standardized.’

Two benefits of the 1990 plans that will be discontinued are the preventative benefits and the at-home recovery benefit. It was determined that these benefits were underutilized and unnecessary, in many cases, since Medicare now covers many of the preventative procedures that were not covered when these policies were developed in the late 1980s. People who have the 1990 plans may keep them, which will include these retired benefits. What will remain are modernized plans A-D, Plan F, High Deductible F, Plan G and Plans K and L. Two new plans will be added to the mix, Plans M and N.

The NAIC considered renumbering the plan designations, but decided it would be too confusing. Under the current law, a company that sells any Medicare supplements would be required to offer plan A. Under the new regulations, if a company offers a plan A, they must also offer a plan C or a plan F (high deductible F doesn’t count). Beware, that all plans can be offered as a select plan. It is possible for a carrier to have offered a standardized version in 1990 and offer only a select version in 2010 as AARP will be doing with its F plan.

Typically, a Select plan restricts the insured to a specific list of providers or hospitals. There have been a number of Select C plans available in various markets for several years, typically offered by hospital chains. Another notable change will be in Modernized Plan G. The 80% excess charge benefit (1990 plan) will be 100% in the modernized 2010 version.

A new benefit will be added to the basic coverage, which is already included in plans K and L coverage for Hospice Care. Currently, Medicare pays for 95% of most Hospice care and has a $5 co-pay for medication. Under the 2010 Plans, the 5% and the $5 will be covered by the new modernized supplements.

The monthly cost of Medicare supplements has risen continuously over the years, and has priced the plans beyond reach for some Medicare beneficiaries. Enter plans M and N. These modernized plans are available with effective dates of June 1 and will be sold by insurers who wish to offer them. Chances are that one may be offered rather than both. Carriers will have the choice. Medicare Supplement Plan N will have similar benefits to the Modernized Plan D. To help lower the monthly premium, there will be up to a $20 co-payment for doctor visits and up to a $50 co-payment for emergency room visits. This benefit will begin after satisfying the Part B Medicare deductible. These plans are expected to have premiums around 70% of the cost of Plan F, the most popular plan currently being sold and about 77% of the current plan D premium.

The Medicare supplement plan M will also offer similar benefits to Plan D, but will only cover 50% of the Part A hospital deducible and none of the part B medical deductible. The cost of Plan M is expected to be about 85% of Plan F (or 92% of current plan D).

Your clients may stay on their current plans. But if they choose to move to a modernized plan, it will be up to the carriers to determine if they wish to allow upgrading without underwriting. Section 8 of the revised model provides transition standards, but does not require companies to offer existing policyholders the opportunity to exchange to a modernized 2010 standardized policy without underwriting. State guaranteed issue and conversion rules would permit a person to move from a 1990 plan to a 2010 plan without underwriting. So, the California birthday rule will apply to those seniors wishing to switch plans without underwriting during the 30-day period following their birthday.

Harry P. Thal, CSA is member of the Society of Certified Senior Advisors. He is Immediate Past President and President Elect of the Kern Association of Health Underwriters, serves on the NAHU Senior Medicare Advisory Group and is a nationally recognized expert on Medicare. He may be reached at or 800-498-8425.