May 2011 California Broker Cover Life InsuranceStormy Weather or Sunshine for the Life Industry in 2011?
Arming Yourselves with the Latest Educational and Technological Tools
by Leila Morris
• We asked executives what the most important life insurance trends are today. Some common themes are a renewed focus on the middle market and increased efficiency in sales and underwriting.
New Rules to Weather for Employer Owned Life – A Fearless Forecaster Weighs In

by Denise Desautels
• It behooves advisors to review their Employer-Owned Life Insurance records and identify those contracts for which notice and consent forms were not completed before the policies were issued.
Voluntary Benefits View From The Top

by Leila Morris
• Many employers can’t afford fully paid benefits. Voluntary-employee paid benefits offer a compelling solution.
Defined Benefit Retirement Plans–Age-Based Investing

by Brian T. Mong, CFA, AIF
• The search is on for a lifecycle fund or allocation design that meets employee needs; withstands the turbulence of an uncertain economy; reveals all costs, expenses and fees; and helps employers meet their fiduciary responsibilities which come with providing a retirement plan.
HDHPs Offer Solutions in the Health Reform Era

by Ron Goldstein, CLU
• Offering an HDHP coupled with all of the attractive features of an HSA, might just be the solution many of your customers are looking for as healthcare reform takes hold. But they need you to take the lead. Are you ready?
Group Legal to the Rescue
–Employees Face Rampant Foreclosures, Financial hardship, and Soaring Debt
by Tanner Kin
• Group legal plans improve quality of life for their employees and increase employee loyalty. They are good for employees, good for employers, and bottom line, very good for you, too.
Not an Expert on Stop-Loss Insurance? Time to Become One!
by Matthew S. Hayward
• For brokers, last year’s healthcare reform law may result in new opportunities to build deeper relationships with their clients.
Wild About Wellness–Part I of Our Annual Survey

by Leila Morris
• Welcome to our first annual Wellness Survey. A serious discussion on a topic that’s become increasingly relevant to today’s market. Part II will appear in our upcoming June issue.
Gaining a Competitive Edge with Critical Illness Coverage
by TJ Gibb
• It is essential for brokers to explain the value of this important benefit to employers and encourage them to offer this coverage to their employees
Why Total Absence Management?
by Paul D. Taylor
• Brokers who encourage their clients to take an integrated approach to absence management can highlight the enhanced tracking and reporting capabilities, efficiencies in administration, and the employer’s ability to focus on the workforce issues that affect their business.

Stormy Weather or Sunshine for the Life Industry in 2011?

Fearless Forecasters Weigh In Predicting How the Life Market Will Weather the Current Economy

Arming Yourselves with the Latest Educational and Technological Tools

by Leila Morris

We asked executives what the most important life insurance trends are today. Some common themes are a renewed focus on the middle market and increased efficiency in sales and underwriting. They also give their take on up and coming products and features.

In addition, we took a look at recent industry studies, which reveal an encouraging increase in individual sales, some interesting demographic trends, and the importance of having a life designation at the end of your title.

The Increasing Role of Technology

Larry Noyes, vice president of Sales and Marketing, Foresters US Division said, “I believe the most significant trend in our business today is the emphasis on streamlining the process and improving the ease of doing business. Carriers with superior technology tools and processes will be able to use them to their competitive advantage.”

Shawn Smith, territory vice president, Transamerica Worksite Marketing said, “From a worksite carrier perspective, I’m seeing more Web-based delivery of individual life insurance products to employees. Technology sells life insurance.” Smith said that superior Web based benefit module systems help employees make informed decisions about buying life insurance at work. Web based coaching technology can inform employees about the basics of life insurance and why some of the riders can make good financial sense, such as long-term care and critical illness. He noted the value of having guaranteed issue life insurance spreadsheet enrollments with no employee signature required — just click and buy. Smith said that the best Web-based systems will compel employees to make a decision to elect or waive their initial benefit offering.

Kenneth A. Shapiro, president of First American Insurance Underwriters said it may be a pivotal year for producers in adopting new technology for sales and customer service. It has never been easier to manage more prospects and clients and stay in contact with them, he said. With an iPad or other tablet, a producer can deliver the information the customer wants and needs instead of just leaving brochures behind at the end of a meeting.

Shapiro added, “Going through the hassle of having clients fill out applications – which is how they often feel about it – is on its way out as producers can complete forms for them electronically, with greater accuracy, during a meeting, thus moving the process forward faster. All this can happen at the moment of the client’s highest interest and motivation. And then there are case histories and video testimonials. All of this contributes to making the customer experience much more satisfying, meaningful, and friendly. When it’s over, there are opportunities for video testimonials. As we all know, consumers trust word of mouth and now you can make it work for your practice. The best part about it is that you’ll never find yourself saying, ‘I’ll get back to you about that.”

Butch Britton, CEO of ING U.S. Insurance said that more producers and carriers are looking at innovative ways to serve the middle market in an efficient manner and technology continues to play a big role in these innovations. A number of carriers are using technology to help underwrite simplified-issued policies, particularly with younger individuals and lower face amounts. They use some form of automated underwriting instead of taking blood samples with a paramed exam, he added.

Product Trends

When it comes to product trends, Britton said that index products have a great deal momentum in the low rate environment because they provide a guaranteed crediting rate and upside potential. “As a result, we are also seeing creative designs in the market like the tri-index global product we introduced past year,” he said.

George Daggett, assistant vice president, life insurance product manager for Jackson National said, “In the product world, the industry is seeing a continued decrease in universal life crediting rates. There is also an increase in term and no-lapse guarantee universal life premiums in response to declining interest rates.”

Dagget sees sales moving away from stand-alone long-term care products as premiums continue to climb. There is a shift toward more life insurance policies that include chronic illness provisions. Dagget explains, “An accelerated death benefit rider for chronic illness pays out to the policy owner or the family depending on the situation, so it’s not a use-or-lose proposition. I think you’ll see the industry gravitate toward this type of product attached to life insurance policies as long-term care costs inevitably increase.”

Michael Ferik senior vice president, Individual Life, for The Guardian said, “We continue to see growth in our whole life product line, which provides consumers with the guarantees of known premium outlay, guaranteed cash values, guaranteed death benefit, upside potential and attractive rates of return.  We’re also seeing a renewed and growing interest in limited-pay whole life plans, whereby clients can pay for their policy over a fixed duration – say, 10 years, 20 years or by age 65 – and optimize their cash flow and insurance needs based on their particular situation.”

Individual Life Insurance Sales Improve

A Recent LIMRA study reveals that total new annualized premiums for individual life increased 2% in the fourth quarter of 2010, resulting in a 4% increase for the year. Whole life and universal life were strong performers throughout the year, spurring an increase of individual life insurance sales. “While we have not gotten back to the peak level reached in 2007, we are encouraged by the positive results this year,” said Ashley Durham, senior analyst, LIMRA Product Research.

New whole life premiums grew 14% in the fourth quarter and 15% in 2010. Policy sales also increased, up 6% for the quarter and 2% for the year. Nearly 60% of the writers increased their whole life premium this year, including all but one of the top 10. This is the 6th consecutive quarter of growth for whole life sales.

New universal life annualized premium also performed well in the last three months of 2010, increasing 13%. Universal life premium sales rose 10% in 2010, raising its market share back to 41%. Policy count was up 20% for the quarter and 21% for 2010. The introduction of term universal life products has been influential in driving universal life policy sales.

Sixty percent of universal life writers saw increased premium sales. Products featuring long-term secondary guarantees fell slightly while annualized premium sales grew 27% for products without guarantees. Indexed universal life sales grew 47% in 2010, representing nearly 20% of 2010 universal life annualized premium sales.

Many factors contributed to the growth indexed universal life, including increased marketing and training as well as new products. Indexed universal life sales are also benefiting from the economic environment. Like other indexed products, indexed universal life products’ cash value can grow with the market but are protected against severe market declines, Durham added.

Term life insurance premium fell 16% for the quarter and 12% for the year, as did term policy sales. This is the largest annual decline for term on record. Durham noted that companies increased prices and dropped product lines, such as longer-duration and return-on-premium term products. The fourth quarter saw a 25% decline in variable sales. Only a quarter of the writers increased their sales over 2009 (a time when sales were down by 50%). For more information, visit

The Emergence of Women Buyers

As life insurance products and delivery are changing, so is the image of the traditional buyer. In 2010, almost six out of 10 women owned life insurance, which is on par with men’s life insurance ownership, according to a recent LIMRA study. While life insurance ownership levels are down from 2004, the decline was smaller for women. However, women still lag behind when it comes to levels of coverage; women’s coverage averages only about 69% of men’s coverage.

Cheryl Retzloff, senior research director, LIMRA markets research said, “In our recent studies, we found that women (70%) place more value on life insurance than men (62%). We also know most modern U.S. households are dual-income households with more women working and contributing to the family’s finances. Recent Pew research discovered that almost 30% of wives earn more money than their husbands.” Married households are less likely to buy individual life insurance for wives than for husbands. The good news is that the average amount of individual life insurance coverage has increased for most wives who are insured.

She said that it takes a different approach to connect with woman clients. “Our research has found that women are more interested in developing a relationship with their advisor. They are more deliberate when making the decision to buy life insurance. Advisors should expect to spend more time answering questions and providing educational materials than they might with their male clients.”

A prior LIMRA study reveals that women place more value on referrals. Also, they are more likely to provide referrals to their friends and family if they are happy with their advisor. In addition, women (51%) are more likely than men (44%) to favor an insurance checkup every year or two.

Retzloff  said that, overwhelmingly, women are making or helping to make the financial decisions for their families. “This is a great opportunity for our industry to redouble their efforts to reach out to women to ensure their families are adequately protected against the financial repercussions of the death of a wage earner.”

The Overlooked Single Parent Market

Who could be more in need of life insurance than a single parent? But, this group is dangerously underserved when it comes to protecting their loved ones. If you define success as doing the most good for society, this is a prime demographic. Single parents with children living in the home make up the highest percentage of Americans without life insurance, according to a study by Genworth and the University of Virginia Darden School of Business. Sixty-nine percent of single parents with children in the home don’t have life insurance compared to 45% of married parents with children in the home.

When it comes to explaining the value of life insurance, Gregory Bucko, director of Customer Innovation at Genworth said, “It’s a common misconception that life insurance is always expensive or something you need to purchase all at one time. Life insurance should be thought of as a journey, as something that can be obtained in increments as life needs evolve. Even small increases in a person’s life insurance coverage over time can mean the difference between financial independence and financial hardship for their loved ones in the event of a death.”

Surprisingly, fewer single fathers than single mothers have life insurance. The uninsured rate rises to 79% for single fathers who are not homeowners and have children in the home. If you think that statistic only applies to low-income fathers, you’re wrong. It applies to those earning up to $250,000 a year.

The uninsured rate is 66% for single mothers who earn less than $50,000 a year and have children in the home. The uninsured figure drops to 56% for those who earn more than $250,000.

The number of single parents without life insurance tends to increase with the number of children, particularly at the lower income levels. The percentage those without life insurance increases drastically in single-parent homes with five or more children.

Fairchild said, “Many single parents are simply too busy or too scared to properly evaluate their life insurance needs. This is an understandable fear because the first level of financial safety from the other parent isn’t there…The insurance industry has an opportunity to better educate consumers and give them the tools and resources to help protect themselves and their families.” To help consumers understand how much coverage they need and demystify the purchase process, Genworth introduced a program called The LifeJacket Project (

Career Trends – The Value of Credentials

However you define success in the life insurance and financial planning industry, having the right education helps. Sole practitioners and senior financial planners who have the Chartered Life Underwriter (CLU) and Chartered Financial Consultant (ChFC) credentials earn significantly more than those with Certified Financial Planner (CFP) certificants.

Senior financial planners who hold the CLU and ChFC designations earn 28% to 31% more than CFP certificants, according to a recent study conducted by the Financial Planning Association (FPA). The median yearly total compensation for CLU and ChFC senior financial planning professionals ranges from $130,000 to $133,000. CFP designees have a median income of $101,000. Median annual total compensation for CLU and ChFC sole practitioners ranges from $83,000 to $89,000 while those with a CFP certification only earn an average of $80,000.

It’s clear that today’s life insurance market demands staying on top of product trends and arming yourself with the latest educational and technological tools.


Leila Morris is editor of California Broker Magazine and the weekly Insurance Insider News, which she produces. She has been a business and technology editor, reporter, and writer for more than 16 years. Before coming to California Broker, she produced custom newsletters for life insurance agents and provided insurance industry Website content. She has a B.A. in Political Science from St. Mary’s College of Md. For more information, e-mail

New Rules to Weather for Employer Owned Life InsuranceA Fearless Forecaster Weighs In On Employer Owned Life Insurance’s Changing Rules

by Denise Desautels

Most of the time when we hear someone say, “The rules have changed,” we don’t pay much attention. Why get excited? They’re changing all the time. But as an advisor, it’s worth your while to give careful attention to Employer-Owned Life Insurance (EOLI) since the new rules can make a significant difference to your clients.

EOLI contracts issued after August 17, 2006 require that certain items be put into place to receive favorable tax treatment. Without the proper filing and notice, a business can’t receive policy proceeds on a federal income tax free basis.

To help avoid having your clients find themselves with this problem, there are a series of steps that must be implemented. They include the following information:
The employer must receive a notice of Insurance.
The employer must consent to the coverage.
The legislation also mandates annual reporting of employer-owned contracts for each year the contract is owned.
The report to the IRS is accomplished with Form 8925 and is attached to the policyholder’s federal tax return.
The employee understands that the employer will be a direct or indirect beneficiary of the death proceeds.
The notice and consent requirements  should be fulfilled prior to issuing the policy.
Form 8925 requires the following information:
The number of employees at the end of the year.
The number of employees insured under the contract.
The total amount of insurance in force under such contract.
The name, address, taxpayer ID number of the policyholder––and the type of business.
An attestation that valid consent has been obtained for each insured.

If these prescribed steps are taken, the death benefit proceeds can be received income tax free.

The life policy can be an important tool for a business, but following the rules is the key to having a successful plan. It’s extremely important to maintain the documents and show that the client has met the notice and consent requirements in a timely manner.

Since meeting the requirements depends on having the correct documents, here are samples, although employers must rely on an attorney to develop suitable forms. However, the sample forms can serve as a guide for the client’s lawyer in drafting the notice and consent forms.

Here are three Employee Acknowledgement and Consent to Employer-Owned Life Insurance forms for your review:

Sample Form #1

The employer/applicable policyholder has given me notice that it intends to purchase a life insurance policy or policies on my life. I understand and consent to the following:
I will be the insured under the policy(ies).
The employer/applicable policyholder will own the policy.
The employer/applicable policyholder may, directly or indirectly, be a beneficiary of the policy(ies) and may receive proceeds payable on my death
The employer/applicable policyholder, or its successors, may continue to be the owner and/or may be a beneficiary of the policy even after my employment terminates.
$ (fill in figure) is the maximum face amount for which I may be insured by the employer/applicable policyholder at time of issue.

[Signature of proposed insured and date of signing]

Sample Form #2

I, [name] am currently employed by [company name], (the “Company”). I understand that the Company is purchasing an insurance policy on my life with a $(face amount) maximum face amount at issue. I voluntarily consent to have insurance purchased on my life for the benefit of the Company. I understand the reason(s) for this insurance and understand that the Company will have the rights of ownership, will pay all premiums, and will be the beneficiary of the policy. I understand and agree that my administrators, estate, heirs, and assignees have no rights to any policy proceeds, unless expressly agreed otherwise in a separate writing between the Company and me. I also understand that the Company may keep a life insurance policy in effect on my life after my employment has terminated with the Company.

This notice and consent was executed by the undersigned on this [date] day of [month], 202024.

Signature of Insured Employee

Sample Form #3

Employee acknowledges receipt of the above notice and agrees that:
I consent to being insured by employer
I consent to the policy being continued after I terminate employment with employer
I understand that employer will be a direct or indirect beneficiary of any death proceeds payable on my death

Employee signature and date

While it’s important to make sure the notice and consent forms are filled out properly before policies are issued, there are occasions when the paperwork may not have been taken care of properly. This raises the question of what can be done when this occurs.

When the employer-owned life insurance legislation, under IRC §101(j), was enacted in 2006, advisors believed the only way to correct the situation on policies issued after August 17, 2006, was to surrender the contracts and reissue new ones after proper notice and consent was obtained from affected employees.

However, a recent notice provides another option, which also creates an opportunity for advisors.  A Section 1035 exchange to a new policy with a larger face amount or other material change is now deemed a new contract on which proper notice and consent can be obtained before issue.

It behooves advisors to review their Employer-Owned Life Insurance records and identify those contracts for which notice and consent forms were not completed before the policies were issued.

This gives agents the opportunity to sit down with employers to review the situation and present them with options. The specter of being faced with paying federal income tax on the proceeds from the existing policies should make them interested in listening to your recommendations.


Denise M. Desautels is vice president of Brokerage Sales at First American Insurance Underwriters, Inc. of Needham, Mass. She has more than 20 years experience working with life insurance producers. She can be contacted at 800-444-8715, via email at The web address is

Voluntary Benefits View From the Top

by Leila Morris

The changing tide in employee benefits will be a boon for brokers, say industry experts. With all the changes and confusion resulting from healthcare reform, employers will turn to brokers for advice, which may bring even more opportunities. But when it comes to working with clients, it is important to frame the discussion correctly; employers need to see voluntary benefits as a way to make their employees’ pay go further. Our experts describe a variety of benefits that will be popular in the coming years. Since the recession, legal benefits have become essential and are increasing as a percentage of what is sold today.

A Guardian study revealed that disability and vision insurance are top voluntary choices. With the focus around increasing healthcare costs and rising major medial deductibles, experts are also seeing strong interest in supplemental health plans that help cover their out-of-pocket expenses before major medical kicks in. Other popular coverages are critical illness insurance as well as auto and home.

Many experts anticipate that, with the instability in the healthcare arena, brokers will look for a more stable place to land in order to supplement the loss to their income. Solid voluntary benefits provide that platform.

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?

Ron Agypt, Aflac’s Senior Vice President of Market Development and Broker Sales, U.S.: Despite what’s happening in the economy, the need for insurance does not change — accidents and illnesses will still occur. In addition, most Americans are living paycheck to paycheck, are carrying credit card debt and have very little savings. They do not have the financial resources to handle the out-of-pocket and non-medical costs associated with a serious accident or illness. But, for a few dollars a week, they can insure themselves against this type of exposure. And, even if they do have savings, the voluntary plans can help protect those assets so they remain in place for retirement, college funds, etc. Simply put, the fact that people have to cut back only emphasizes the point that they will not be able to handle the financial impact if something happens. Now more than ever before, voluntary insurance can serve as an important tool in helping employees safeguard their income if faced with an unexpected health event.

Scott R. Llewellyn, Western Regional sales vice president, Ameritas Group: Although discretionary income may be lower, employees who are offered voluntary benefit plans have a great opportunity to purchase benefits at rates normally not possible to the individual. Voluntary dental insurance is a great example. Dental is the second most requested health benefit after medical insurance. Regular cleanings, exams, and X-rays, which usually are covered at 100%, protect people from bigger and more expensive problems down the road. Maintaining your health and the health of your family should always be priority number one.

Crystal Caldwell Virtue, Esq., Executive Vice President of Caldwell Legal, USA: It always makes good economic sense to spend a small amount of money on a voluntary benefit that will save a large amount of money when a critical need arises. Voluntary benefits provide essential services at a greatly reduced cost. In the legal arena, having access to sound advice early on can make all the difference in limiting the scope and expense of an issue. Legal problems can often be minimized or averted entirely when handled quickly. Legal plans allow for immediate and qualified care without the high cost that would usually accompany it.

Steve Toby, Director Worksite Planning, The Guardian Life Insurance Company of America: The bottom line is that employers are cutting back on benefits despite the signs of an economic recovery. According to the Society for Human Resource Management, in the last six months, 20% of employers reported that they reduced employee benefits. By making sure they are in touch with employees’ needs, voluntary benefits can be extremely valuable and justify the cost. Employers need to see voluntary benefits as a way to make their employees’ pay go further. In fact, employees can benefit from the financial leverage created by the flexibility of a voluntary benefits program. It’s a way to get necessary protections – vision, dental, life, DI, CI – at a cheaper group rate than employees would get elsewhere.

Darin Pastor, Territory Sales Manager – Los Angeles, Colonial Life: Voluntary benefits can help employees protect their most valuable asset — their ability to earn an income — as well as their family’s lifestyle. Maintaining that financial safety net is more important now than ever, when many families’ budgets couldn’t withstand the pressure of large, uncovered expenses. In addition, individual voluntary benefits are portable, so employees can keep the coverage if they suffer an interruption in employment.

Glenn Petersen, Vice President, Voluntary Benefits Sales, MetLife: Economic realities have served as a reminder to employees that financial protection must be a priority, and according to MetLife’s 9th annual Study of Employee Benefits Trends, 80% of employees obtain the majority of their financial protection products through the workplace. Voluntary benefits meet important financial protection needs, with the added convenience of payroll deduction and competitive group rates. Eighty-five percent of employees say they are interested in their employer providing a greater array of employee benefits that they can choose to pay for on their own. Payroll deduction not only helps employees with budgeting their premium payments, but also, depending upon the benefits, this payment method could qualify employees for additional discounts and/or waiving the requirement for down payments.

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?

Crystal Caldwell Virtue, Esq., Caldwell Legal, USA: To remain competitive, top brokers should have a full portfolio of plan offerings. A broker can expand their income by selling high-quality voluntary benefits to their existing client base. A great voluntary benefit will offer a residual income, easy administration and unrestricted enrollment procedures. Discussing new voluntary benefit opportunities with clients can be a great lead-in to upgrading existing business, as well.

Glenn Petersen, MetLife: Brokers can benefit from working with carriers that handle the marketing, enrollment and administration of voluntary benefits. This lightens the workload for brokers and helps provide a seamless experience for employers and their employees.

Scott R. Llewellyn, Ameritas Group: Offering a vision benefit on a voluntary basis alongside employer-paid dental is a perfect pairing. In this tough economy, some employers may be forced to eliminate a benefit or two that may have been previously paid for or partially paid for by the company. Companies can lessen the impact of this benefit reduction by offering those benefits on a voluntary basis, and generally at a cost negotiated with the broker that improves the buying power of the employee. Carriers’ reps should be more than willing to assist the broker at voluntary enrollment meetings to make the process as smooth as possible for everyone.

Darin Pastor, Colonial Life: Brokers don’t have to be experts in voluntary benefits; they just need to partner with a carrier that is. A turnkey voluntary carrier can offer plug and play capabilities including products, benefit communication and education, and enrollment services. There is no investment in training or time on the broker’s part. The voluntary carrier will do the work and pay the broker the commissions. Adding voluntary benefits to their portfolios also helps brokers protect their revenue stream at a time when they may be seeing reduced income from other lines, such as major medical.

Steve Toby, Guardian Life: The changing tide in employee benefits is a boon for brokers. With all the changes out there and the confusion resulting from healthcare reform, employers are going to turn to their brokers for advice, which may result in even more opportunities. Brokers should be looking for a carrier that is willing to perform the enrollments instead of putting the burden on the broker – saving them time and money and letting them focus on the client.

Ron Agypt, Aflac: Some brokers have found that they have made equal to or more commissions than with some of their other products when they have offered voluntary insurance plans. The key issue is not so much about the commissions but about brokers having a holistic approach in designing the benefit platform, along with strong education. Employers are looking to brokers to identify benefits solutions that are cost-effective and hassle-free, and a product mix that helps safeguard and retain a productive workforce. We believe, once again, that brokers who take a holistic approach with their clients encompassing six main areas — major medical insurance, health care reform, group plans, voluntary insurance, communication, and education — will be the key here.

Shawn A. Jenkins, president and CEO Benefitfocus: Brokers provide a true well-rounded, consultative service to employers. As employers are looking for benefit offering ideas and strategies, brokers provide valuable guidance on what makes sense for them, not just on what will generate the most profit. If brokers can offer lower priced voluntary benefit packages that better suit their employers, while the financial reward may not be as large, they will create longer lasting relationships, therefore protecting their market share.

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

Scott R. Llewellyn, Ameritas Group: In order to provide real value to their clients, brokers must fully understand the group’s needs. Experienced brokers can quickly ascertain which benefits make sense for an employer group. There are dozens of voluntary benefits on the market, but a skilled agent will meet with the group and closely pair up the offerings to the needs of the group’s employee population. A good broker can tailor the offerings, simplify the process and assist the HR department in its ultimate goal of attracting and retaining high quality employees.

Crystal Caldwell Virtue, Esq., Caldwell Legal, USA: The US Department of Labor estimates that a company will generate a return of between $5 and $16 per $1 invested in legal or financial benefits for their companies. When it comes to choosing a provider for these services, satisfied clients are always the best way to see whether a plan offers real value. Find out how long the benefit administration company has been in business and how long their average group client remains with them.

Steve Toby, Guardian Life: Employers are able to offer their employees a more robust benefit package at no cost to help attract and retain valuable employees. An employer needs to be in touch with what is most critical for their employees and what is going to make the most business sense for them. From a carrier perspective, the education component is going to come into play even more over the coming years. Employees are going to need to be better benefit consumers and understand what they need and how they can get it. Things like online tools and personalized enrollment services go hand-in-hand with having a robust product lineup. These are valuable down the food chain from our brokers to employer down to the employee.

Ron Agypt, Aflac: The 2011 Aflac WorkForces Report1 found that nearly 60% of clients plan to shift more of the burden of health care costs onto their employees through increases in premiums and co-pays this year. In other cases, companies have eliminated many benefits that have traditionally been part of the employee benefit package, such as disability or life insurance. In those cases, voluntary life or disability products can provide real value to clients because it allows them to help meet the expectations and needs of their workers without adding any direct costs to the company.

Glenn Petersen, MetLife: Benefit programs can go a long way toward contributing to employee loyalty and retention. Loyalty measures provide a useful way for employers to gauge employees’ interest in particular benefits. Understanding which benefits influence employees’ loyalty and the preferences of the employee demographics comprising a client’s workforce will help ensure that your clients are getting the best return possible on their benefit investment.

Also important to forming a client’s voluntary benefits strategy is a solid understanding of the benefit trends across their particular industry and among employers of similar size and geography.

Darin Pastor, Colonial Life: Nearly every employee can benefit from voluntary coverage because these products are designed to help fill gaps in coverage and add additional protection for financial risks. The idea is to offer a variety of products so the client’s employees have choice to meet their different family needs.

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

Ron Agypt, Aflac: Voluntary insurance helps protect employees’ income. Short-term disability and life insurance policies are very popular in blue-collar industries along with accident insurance plans. In the white-collar industries, products designed to help employees protect their existing assets or savings/retirement from being used to pay for medical expenses are appealing. Products in this category include cancer and lump sum critical illness insurance policies.

Scott R. Llewellyn, Ameritas Group: To the extent that white-collar workers might have more discretionary income than blue-collar workers, then perhaps there is a difference in the two groups, but from a needs standpoint, all employees are looking to protect their health and financial welfare. As a result, brokers will tailor voluntary plans based on the employees’ specific needs and ability to afford the premiums. If a company’s workers have an average age of 26, benefits will be tailored differently than a company with an average age of 40, which by the way is the average age of a civilian worker in the United States. It all boils down to knowing your group.

Crystal Caldwell Virtue, Esq., Caldwell Legal, USA: As a legal plan administrator, I can say without reservation that every employer group needs affordable legal services. Whether it is family law, consumer law, landlord/tenant, wills and estates, or pressing financial distress issues, every employer group across the board needs expert advice and direction. The recession, combined with the drastic fall of the housing market, has been a significant leveler, leaving both blue and white collar groups hurting financially, and therefore in great need of legal guidance.

Darin Pastor, Colonial Life: Voluntary benefits can be a good fit in the benefit package for any type of industry, from a three-person mom-and-pop shop to a national chain with many thousands of employees. Voluntary benefits can help employers of any size in any industry offer a more competitive and cost-effective benefits program with expanded choices. Whether you sit at a desk or work on an assembly line, you need the basics of life and disability coverage. Then, depending on the company’s benefits and your family situation, you may have other coverage gaps that could be met by supplemental medical, accident, cancer or critical illness insurance, for example.

Glenn Petersen, MetLife: Yes, different types of benefits appeal to various employee populations. That is why it is helpful to do some homework to understand a particular employee population, the benefits that are deemed most important, and those that are the greatest influencers of loyalty.

Steve Toby, Guardian Life: Voluntary benefits cross all employee demographics and the appeal isn’t exclusive to any employee segment. The trend is turning toward voluntary. Employers need to manage costs while remaining competitive and employees are being charged with managing their own health.

Shawn A. Jenkins, Benefitfocus: The trend now is for the employers to rely more on higher employee contributions, by offering products such as HDHPs accompanied with HSA’s. The voluntary benefits that fit this design are the ones that fill in the payment gaps for medical services that may or may not be covered due to the nature of health plan designs. I believe this is less about the type of employee and more about the type of offering.

Which voluntary benefits are becoming more or less popular?

Crystal Caldwell Virtue, Esq., Caldwell Legal, USA: Since the recession, legal benefits have become essential. When people are in financial distress, they often have a critical need for information about fighting wage garnishments, repossessions, and foreclosures. They may need information about credit problems, tax issues, or bankruptcy. Where there are money problems, family law issues like divorce, child custody, and spousal support are also painfully common. Good legal counsel is crucial in order to make the best decisions to protect homes and families. A quality legal plan helps relieve stress by providing the affordable legal expertise that is needed.

Scott R. Llewellyn, Ameritas Group: As many companies struggle to maintain contributions to employee benefits, and some are forced to eliminate paid benefits, voluntary benefits such as dental, vision and disability have become top picks by employees. So to the extent that voluntary benefits are being offered in lieu of employer-paid benefits, they are increasing as a percentage of what is sold today. In this economy, more people may be purchasing additional or incremental benefits above and beyond their employer benefits. Offsetting some of the lack in demand created by the down economy are a host of very new and creative voluntary benefits. Brokers are using these benefits to help increase their income given the new realities of lower commissions from medical carriers.

Steve Toby, Guardian Life: A Guardian study revealed that disability and vision insurance were top voluntary choices. It isn’t so surprising since disability and vision insurance have a relatively lower penetration in the workplace so employees might be willing to pay for these benefits on a voluntary basis. Today though, as employers are cutting back, it’s going to become more popular for some of the “mainstream” offerings like dental and life to be offered on a voluntary basis. Dental insurance is an enormously popular benefit in general. The same holds true for dental as a voluntary offering when an employer can’t maintain it and it’s a choice between not having it at all or gaining access on a voluntary basis. Our voluntary dental programs are huge and are some of our most popular voluntary products. In fact Guardian is one of the top voluntary dental providers.

Darin Pastor, Colonial Life: With the focus around increasing healthcare costs and rising major medial deductibles, we’re seeing strong interest from employees in supplemental health plans that will help cover their out-of-pocket expenses before major medical kicks in. The benefits from supplemental health plans also can be used to pay non-medical expenses that aren’t covered at all by major medical plans. Cancer and critical illness plans are also very popular because nearly everyone has a family member or friend touched by these kinds of health problems. They’ve seen the financial burden that treating cancer or a stroke can cause for a family.

Glenn Petersen, MetLife: We find that all voluntary offerings are becoming increasingly important in employers’ overall benefits strategies, and particularly critical illness insurance (CII), auto & home and group legal plans. 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 offering because it provides employees with access to group rate savings on coverages they likely already have.

Group legal plans are another area of growing interest. Employees see great value in having access to office and phone consultations with a network attorney on an unlimited number of frequent personal legal matters, with the added benefit of knowing upfront what their spend will be. And there is a benefit for employers, too. The Hyatt Legal Plans study, The Impact of Legal Matters on Today’s Workforce, found that people accessing their attorney through a group legal plan were less likely to use vacation or other paid time off to address their legal issue than people who hired an attorney independently, which helps positively influence productivity. Employees also appreciate the value of the legal plan for long-term legal needs such as the preparation of wills and trusts. Supplemental life insurance and disability income insurance are also popular voluntary options. Employees can better meet their needs and obtain the right amount of coverage for their personal situation by supplementing their employer-paid coverages.

Ron Agypt, Aflac: In the face of diminishing budgets, rising health care costs, and a heated competition for talent, employers of all sizes are making tough decisions in the employee benefits arena. Voluntary insurance plans accomplish the seemingly impossible — help create a more attractive benefits package without adding any direct costs to the company.Voluntary dental insurance is a great example of a product increasing in popularity. It is the third most-requested benefit after major medical and retirement plans. Employers are seeking cost-effective ways to retain employees by offering competitive benefits packages while controlling expenses. Aflac dental accomplishes just that by providing employees with a valuable benefit that requires no premium contribution from the employer.

Another voluntary plan growing in demand is critical illness insurance. The good news is that today, people are more likely to survive a major critical illness, such as heart attack or stroke, than ever before. Unfortunately, the strain on a family’s finances as the result of a major health event can be devastating. Voluntary critical illness plans provide upfront benefits when an illness strikes, and will continue to pay benefits for reoccurrences, as well as hospital stays, travel to receive care, and associated therapies, among several other benefits. As companies continue to struggle to find ways to keep health costs down, voluntary insurance plans are one way employers can manage rising health care costs and continue to offer employees options and the benefits they need.

6) How do you choose a carrier?

Scott R. Llewellyn, Ameritas Group: It is still all about relationships. Brokers need to know and trust their carrier rep. They need to have a solid history with their carrier. After all, the most important service a broker can provide a group is their recommendation on a carrier. They are putting their agency’s reputation on the line with their recommendation. Selecting a carrier strictly on price alone is a dangerous proposition. You wouldn’t select your hospital or doctor on their low price, but instead on their education, experience, track record and reputation. All carriers are not created equal. Some have customer service calls answered in foreign countries to hold down costs, and some may pay claims in months instead of days. Look for reputation, administrative support, ratings, prior experience and most of all relationship with your agency.

Crystal Caldwell Virtue, Esq., Caldwell Legal, USA: Brokers should carefully evaluate the options they have for benefit providers. They should consider qualities, such as the experience the provider brings to the industry, the breadth and depth of the product offering, the flexibility of the provider, and the amount of administration that will be necessary with the plan, both initially and on a continuing basis. Another important criterion for brokers to consider is flexibility. Many carriers, but not all, are able and willing to tailor a benefit package specificly to their particular clients’ needs.

Shawn A. Jenkins, Benefitfocus: Cost and network are key drivers of choice. When it comes to voluntary benefits providers, price is obviously the top factor; however, we’re seeing the brand grow in importance.

Darin Pastor, Colonial Life: Base your decision on more than just products and price. A spreadsheet approach isn’t in the best interest of you or your clients. Instead, look for a voluntary partner that offers a broad portfolio of products, a variety of enrollment options and services, effective benefits communication and education, a reputation for great service and proven experience in this market. Low price won’t matter if employees don’t understand and value the coverage offered, or if your client has trouble with billing or claims down the road.

Glenn Petersen, MetLife: Experience is key, so the carrier should have a long history of offering voluntary benefits and be able to provide a broad suite of products and solutions. Other important considerations are the carrier’s administrative, marketing and enrollment capabilities, and the carrier’s financial strength. It is also beneficial for the carrier to have a wide 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.

Steve Toby, Guardian Life: Brokers should work with carriers that make the experience as easy as possible for their clients. Guardian is committed to helping educate employees about their benefit choices and to making the enrollment process a simple procedure.

Ron Agypt, Aflac: Selecting an insurance carrier or provider requires a fair amount of research and consideration. While each plan sponsor is unique and has its own set of criteria and needs, there are several “must-haves” every HR decision-maker should look for in the potential provider.

Financial Stability and Long-Term Experience —How long has the company been in business? Is it consistently ranked among peers as a reputable leader in the industry? How many clients and policyholders does the company service?

Range of Policies — Partnering with a voluntary provider that boasts a broad product portfolio can offer peace of mind; as an organization grows and changes, the provider can meet changing needs because it offers a wide range of group and individual insurance policies, such as disability, hospital confinement, cancer, accident and dental.

Broad Spectrum of Enrollment Options — Plan sponsors should avoid choosing providers that offer only a one-size-fits-all enrollment option. For example, many smaller organizations are best suited to in-person enrollment sessions with benefits consultants or representatives from the provider. Other larger companies may require online enrollment platforms or call centers to help field-based employees located throughout the country.

Verifiable Claims, Customer Support and Administration Processes — A primary reason HR decision-makers rely on voluntary providers is to ease the burden of administrative workloads that can come from adding benefits. Seek partners that can provide documented track records of their claims and billing processes. How fast do they process claims? Do they offer electronic billing and payment processes? Do they measure their customer service levels?

Value-Added Services — There are many voluntary providers that not only meet these requirements, but also go beyond to deliver value-added services to their clients. These can include an outsourced benefits communication program to help ensure that workers are knowledgeable and aware of benefit options prior to and during enrollment periods. Can the company offer best-in-class strategies or programs when it comes to benefits communication? Can it offer advice and guidance during and after enrollment?

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

Scott R. Llewellyn, Ameritas Group: The specific needs of the group will determine what types of voluntary offerings make sense. Simply because some benefits are normally sold together, such as dental and life, dental and vision, or life and disability – this alone is not reason enough to offer these plans together. A broker can analyze the current benefit offering and look for holes in coverage or caps in programs that can be filled with a strong offering of voluntary benefits.

Crystal Caldwell Virtue, Esq., Caldwell Legal, USA: Legal plan benefits have a very broad base of appeal and present well with all types of voluntary products.

Ron Agypt, Aflac: Voluntary disability and life insurance are one example. These two products help protect a client from loss of income. Dental and vision insurance policies are another example. As employers have to make tough choices in their major medical plans, voluntary dental and vision insurance products may be a solution.

Darin Pastor, Colonial Life: We really recommend an individual needs-based approach when presenting voluntary coverage. Each employee’s situation and needs are different. It’s important to listen to the employee and help identify the gaps in coverage and types of protection that a person needs.

Glenn Petersen, MetLife: Often, group auto and home, group legal plans and critical illness insurance are offered at the same time. These products have a broad appeal and can help meet everyday needs of your clients’ employees. While these products are often adopted by employers at the same time, we recommend a customized communication and enrollment strategy for each product to help maximize employee awareness and understanding of the benefits. Supplemental individual disability income insurance and supplemental life insurance also fit naturally together as they form part of the foundation of employees’ safety nets.

Steve Toby, Guardian Life: Life and DI for their income protection and Dental and Vision for their health focus.

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

Crystal Caldwell Virtue, Esq., Caldwell Legal, USA: Do the research up front. Seek out top quality companies with excellent plan offerings and then stick with them. Believe in your products and sell them with confidence. No one wants to lose a sale because the client was overwhelmed with choices.

Shawn A. Jenkins, Benefitfocus: It is important to make the benefit enrollment process very obvious and natural. When voluntary benefits are part of the flow and regular process, it results in higher participation rates.

Ron Agypt, Aflac: This is an important issue and one that will become even more crucial with any onset of health reform. We have studied U.S. workers and their need for better education and communication about benefits. In fact, our own research finds that 62 percent of workers rely on their friends and colleagues for advice about benefits, when most of them would prefer to sit with a benefits consultant or HR professional.

The reality is that many HR professionals are simply strapped for time and don’t have the resources available to them to field questions and provide advice to confused workers. Further, every employee has different preferences or desires when it comes to how they get benefits information and the tools they need to make a clear decision.

First, we advise our clients to try to uncover what the general preferences are among their workforce and where the misconceptions about voluntary plans are, etc. Aflac research indicates that a full quarter of workers today concede they are not adequately informed about benefits. Second, we often recommend using a variety or combination of venues and approaches to deliver benefits information clearly. This may include online tools, portals, in-person meetings with HR benefits consultants or brokers, and printed materials.

Last, we know from our research that workers have several misconceptions about voluntary insurance. Those include misinformation about the cost of voluntary plans, how the benefits are paid and to whom, and why they are important in the first place. Armed with this knowledge, we address these myths with workers so that we can be sure they understand the options presented to them.

Scott R. Llewellyn, Ameritas Group: This critical area is often overlooked. The presentation of voluntary benefits can be confusing, overwhelming, and difficult for any person outside the insurance industry. Benefits should be straightforward and honest. Offerings should be tested before they are launched. Create a sample group and see how they respond, and see if employees truly understand the cost benefit of each program.

Darin Pastor, Colonial Life: The best method is to offer two or three voluntary products at first and take the time to help employees understand their coverage gaps and their most pressing needs. Having a benefit 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. Additional products can be added to the benefits offering over time.

Glenn Petersen, MetLife: It can be helpful to encourage clients to create segmented marketing campaigns and to introduce new products individually.

Steve Toby, Guardian Life: The name of the game in this drastically different landscape is going to be education. We’re giving small and mid-size employers the access to not only the benefits, but also education that will help them to make better decisions and offer programs that are in line with what their employees need. With things like 24/7 access to Guardian’s online benefits website, Guardian Anytime, which includes provider locators, health resources, glossaries and plan information as well as our online educational resource with information about everything from reform to the latest benefit news and trends, About Employee Benefits, brokers, employers and employees have instant access to everything they need to know. It’s the comfort that comes from having access to information that is going to cure some of the unease and inertia that has resulted from all these changes.

Do you see more unbundling of voluntary benefit options?

Ron Agypt, Aflac: Actually, we are seeing more bundling occur. Many brokers and consultants are trying to integrate their benefits packages to dovetail with their medical and true group insurance plans. In addition, in the marketplace, we are seeing a big push on communication and education to support an integration of all benefits.

Scott R. Llewellyn, Ameritas Group: Again, benefits should be tailored to the needs of the company. A broker should spend time analyzing the current benefit offering and look for holes in coverage or caps in programs that can be filled with a strong array of voluntary benefits. The broker can select and build a voluntary product that exactly meets the needs of the employer, and is selected from the best carrier for that specific coverage.

Crystal Caldwell Virtue, Esq., Caldwell Legal, USA: Voluntary benefit plans are becoming more and more flexible in order to stay competitive and meet the changing benefit needs of their members.

Darin Pastor, Colonial Life: Actually we see the opposite. For example, we’re seeing disability riders on accident products and long-term care riders on life insurance products. Voluntary benefits can work together this way to create more value for consumers.

Glenn Petersen, MetLife: Yes, especially because experience shows that focused awareness campaigns and enrollment opportunities optimize the value of the offerings for clients and their employees. Employees gain a better understanding of the needs that each product meets, and clients see a better return on their benefits investment because employees understand and appreciate their benefits.

What changes do you see to the voluntary benefits market as a result of health reform?

Crystal Caldwell Virtue, Esq., Caldwell Legal, USA: Many experts anticipate that with the instability in the healthcare arena, brokers will look for a more stable place to land in order to supplement the loss to their income. Solid voluntary benefits provide that platform.

Scott R. Llewellyn, Ameritas Group: At the time concrete policies and provisions emerge with the healthcare regulation, we will better understand the impact it will have on voluntary benefits.

Darin Pastor, Colonial Life: Two things are clear about the impact of healthcare reform on voluntary benefits: the need for coverage will continue, and the need for clear benefits communication will be greater than ever. For the most part, the products themselves are outside the scope of the healthcare reform legislation.

Glenn Petersen, MetLife: Healthcare reform seems to have increased the importance of non-medical benefits to both employers and employees. A MetLife Healthcare Reform Poll found that 43% of employers feel strongly that offering non-medical benefits will become a more important strategy for their companies over the next five years. The poll also found that 71% of employees who say they have a good understanding of healthcare reform also say that their non-medical benefits are very important in driving their feelings of employer loyalty, compared to only 57% of employees who admit they don’t have a good understanding of the legislation. This means increased opportunity for brokers and consultants.

Do you have anything else to add about voluntary benefits?

Crystal Caldwell Virtue, Esq., Caldwell Legal, USA: To survive these tough financial times, many companies have been forced to cut back on the number of their employees. Those crucial employees who remain are being asked to do more with less, which makes it all the more necessary to keep turnover low and retain those essential, quality people who keep things running. Voluntary benefits offer employers an opportunity to offer significant value to their employees at no cost to their bottom line.

Darin Pastor, Colonial Life: Voluntary benefits are a win-win-win: for your clients, for their employees, and for your business.

Glenn Petersen, MetLife: Voluntary benefits provide an excellent way for clients to offer additional benefits value without increasing the company’s benefits costs.

Defined Benefit Plans Age-Based Investing:An All-In-One Hit With Employees Plus Fiduciary Protection for Employers

by Brian T. Mong, CFA, AIF

The search is on for a lifecycle fund or allocation design that meets employee needs; withstands the turbulence of an uncertain economy; reveals all costs, expenses and fees; and helps employers meet their fiduciary responsibilities which come with providing a retirement plan.

The Dept. of Labor and many plan sponsors have recently contemplated the weaknesses of target date funds during the Great Recession. Many potential solutions are being discussed, including the notion that the dates of planned events, such as retirement, can change.

Data gathered over four years of experience with a target age program – as opposed to target date – show the age-based allocation approach to lifecycle investment options is popular with “do it for me” employees because of its simplicity. Employers find it attractive because it’s a fiduciary-friendly alternative to target date and other lifecycle funds.

Here are some characteristics of the target age allocation option that -yielded the data described in this article:
100% of participant’s balance must be invested in the target age option.
The portfolios that comprise the target age option are rebalanced annually.
The portfolios are transparent; it is clear to plan sponsors and participants which underlying funds are included in the target age option.
There are no charges beyond the weighted average of -underlying investment option expenses, regardless of plan size.
There are 95 million possible options available from the 98 investments offered in this particular target age option.
There are no requirements to include proprietary funds in the target age portfolios.

An Understandable All-in-One Solution for Employees

Target age allocation options provide an asset allocation tool for employees who lack the time, expertise, or desire to allocate their retirement plan investments. Asset mix and separate account investment options selected by each plan sponsor deliver a reasonable risk-return profile based on a participant’s age. Unlike target date funds, a participant’s entire balance must be invested in the target age option to ensure appropriateness of the account allocation. Accounts are rebalanced automatically in accordance with the participant’s investment goals; the investment mix is adjusted as the participant ages.

Participants in every age group are more likely to choose the target age option than to default into it. The target age option appeals to participants who are just beginning to invest as well as those near retirement.

In this regulatory environment, plan sponsors who include the target age options in their plans are pleased that there are no concerns about a lack of transparency or appropriateness of fees.

With the target age option, smaller plan sponsors are able to offer custom portfolios, an option previously offered only to large plans.

Target Age Options Simplify Asset Allocation Decisions

Creating an appropriate asset allocation in a retirement account is daunting for most people. On their own, participants often create portfolios that are not properly diversified because they often make the following mistakes:
Select investment options based solely on past performance.
Select only money market or stable value investments.
Allocate equal percentages to all options.
Use other unsophisticated techniques.

The target age options simplify the asset allocation decision  by providing reasonable investment portfolios that are carefully diversified and appropriate for the participant’s age. They are not for participants who want to add other investment options to their portfolios since these additions would alter their portfolios in unpredictable ways. Employees who choose this target age option must commit 100% of the account balance.

As of December 31, 2010, more than 40% of participants in a discrete group of plans that offer target age options invested their entire balance in the target age option.
Among the youngest group of investors (under 30), nearly 55% use the target age option, the highest percentage of all age groups studied.
This may signal a trend that younger investors may be more open to adopting an all-in-one retirement plan investment option.
Older age groups use target age less frequently, but even in the oldest group (60 and older), 32% selected target age options.

Employees Actively Select Target Age Options

Employers can use a target age program as a default option for participants who make no investment allocation decisions, but it also appeals to participants who seek a “do-it-for-me” solution. When given the opportunity, more employees select a target age option than default into it. Over 25 percent of participants selected target age – even with the requirement that they invest their entire balance – while 15 percent defaulted into it.

“Transparency” speaks to participants

Even though they make only one investment and allocation decision, participants who choose the target age option see diversified portfolios when they view their accounts. Clearly presenting a detailed summary of a participant’s portfolio, including each of the underlying investment options, directly addresses the behavior of participants who randomly allocate balances across the entire investment lineup in the hopes of feeling diversified. Target age options are popular with participants because they can easily see and understand how diversification benefits them. They incur no additional management charges and the transparency of the portfolios allows them to see all of the expenses associated with their accounts.

Fiduciary-Friendly for Plan Sponsors

Target age options give plan sponsors and their advisors a wide range of -choices. A long list of investment options provides the freedom to build portfolios that match the specific needs of each employee group. Plan sponsors can customize the target age investment selection with a wide array of risk and return characteristics to meet participant comfort level and return expectations. Additionally, plan sponsors can create prudent portfolios with varying characteristics based on cost, risk and historical returns.

Fiduciary Focus on Risk-Adjusted Returns

The possibilities available with the target age allocation options provide plan sponsors with many portfolio choices. Depending on the investment options selected target age can vary widely, particularly when it comes to risk. Some employers choose target age component portfolios with low volatility to keep fluctuations and risk to a minimum. Others select portfolios with higher potential for greater returns and higher volatility.

Fiduciary Focus on Underlying Funds

Plan sponsors have complete control over the selection of underlying investments in the target age option and they can tailor it to the unique characteristics of an employee group. If an investment option underlying target age does not perform well or the plan sponsor wants  to replace the investment option, the target age does not have to be discontinued. Employees can easily identify the identities, expenses, and performance of underlying investments, and portfolio rebalancing is done on a consistent, predictable schedule.

For an in-depth summary of target age glide path methodology behind this program and how it compares to target date funds, visit this link ( to read  “Age-Based Investing: “All-In-One” Hit With Participants.”

Fiduciary Protection For Plan Sponsors

This target age program uses a series of allocation portfolios based on participant age and the investments available in a plan. The portfolios are based on generally accepted investment principles and consider an investor’s life expectancy. Plan sponsors decide which separate account investment options to include in the target age option. Participants give prior approval for their accounts to be invested according to their age, rebalanced annually, and reallocated to more conservative portfolios as they age. The target age allocation (for a participant’s age 75 and older) is heavily weighted towards fixed income investment options. A participant’s target age effective date is the date they set it up – possibly the next business day. Past performance does not guarantee future results.


Brian T. Mong, CFA, AIF, is an investment consultant for Securian Retirement, a unit of Securian Financial Group, Inc. He has an MBA from Texas A&M University and a bachelor’s degree from the University of Texas. Mong joined Securian in January 2009. He previously held positions with Janus Capital Group, American Funds Distributors, and GMAC Residential Capital Group. Securian Financial Group and its affiliates provide financial security for individuals and businesses in the form of insurance, investments and retirement plans.

HSAs–HDHPs Offer Solutions in the Health Reform Era

by Ron Goldstein, CLU

High-deductible health plans (HDHP) have emerged on the scene and are growing in popularity as a way to address rising health insurance costs that have become unaffordable for some individuals and businesses. These plans deliver lower premiums and higher deductibles than do traditional HMOs and PPOs, proving, once again, that one size does not fit all when it comes to health insurance coverage.

High-deductible health plans offer lower premiums because the insurance company no longer pays for many aspects of routine healthcare found in more traditional models.  What’s more, insurance underwriters believe that Americans will consume less medical care and do a better job of shopping for lower cost options when they see a more direct relationship between medical cost and their bank accounts. In fact, among the government’s goals in establishing these HDHPs is to introduce consumer-driven supply and demand and control inflation in healthcare and health insurance.

The addition of health savings accounts (HSAs) makes high-deductible health plans even more attractive. The HSA is a type of medical savings account that allows consumers to save for medical expenses on a tax-free basis. Together with HDHPs, HSAs represent a growing approach to healthcare, commonly referred to as “consumer-directed care.”

HSAs were federally enacted as part of the Medicare Prescription Drug Improvement and Modernization Act of 2003. These tax-advantaged medical savings accounts are available to taxpayers who are enrolled in a HDHP with a minimum annual deductible of $1,200 for individuals and $2,400 for families. HSAs allow the individual to receive needed care without a gatekeeper to determine which benefits are allowed and, as a result, make consumers more responsible for their own healthcare choices.

Many individuals are enrolling in HDHPs and contributing some of the savings in their health premiums into an HSA to reap the following benefits:
Dollars contributed to HSAs are not subject to federal income tax at the time of deposit.
Dollars in the HSA can be used to pay for qualified medical expenses any time without federal tax liability or penalty.
Funds that are not spent roll over and accumulate year to year.
HSAs provide a flexibility to pay, on a pre-tax basis, qualified medical expenses that are not covered in standard insurance plans. In some cases, this includes dental, orthodontics, vision, and other approved expenses.
In catastrophic situations, the maximum out-of-pocket expense liability can actually be less with HSAs than with a traditional health plan. A qualified HDHP can cover 100% after the deductible, involving no co-insurance.
If medical expenses are low and contributions are made regularly to the HSA, the account can accumulate significant assets, over time, which can be used for retirement on a tax-deferred basis.

Many employers also embrace HSAs. Employers can demonstrate their commitment by contributing funds to their employees’ HSAs. Employees can use these funds to pay for medical expenses, such as check-ups, preventive care, and emergency services. The money contributed can also help employees build a fund for future expenses or retirement.

When HSAs were created in 2003 under President George Bush, no one could have anticipated how the 2010 Patient Protection and Affordability Act (healthcare reform), enacted under President Obama, would affect the popularity of HDHPs and HSAs. But the potential is there, nonetheless, on three fronts:

High-deductible plans are the most attractive plan design going forward with 55% of large employers saying they are likely to choose a high-deductible health plan following the passage of healthcare reform legislation, according to a 2010 survey of more than 400 employers conducted by Fidelity Investments. Employers already offer an HDHP are more likely to consider this plan type as the more likely option for the future. Sixty percent say that HDHPs make the most sense for their organization. Eight-four percent of U.S. employers expect to revisit their healthcare benefit strategy this year in light of reform, according to the survey. In addition, a 2009 Mercer study reveals that consumer-driven health plan offerings increased from 9% to 15% among employers with 10 to 499 employees. It is increasingly clear that HDHPs are becoming extremely attractive to employers of all sizes in this environment.

Healthcare reform will funnel 30 million to 40 million new individuals into the healthcare system. Many are expected to be lower income men, women, and children who have been disenfranchised from the healthcare system due to their inability to afford care. For them, high-deductible plans will be particularly attractive. In fact, they constitute the precise audience for which these plans were first developed. (As it unfolded, individuals of all income levels became attracted to these plans including healthy Americans who just want catastrophic coverage and those who simply want to take better control of their healthcare dollars). For this reason, brokers would be well advised to have HDHPs and HSAs in their arsenal as they prepare to serve this wave of potential new customers

There is a direct connection between high-deductible plans and the emergence of health insurance exchanges. Healthcare reform mandates that every state establish health exchanges by January 1, 2014 or default to a federal fallback program. Health insurance exchanges are designed to promote choice and make health insurance purchasing more value based by creating a sort of online shopping mall where consumers, employers, and brokers can see health insurance plans side-by-side and compare benefits, costs, and other features. Each health plan offered in an exchange will include an essential set of benefits that provide healthcare services with different levels of cost sharing. There will be multiple benefit categories so consumer can choose the one that best meets their needs and budget. Among these gold, silver, and bronze plans will be a high-deductible plan for individuals who want the lowest possible premium and the highest possible personal accountability for their healthcare dollars. Brokers will need to become fully educated on HDHPs and HSAs and feel comfortable explaining their pros and cons if they are going to add value in the health insurance exchange marketplace.

Three Things Brokers Should Start Doing

With high-deductible health plans and HSAs poised for growth, there are three things California’s brokers should start doing now:

Start learning all you can about these attractive options. Since the laws regarding HSAs are changing, it’s important for you to remain current and knowledgeable. For example, beginning this year, HSA funds can no longer be used to buy over-the-counter drugs without a doctor’s prescription. In addition, members who use their HSAs for non-medical expenses will be hit with a 20% penalty instead of the former 10%. Other changes are likely to be in store as well. It is important for brokers to fully understand and keep up with all of the rules governing HSAs in order to confidently and clearly explain them to clients – from how to set up an account to how to make withdrawals to what are the allowable medical expenses that can be paid for through an HSA.

Reassess the needs of each of your clients to see if high-deductible health plans may be right for them and their employees. Here, in California, health insurance premiums continue to rise at a much faster rate than overall consumer prices. Since 2002, premiums have increased by 117.5%, which is more than four times the 23.1% increase in California’s overall inflation rate. The average health insurance premium for a family of four is expected to be $28,500 in 2019, according to a California health benefits survey conducted by the California Healthcare Foundation in December 2010. With health insurance premiums escalating at such an alarming rate, business owners of all sizes, particularly small business owners, are looking for relief. As your clients’ trusted advisor, you may want to explore with them HSA-compatible high-deductible health plans.

Develop a strategy to reach the millions of new consumers who are entering the health insurance purchasing marketplace as a result of healthcare reform – many for the first time. They will need extra guidance and plain speak about what plan works best for them. For some, high-deductible plans coupled with an HSA will be the right answer. It is particularly important for lower income individuals to select and budget wisely to truly benefit from the tax breaks offered by HSAs.

The bottom line is that HDHPs and the HSAs that link to them are becoming familiar fixtures in the health insurance landscape. More and more employers are adding these plans to the mix or using them to replace traditional plans. In 2009, about 12% of employers offered a consumer-driven health plan and many more plan to do so in the near future, according to an analysis by the Employee Benefit Research Institute. These plans have a growing number of fans among small to mid-size business owners, in particular, because these employers know that they offer an effective way to keep premiums down while still providing their employees with responsible coverage.

Offering an HDHP coupled with all of the attractive features of an HSA, might just be the solution many of your customers are looking for as healthcare reform takes hold. But they need you to take the lead. Are you ready?


Ron Goldstein, CLU, is president and chief executive officer of CHOICE Administrators, the nation’s leading developer and administrator of health insurance exchanges.

Legal Plans–Group Legal to the RescueEmployees Face Rampant Foreclosures, Financial Hardship, and Soaring Debt

by Tanner Kin

One in eight homes stands in foreclosure in Lathrop, ­California. This Northern California city is an extreme example of the troubles sweeping our country. California has a higher foreclosure rate than any other state. Many people have lost their jobs and many more have taken significant pay cuts, particularly government workers. Personal debt has skyrocketed while incomes have fallen. Many of those who are not facing foreclosure also worry about a rising tide of debt.

These burdens on workers impose burdens on their employers as well. More than half of Americans say that financial distress has made them more irritable, angry, tired, and sleepless, leading to lower productivity at work. A pre-recession study in the Harvard Business Review reveals that U.S. companies lose more than $150 billion a year to employee stress. The problem is only getting worse with rampant foreclosures, financial hardship, and soaring debt.

Group legal plans provide a solution. With group legal, your clients can get desperately needed legal advice without the cost or hassle that goes into looking for a qualified and honest attorney. Employers that offer group legal plans can reduce the business cost of employee stress and hardship and increase loyalty. And California insurance brokers are poised to earn significant income while meeting this important need.

Benefits to Employees

Most people know they need professional assistance when facing the loss of their homes. They may be aware of the possible paths: debt consolidation, bankruptcy, loan modification, and short sale, to name a few. But many people don’t know which is the best solution for their circumstances. When it comes to complicated legal issues, one size does not fit all. Even though a flood of general information is available, people need direction and advice that is specific to their needs.

Unfortunately, people in financial distress are likely to give their business to whomever advertises the most and this is not likely to be someone who has the consumer’s best interest at heart. After all, a bankruptcy lawyer will recommend bankruptcy and a loan modification group will recommend loan modification. That’s not a consultation; it’s a sales pitch.

A much better option is for the employee to consult with an attorney. A good attorney can address specific issues and find the best solution for each individual. Financial laws and regulations are changing constantly, with state and federal programs being established and then sunsetting. A good attorney can direct the client to the most beneficial programs. The attorney can make calls and write letters on behalf of their clients, relieving them of some of the stress they face. But, that kind of help can be expensive and finding a competent and helpful attorney can be time-consuming.

Unfortunately, Californians face special hurdles when it comes to foreclosures. The state recently passed a law prohibiting lawyers from being paid for loan modification services until the work is complete. The law intended to answer the thousands of complaints about modification swindles received by the California state bar. But it has prevented many legitimate attorneys from taking on loan modification cases. Payments to lawyers are often delayed or denied completely since these cases often last a year or more and may end in bankruptcy. Many attorneys can no longer afford to take loan modification cases while big banks can hire all the lawyers they need.

Fortunately, group legal can help with access to qualified, knowledgeable attorneys. Recently, one California state employee paid $3,500 to a television attorney firm to get help modifying his home loan. He was facing possible foreclosure due to state-imposed furloughs. The firm did little to earn that money, relegating most of the legwork to him. In fact, he had to hound them to get any service at all. He then discovered that his employer offered a legal benefit plan. His legal plan attorneys helped him through another loan modification at no additional charge and showed him the respect of promptly returning his phone calls. The cost of one year of his legal plan was a mere fraction of the $3,500 he paid to the first firm.

There is a great need for attorneys to assist customers with loan modification. Investigations have revealed that big banks often fail at proper record keeping. Lenders have lost thousands of mortgage documents and many more documents may be wrong or fraudulent. Too often, banks are sloppy when processing foreclosure documents and they frequently make mistakes. The law that was intended to protect consumers has made it extremely difficult for people to find an attorney to help defend them from the failures of the mortgage-lending industry.

Group legal is, by far, the best option for employees who are looking for vital information and assistance. A legal plan frees an employee from worrying about their lawyer and allows them to focus on solving their problems.

It’s important to remember that employees need legal services whether or not the economy is doing well and group legal plans provide assistance with more than foreclosures or financial issues. Employees need consultations on family law, divorce, estate planning, and more. Some group legal plans even provide tax advice and preparation services, which is another benefit that can save employees time, money, and trouble. Above all, group legal plans allow members to find reliable, experienced attorneys who rely on the group legal company for business and therefore treat their group legal clients with an extra degree of respect and care.

Additionally, group legal plans can function as preventive care. Group legal providers can review documents and contracts for their members, such as renter’s agreements, insurance policies, adoption papers, and more — often at no additional cost. When employees have the freedom to consult an attorney proactively, group legal can keep small issues from becoming serious.

Seventy percent of Americans face at least one legal problem in a given year, but most do not seek legal assistance, according to an American Bar Association study conducted before the crash of the housing market. They fear the high cost of legal help and they don’t know how to find the right attorney. Legal problems can grow with inattention and negligence. Group legal plans solve both issues by providing a network of qualified and capable attorneys and by covering much or all of the cost of legal aid — help that’s designed to get someone’s life back on track.

Benefits to Employers

Because financial stress and legal problems go hand-in-hand, an employer must consider how these problems affect the workplace. A December 2008 survey by the Employee Assistance Society of North America reveals a startling 88% increase in employee requests for financial services over the previous year and a corresponding increase in requests for credit counseling, debt management, and bankruptcy assistance.

Even before the recession, more than two-fifths of American employees took time off work each year to deal with legal issues. Employees who are facing financial stress are more likely to be absent from work. A 1987 study by G.T. Adams reveals that stress-related illness is the cause of over 70% of absenteeism.

Financial stress increases the likelihood that employees will need physical and mental healthcare, which increases costs to employers. Employees who report financial stress also report higher levels of physical impairment and reduced physical capacity, possibly leading to increased injuries for employees who have physically demanding jobs.

Stressed employees are less loyal to their employers. They are also less productive at work — a phenomenon that has come to be known as “presenteeism.” A 2004 study by Cornell University reveals that presenteeism costs companies up to three times as much as absenteeism does.

Presenteeism is estimated to cost about $2,000 per-year, per-employee. The Government Accountability Office anticipates more than one million home foreclosures in the next several years. When a home is foreclosed, an employee is forced to move and may have to leave their job. Your clients know the high cost of replacing employees; anything they can do to reduce turnover will be a great benefit.

With all the problems employees are facing, group legal provides employers a tremendous return on investment. The Dept. of Labor estimates that a company will generate a return of $5 to $16 per $1 invested in financial or legal benefits for their employees.

Seventy-four percent of workers who used an employer-provided financial or legal advisor had reduced stress, 67% had improved health, 39% had reduced absenteeism, and 36% had increased work productivity, resulting in reduced costs and improved profits for the employer, according to a 2002 study by Mark Attridge. Those are tremendous results for such an affordable employee benefit.

It is plain to see that an employee who is in crisis is an unproductive employee. There is rapidly growing need for financial and legal assistance from employers. Employers can reap the benefits of making sure that their employees are happy, safe, and healthy.

Finally, several legal administration companies that provide group legal offerings also offer legal plans that cover small businesses, not just the employees. Typical small business plans include benefits, such as contract and document review or telephone calls made and letters written on behalf of the business, as well as legal consultations for the business. Employers have reported that having a good legal plan for their business is like having an attorney on staff who is ready to offer the crucial legal advice and assistance they need to survive tough economic challenges.

Benefits to Brokers

We see why group legal can benefit employees and employers, but how does selling group legal benefit brokers?

• A Growth market — The group legal market is enormous and underserved. Small and medium businesses stand to benefit greatly from group legal, but very few have even considered group legal as an option. Ninety percent of Fortune 500 companies provide financial or legal assistance for their employees, but only 9% of companies with fewer than 50 employees provide this assistance. In addition, less than a quarter of all Americans have any legal coverage.

• No California Licensing — Unlike health insurance, group legal requires no licensing in California. This results in lower costs and no time spent satisfying state regulations.

• Easy Administration — Group legal plans are easy to administer and they are an excellent source of residual income. They also lack the overhead and maintenance of health and dental plans, which require a lot of paperwork and may require frequent education for employees. In addition, most group legal providers do not restrict enrollment periods. Also, some are flexible about benefit offerings.

• Return on Investment– Group legal provides an excellent return on investment for brokers. Since group legal costs significantly less than health insurance, it does offer lower commissions. But, it requires significantly less time and paperwork. Also, there is virtually no work involved for renewals. As such, group legal is an excellent source of residual income.

• A Winning Pitch — Above all, group legal makes an excellent case for itself. For business owners and employees alike, having group legal is like having an attorney on call. Group legal can provide relief for troubled employees and legal advice for business owners. The benefits are proven; employers simply need the information and education that you, as their broker, can provide.

Group legal plans improve quality of life for their employees and increase employee loyalty. They are good for employees, good for employers, and bottom line, very good for you, too.


Tanner Kinkead represents Caldwell Legal, whose founder, Donald Caldwell, pioneered the prepaid legal industry in 1967. For more information call 800-222-3035 or visit us online at

Self-Funding–Not an Expert on Stop-Loss Insurance? Time to Become One!

by Matthew S. Hayward

ast year’s healthcare reform law has spurred a surge of interest among California employers in self-insuring their health benefit plans and keeping a lid on liability with stop-loss insurance. For brokers, that may result in new opportunities to build deeper relationships with their clients.

Brokers and advisers across the state are noticing that more and more clients are reassessing the risk exposure of their health benefit plans. The law is prompting many employers to explore alternative ways to better manage those risks. Self-insuring, combined with stop-loss coverage, is one solution that is grabbing their attention.

Naturally, they will be turning to their brokers for advice. That’s why it’s important to stay on top of the latest developments. Advisers who are able to explain how different funding arrangements can help keep a lid on costs and suggest reliable partners to help manage employers’ risks will prove themselves to be valuable allies.

The Brokers’ Role

Stop-loss insurance allows employers who self-insure for medical coverage to limit their financial exposure. It helps protect them when their group medical costs are higher than anticipated or individual employees experience high-cost catastrophic illnesses or accidents.

Claims are reimbursed under a stop-loss policy once a preset amount – the deductible – is exceeded. Plans can be designed in accordance with a company’s financial strength, with premiums typically decreasing as the deductible increases.

The broker’s role is primarily to educate and sell the concepts of self-insurance and stop-loss coverage to their clients, conduct due diligence on third-party administrators (TPAs) and stop-loss carriers, and recommend those with high-quality service and track records of managing costs effectively. The TPA typically adjudicates claims and otherwise acts in the same capacity as a carrier does in a fully insured arrangement, without assuming any of the insurance risk.

Health Reform Drives Change

Under the new law, formally known as the “Patient Protection and Affordable Care Act,” group health plans will no longer be able to have lifetime dollar maximums on “essential health benefits,” effective for plan years starting on or after Sept. 23, 2010. For calendar year plans, this means the provision was effective Jan. 1, 2011. This prohibition applies to both fully insured and self-insured group health plans.

The law broadly defines certain categories of benefits as “essential health benefits,” including for example, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, prescription drugs and laboratory services. The Secretary of Health and Human Services is expected to issue further guidance on what specific services are included in the definition.

While lifetime limits are now prohibited, the law still allows annual limits for a brief time. Interim regulations state that any annual limits for all “essential health benefits” can be no less than $750,000, $1.25 million, and $2 million per individual for plan years beginning Sept. 23, 2010, 2011, and 2012 respectively. On Jan. 1, 2014, annual limits are prohibited entirely for “essential health benefits.”

California brokers are already seeing ripples of change across the employer community:

Even the largest self- insured employers are assessing the need for stop-loss insurance to manage their potential financial exposure since they can no longer cap lifetime benefits for employee health care coverage.

Fully insured companies are considering switching to self-insurance with stop-loss coverage as a financially attractive alternative.

Potential liability

Self-insured companies are rightly concerned about their ability to absorb the entire amount of claims, particularly for serious illnesses with highly unpredictable costs. Congenital heart disease, for example, which includes numerous conditions that vary widely in complexity, is the leading cause of birth defect-related deaths in the United States. A single complex case of congenital heart disease averages $286,000, and can even exceed $2 million.

Before the new law went into effect, many self-insured companies set aside sufficient reserves to fund medical claims like these and included dollar limits to set a ceiling on their liability. Large employers, for instance, often set maximum caps of $1 million per covered life in their benefit plans. Now, no longer able to impose those limits, these businesses seek protection in the event of a catastrophic claim that could threaten their financial viability. Stop-loss coverage offers that protection – helping employers to shift the risk of paying the entire amount of high-cost claims.

The Benefits of Self-Insurance

In the California market today, self-insured firms are not the only groups seeking their brokers’ advice about the feasibility of stop-loss insurance. The healthcare reform law is also driving interest among fully insured companies in becoming self-insured and hedging their potential risk exposure with stop-loss coverage. Fully insured companies may also be attracted to other benefits of self-insurance, such as greater plan design flexibility, an exemption from certain state-mandated benefits laws and the freedom to standardize benefits on a national basis.

Obtaining insights into valuable claims data is another reason that businesses are eyeing self-insurance. In fully insured arrangements, employers generally don’t have access to claims data since it resides with the carrier in its role as plan fiduciary. Self-insured companies, on the other hand, are able to view this information, which can be used to implement disease management programs or wellness campaigns targeted for their specific employee population.

For example, if claims data reveals that an unusually large number of employees suffer from lower back pain, an employer could institute a program on proper lifting techniques or ensure that desk-based workers use ergonomically designed chairs, thereby helping to limit future claims.

A Word of Caution

Some brokers are under the mistaken impression that a stop-loss policy is a commodity – standard reinsurance over a self-insured plan. They assume that, if a claim is covered under the underlying medical plan, then the stop-loss carrier will automatically reimburse if it exceeds the employer’s deductible. But that may not be true. In a worst-case situation, an employer submitting a high-dollar claim to its stop-loss carrier could have it rejected because, unknown to the employer, that particular type of claim is excluded from coverage under the carrier’s policy.

Brokers must conduct due diligence on behalf of their clients by comparing stop-loss policies carefully and understanding definitions, exclusions, time frames for submitting claims, and other key provisions. No client wants to be surprised with a rejected claim resulting from inconsistent definitions or exclusions between its own self-insured plan and the stop-loss policy.

Another potential trap is that, while group health plans are prohibited from imposing a lifetime maximum on “essential health benefits,” this restriction doesn’t apply to stop-loss coverage. In other words, stop-loss carriers do not have to provide unlimited benefit coverage. To avoid gaps in coverage, brokers should encourage their clients to ask their stop-loss carriers to mirror the law’s requirement – that is, to provide an unlimited lifetime maximum in their policies.

Unlike fully insured plans, self-funded arrangements are undoubtedly more labor intensive, requiring brokers to educate clients and coordinate multiple vendors. But, with the cost of healthcare continuing to seriously affect employers’ bottom lines, senior executives are increasingly demanding that brokers help them find creative ways to get the most from their limited benefit dollars. With that reality in mind, brokers who bring options like self-insurance and stop-loss coverage to their clients, before being asked to, will be a step ahead of the competition.


Matthew S. Hayward is the West Coast Stop Loss sales director for OptumHealth Financial Services. He sells medical stop loss products and services to the TPA and brokerage market, and creates self-funding strategies for clients in a variety of markets. Matt earned an MBA from California State University, Fullerton, and a bachelor’s degree from the Univ. of San Diego. He is based in Orange County, California. He can be reached at 714-445-0712 or by email at

Wild About Wellness–Part I of Our Annual Survey

Please list the wellness benefits that you offer along with the minimum group size for each offering:

American Specialty Health: As one of the nation’s leading total health management organizations, Healthyroads is committed to helping people take greater control over their health and empowering them to live healthier and longer lives by offering:
• Telephone-based lifestyle coaching for weight management, tobacco cessation, stress management, and healthy living
• Online tools and resources
• Personal health assessment (PHA)
• Biometrics screenings
• Incentive programs
• Employer-promoted health challenges and online health competitions
• Worksite education

In addition to benefits we offer our employees, we provide our groups with award-winning member engagement promotions and program management.

We do not have minimum group size requirements.

Subsidiaries of Healthyroads’ parent company American Specialty Health Incorporated (ASH) also provide fitness and exercise programs for commercial plans and Medicare beneficiaries, as well as specialty network management benefit administration programs for complementary health care and physical medicine services.

CIGNA: CIGNA’s wellness benefits are meant to cover a full spectrum of wellness needs, such as discounts, personalized coaching, and critical incident support. Our benefits also cover many modalities, such as online, telephone, and onsite.

Wellness Benefit Minimum Group Size Modality
Benefits/DiscountsHealthy Rewards discount program None N/A
Data Gathering/Assessments

Health risk assessment


None Online, paper
Biometrics >50 individuals needed for onsite events Online, onsite, telephone
Metabolic Syndrome Improvement Program Target 500+ Onsite
Onsite health coordinator/coach >250 at site if CIGNA medical: none Onsite Telephone, limited online
Chronic condition management programs If CIGNA medical: none limited online
Additional Wellness Services
Healthy Pregnancies, Healthy Babies if CIGNA medical: none
non-CIGNA medical >50
Employee assistance program (EAP) >200 Telephone, onsite
Onsite clinic >800 Onsite
24 hour nurse line (health information) None Telephone

Health Net: Health Net’s member wellness includes a variety of online and telephone programs and resources. Members can participate in robust behavior-change programs in our online health improvement program offerings for tobacco cessation, stress management, nutrition, weight management, emotional health and exercise. In addition, members can reach out to the Health Coaches for one-on-one telephone programs in weight loss and tobacco cessation. Each telephone program includes a comprehensive interactive toolkit that the member and Health Coach utilize for program process and information. Health Net’s online Health Risk Questionnaire (HRQ) is available in English and Spanish and provides a confidential assessment of the member’s health risks and next steps. Health Net also offers an array of worksite resources and screenings.

Groups with less than 300 employers receive the following:
• DVD lending library
Self service screenings (BMI, grip strength, germ detector, stress dots)
Wellness displays

Groups with over 300 employers receive the following:
• DVD lending library
Self-service screenings (BMI, grip strength, germ detector, stress dots)
• Wellness displays
• Speakers bureau

Kaiser Permanente: HealthWorks by Kaiser Permanente offers workforce heath programs at no additional charge as well as a portfolio of fee-based programs to employer groups. Brokers and employers may choose from three different wellness packages specifically designed for employers with 51 to 250 employees. Kaiser Permanente’s HealthWorks consultants work with brokers and employers to design and implement customized workforce health programs for groups with more than 250 employees. All employees who are Kaiser Permanente members receive preventive care, evidence-based disease management programs, self-care tools including an electronic personal health record, and health education—all at no extra cost.  The Kaiser Permanente package offerings range from workforce health tools already built into their employees’ current health plans to fee-based products and services that motivate employees and measure success. Some packages feature onsite biometric screening for blood pressure and cholesterol, Healthy Eating class, and customized promotions. Another feature includes an implementation guide and support from beginning to end by a HealthWorks consultant.  In addition to the standard offerings, customized HealthWorks programs are available to all customers with more than 250 eligible employees, whether they are Kaiser Permanente members or non-members.

LifeBalance: The Classic LifeBalance Program is a turnkey active wellness program that includes a comprehensive discount network (LifeBalance Vendor Network, Event Calendar and Ticket Window) offering discounts and benefits on a variety of businesses, events and tickets that revolve around healthy, active behaviors within 70+ categories of recreation, culture, wellness and travel.

The program also includes access to a variety of online wellness tools for individuals that include: the LifeBalance Walking Tracker and Journal, LifeBalance Virtual Guide (educates members on how the choices they make toward physical fitness, nutrition, green living, community involvement and stress play a roll in overall wellness), LifeBalance Activity Planner, Tracker and Journal as well as the LifeBalance Food Tracker and Journal which are all included in the Classic LifeBalance Program. LifeBalance services a wide range in clients from Health Plans to individual employers of all shapes and sizes.

UnitedHealthcare: 500+ employees. Health assessments, biometric screenings, online and telephone health coaching, communications tools (newsletters, articles, marketing campaigns), webinars and podcasts, onsite seminars, activities and support groups, strategic planning and reporting.

Do you have any wellness offerings for employees that work fewer than 40 hours a week?

American Specialty Health: The manner in which our wellness programs are implemented is largely up to the employer group client (offer to all employees, just benefits-eligible employees, or those on the client medical plan), though all Healthyroads programs are available to part-time employees as well.

CIGNA: Yes, wellness programs are available for employees with flexible/limited work arrangements.

Health Net: Yes, Health Net’s worksite programs and services are available to be delivered at an employer group setting if certain criteria are met.

Kaiser Permanente: Yes, Kaiser Permanente HealthWorks consultants work with brokers and employers to customize wellness offerings based on employer and employee needs. Kaiser Permanente’s initial HealthWorks surveys assess whether a workplace provides employees with healthy surroundings, as well as employee interest to help employers, brokers, and consultants determine the best action plan for wellness based on employees’ health issues, worksite, and interests.

LifeBalance: Yes, all LifeBalance programs, wellness challenges, planning services and screening services are all available to employees that work 40 hours a week, less than 40 hours, part-time staff, sub-contracted staff, etc. That decision would be the decision of the employer.

UnitedHealthcare: Yes, it’s up to the employer

Do you offer marketing materials that are easy to present and simple for clients to understand?

American Specialty Health: Yes, houses more than 1,000 standard marketing pieces from which clients can pick and choose to best communicate to employees, and custom work is also available for clients. Our marketing guidelines have been adjusted to accommodate health literacy standards.

CIGNA: Yes, all of CIGNA’s materials are being re-written, replacing industry jargon with plain language that’s easy to understand.

Health Net: Yes, “clear and simple” is how Health Net approaches our materials.

Kaiser Permanente: Yes, Kaiser Permanente offers a rich variety of engaging marketing materials to educate clients on HealthWorks wellness programs including the HealthWorks Packages Brochure; HealthWorks Portfolio: For custom programs, the California HealthWorks portfolio provides an overview of the full suite of HealthWorks programs; and the Kaiser Permanente BusinessNet website at

LifeBalance: Yes, we offer custom branded employee overview pages, promotional posters, membership cards and a monthly email newsletter included in the Classic LifeBalance Program. (For more information, visit

UnitedHealthcare: Yes, marketing ongoing collateral and communication materials.

How do you track the quality of the customer service provided to employers? Do you set annual service goals and measure and report results?

American Specialty Health: Our program managers respond to client requests within 1 business day (typically same business day) and hold at least a monthly touch-point meeting with each client group.

For our clients’ employees, we adhere to the following performance standards, which we track and report on quarterly:

Answer incoming telephone calls as follows:
a) 75% within 30 seconds
b) 85% within 60 seconds
c) Average speed of answer not to exceed 30 seconds
d) Abandonment rate not to exceed 5%
e) Call blockage rate  not to exceed 2%

Resolve telephone inquiries as follows:
a) 75% immediately
b) 80% within 1 business day
c) 85% within 2 business days
d) 90% within 5 business days

CIGNA: Annual individual satisfaction information is collected and reported for a vast majority of wellness services. Also, our quality committee evaluates the quality and appropriateness of services through staff audits, review of performance against key quality indicators, and evaluation of individual and practitioner satisfaction metrics.

Health Net: Health Net tracks the quality of our customer service by monthly monitoring and scoring of incoming telephone calls to our Customer Contact Center. We have annual service goals and measure the results on a monthly basis. Upon request, reports may be provided to employers.

Kaiser Permanente: For customers engaging in workforce health programs, Kaiser Permanente provides tools to evaluate program success and determine priorities for future programs, including reporting that helps measure health and risk change, and annual customer satisfaction surveys. We offer group specific analytics and reporting. Kaiser Permanente also completes an annual satisfaction survey of customers who have completed HealthWorks programs.

LifeBalance: The quality of the customer service provided by LifeBalance is tracked by direct feedback from our program members and clients. Online surveys provide members with an immediate tool to share their feedback with the LifeBalance team. Since 1998, the LifeBalance Program has achieved a customer satisfaction score above 95%.

UnitedHealthcare: Annual health assessment and biometric screening outcome reporting, claims data analysis, wellness program ROI.

Do you have an established local sales and service team that can provide critical service in the same cities that the broker’s clients are in?

American Specialty Health: We have satellite offices and sales personnel across the country in important markets. We are also able to provide onsite program management staff to help clients implement Healthyroads wellness programs. CIGNA: Yes, local sales support is available for account-level support and local clinical support is available for critical incident response.

Health Net: Yes, Health Net has established local sales and service teams that can provide critical service in the same cities as brokers’ clients.

Kaiser Permanente: Yes, HealthWorks consultants are dedicated to the commercial lines of business in California Kaiser Permanente service areas.

LifeBalance: No, the LifeBalance sales and service team is based in Portland Oregon. Currently, we service clients in Alaska, California, Idaho, Montana, Oregon, Utah and Washington from our Oregon office; however we travel to client locations for program implementation meetings, benefit fairs and open enrollment meetings often to answer employee questions, to help kick off a new wellness challenge, etc.

UnitedHealthcare: Member services hotline, plus a field account manager are assigned to every client.

6. Do you specialize in wellness benefits?

American Specialty Health: Yes, Healthyroads began its wellness programming more than a decade ago and has been a leader in the field since then.

CIGNA: Yes, wellness is a core strength and is incorporated in our corporate mission to improve the health, well-being and sense of security of the people we serve.

Health Net: Yes, Health Net specializes in a vast array of wellness benefits.

Kaiser Permanente: Yes, because wellness, prevention, and disease management are built into the way care is delivered, Kaiser Permanente is uniquely suited to be the single, expert source for bringing health and wellness initiatives to the workforce. Kaiser Permanente is able to effectively and efficiently deliver preventive care, chronic care management, lifestyle management, and superior reporting capabilities because employees are assisted at every point in the care continuum. The products and services offered through HealthWorks are part of Kaiser Permanente’s integrated care model of total health.

LifeBalance: Yes, LifeBalance has specialized in providing wellness benefits since 1996. In fact wellness is all we do.

UnitedHealthcare: Hundreds of UHC Wellness products/programs, plus turnkey incentive administration are available.

How can an employer measure the return on investment with the products you offer?

American Specialty Health: Healthyroads provides a robust reporting package using data captured in our proprietary IT systems. In addition, Healthyroads is able to estimate cost and productivity savings based on risk reduction in an employee population using a Healthyroads/Thomson Reuters ROI forecasting tool that estimates fiscal outcomes of the Healthyroads Coaching® Program. The model incorporates data regarding risk factors that the scientific evidence has shown to highly correlate with medical claims costs.

By measuring these risk factors at baseline and applying the experience Healthyroads has in changing risk, the model can estimate the cost savings to the employer, not just in terms of medical costs but in terms of productivity savings as well. CIGNA: Measurements for wellness products are variable. They are all long-term return models and these methods include analysis of clinical outcomes, medical savings, productivity improvements (reduction of absenteeism and presenteeism).

Health Net: The Lewin Group performed a study on our Decision Power program return, using calendar year 2007 to 2008 and the California commercial large-group book of business. This study concluded that the estimated program ROI was 1.42:1.

Because this is a mature program that has reached steady state, and as the program has not gone through any substantial reconfiguration, we expect the rate of return to remain steady, barring any major internal or external changes.

Care should be exercised when extrapolating these aggregate results to sub-populations.  Many factors can influence the rate of return, especially in smaller populations.  Factors such as age/sex, risk scores (DCGs or similar), disease burden (co-morbidities and complexity), and program exposure time should be considered in any such assessment.

Kaiser Permanente: Kaiser Permanente understands that measuring the effectiveness of wellness interventions is important and the money that employers invest to improve the health of their populations is a valuable resource.  Kaiser Permanente provides short-term metrics. The evaluations provided for each program, including the Partnership in Health and Periodic Utilization Reports, allow Kaiser Permanente to partner with employers to track the impact of programs on utilization.

LifeBalance: Through decreased employee absenteeism rates, through increased employee retention rates, through overall employee satisfaction ratings and employers will see and feel the enhanced company culture by providing a family benefit such as The LifeBalance Program. Additionally for a self-insured client, a healthier employee population equals a return on investment with a reduction in health insurance premiums, costs and renewals.

UnitedHealthcare: Medical trend, shifts in health risk profiles, reduction in sick days and disability claims, plus soft inputs such as increased productivity, reduced turnover, increased job satisfaction, greater ability to hire new talent, etc.


Part II of the Wellness Survey will appear in  the June issue.

Critical Illness–Gaining a Competitive Edge with Critical Illness Coverage

by TJ Gibb

According to a 2009 study by Harvard researchers, 62% of personal bankruptcies in the United States in 2007 were caused by health problems and 78% of those filers had health insurance. As healthcare costs continue to rise faster than household incomes, patients with a serious medical condition might turn to credit cards to pay for their care.

Twenty-nine percent of low and middle-income households with credit-card debt used their plastic to pay off medical expenses, according to a 2007 study by the Annie E. Casey Foundation along with other public foundations.

It’s unfortunate enough when someone gets sick or is diagnosed with a chronic condition, but that person shouldn’t have to worry about the bills or even the risk of losing their home on top of it all. One benefit option can offer peace of mind as well as a sense of financial security during a crisis: critical illness coverage.

Employers are becoming increasingly aware of how important critical illness benefits can be for employees. Eighty one percent of human resources professionals say their organizations review their benefit programs annually, according to the Society for Human Resource Management. Since most companies will review their options, it’s important to understand how critical illness coverage can align with a company’s current plan portfolio. Brokers need to have a deeper understanding of critical illness benefits and a full grasp of what products are available. But before you present critical illness benefits, do your homework on what plan options are available and what options would suit the needs of your clients.

Make the Case: Positioning Critical Illness Coverage

It is important to review the employer’s entire benefit program before recommending critical illness. Take time to understand employee demographics and any unique situations with the employees or the employer. This discovery process will help you build a more successful strategy. It’s important to determine how much, if any, employer funding is available since some critical illness plans can be purchased by the employer for their employees.

Brokers also need to determine the current coverage amounts under an employer’s medical plan as well as other benefit plans, including voluntary benefits. A recent survey by Anthem Blue Cross and Blue Shield reveals that employees enroll in voluntary benefits for a variety of reasons. The top three determining factors are cost savings (54%), greater protection for their families (50%) and ease of mind (44%).

What makes critical illness benefits unique is that these funds can be allocated at the individual’s discretion – whether it is for co-pays, out-of-network specialists, or normal living expenses, such as a mortgage, car payments, utilities, groceries, tuition, and child care – providing maximum flexibility. Another important differentiator is that the benefits are paid in one lump sum, which eliminates the need to deal with ongoing paperwork or submit doctor bills and receipts.

When introducing this coverage option to employers, it’s important to position it as a protection for the future. Critical illness coverage helps to ensure that certain standards of living are met. However, instead of only being available at retirement or during a terminal illness, funds are available once a covered condition is diagnosed. Critical illness benefit amounts typically range from $10,000 to $20,000 and provide benefits during working years.

In 2010, an estimated 1.5 million new cancer cases were diagnosed and cardiovascular disease affected tens of millions of Americans. However, advances in healthcare are helping people live longer and survive these serious illnesses. According to the American Cancer Society, the five-year survival rate for all cancers diagnosed between 1999 and 2005 is 68%, up from 50% in 1975 to 1977. By being able to cover a variety of expenses with this financial protection insurance, the beneficiary and their family can focus on what’s important: their health and making a full recovery.

Enable Employers to Make Decisions

As employees assume more responsibility for their health and welfare, voluntary benefits will continue to increase in popularity. Benefits need to be targeted to each organization. For example, some plans can be offered to companies with very few employees while plans that focus on larger employers provide the opportunity for more substantial guarantee issue and large benefit amounts.

Employers also need to be aware of plan features that all of their employees can use, such as health screenings and blood tests. For example, annual mammograms would be a valuable health benefit for an employer that has a predominantly female workforce. Colonoscopies, stress tests, and cystologic screenings (Pap smears) are also commonly covered in a critical illness benefit. These benefits allow the plan to pay up to a certain amount for costs relating to the exam including childcare and transportation. It’s important to highlight those valuable critical illness benefits when showcasing the robust plan offerings to employers.

When presenting materials to the employers, brokers need to be very thorough about details, such as screening benefits, reimbursements, and what qualifies as an eligible expense. It’s also vital to provide a seamless enrollment process by offering communication options that suit a variety of needs including onsite meetings, call centers, and online tools. Conducting a comprehensive educational process is also essential so that employees understand the value of critical illness benefits and can make informed decisions about their coverage.

Through the Eyes of an Employee

It’s necessary for senior management to support the benefit offering and facilitate information sharing with the employees. Typically, the most effective way to educate employees is to use a professional benefit communication firm. It is a competency that can help you determine how critical illness can complement existing benefits, reach employees most effectively, and offer a positive experience for your clients.

It’s important for brokers to help employers see the big picture and determine the plan options that best suit their employees’ lifestyles. For example, an employee who is married or has a family may want to know whether the critical illness benefit covers their spouse and children or just themselves. Employee and their families will find the plan more appealing if it can be tailored and if you can show how it can be adjusted easily based on any changes that may occur.

On top of the day-to-day stress of work and family life, deciding on benefits may not be high on a person’s to-do list. Since this may seem like a daunting task, it is up to the broker to make sure employees know that assistance is available every step of the way. In addition to offering the expertise of benefit managers and human resource directors, encourage employees to use all communication vehicles that are available including new Web based tools. When you make employees aware of what assistance is available, they will have the resources to explore plan options and determine which one suits their lifestyle.

Final Thoughts on Critical Illness Coverage

People who are diagnosed with a critical condition are affected physically, emotionally, and financially – with unexpected illnesses and injuries causing 350,000 personal bankruptcies each year. Critical illness makes up for what regular insurance doesn’t cover even if a company offers a robust health insurance plan. That’s why it is essential for brokers to explain the value of this important benefit to employers and encourage them to offer this coverage to their employees.


Thomas (TJ) Gibb is the National Practice Leader of Specialty Benefits for Humana. TJ is responsible for distribution and strategy for the group life/AD&D, disability, medical stop loss and workplace voluntary benefits product lines. TJ has an extensive background in the benefits business with 19 years of experience in the industry.  He has held leadership positions for Humana, KMG America and ING. TJ has led business areas including employee benefit distribution, affinity sales, marketing, benefit communication technology, and product development, and has participated in numerous industry association boards.  For information on Humana’s critical illness benefits or other benefit products and services, call 1-800-4-HUMANA.



Why Total Absence Management?

by Paul D. Taylor

Many employers find absence management to be a compliance puzzle and an administrative burden. Leave laws change routinely at the federal, state, and municipal levels and many companies have multiple leave policies for different categories of employees. Employee absences can disrupt workflow and productivity, which affects the bottom line. So, it may be surprising that only 31% of employers use an integrated absence management system to track and report on employee absences, according to MetLife’s 9th Annual Study of Employee Benefits Trends.

That percentage only increases to 52% for larger employers (those with 1,000 or more employees). This means that many larger employers – those that likely have a more widespread workforce – are missing an opportunity for more effective management of employee absences and more influence over workforce productivity.

Employers say that their most important benefits objectives are, in order, controlling costs, retaining employees, and increasing productivity. An integrated absence management solution can help employers ease administrative burdens and attain all of these objectives.

Total absence management programs do not stop with a centralized tracking system. An integrated approach involves mitigating absences in the first place. Brokers and consultants can add significant value by helping clients take a holistic view of absence management. A holistic approach prevents absences through financial and physical wellness programs and helps ease the return-to-work transition.

Health and Wellness Programs to Mitigate Absences

The first step is to help the employer prevent absence from happening in the first place. Employers that have access to technology to administer a leave program can analyze data to identify absence patterns and uncover strategies to help minimize absences. Brokers can help their clients identify health and wellness programs that provide the greatest return on investment for their workforce. They can also address common conditions uncovered through data analysis.

For example, if the data reveals that a significant portion absences are due to diabetes related health issues, an employer may want to offer nutritional counseling and access to fitness facilities. These efforts may lead to a more health-conscious workforce, reduced absences, earlier returns to work, and potentially lower incidences of disability – contributing to a company’s productivity and growth.

It’s important to note that, among the highest users of medical benefits are employees with a disability-related illness or injury or those who have a chronic health condition. Employers that coordinate the management of these claims with health and wellness options can control medical costs more effectively and aid employees in their recovery.

Programs that integrate the options available from the employer’s medical carriers, wellness providers, and disease management providers can help improve employees’ understanding of wellness programs and facilitate access to their plan information for the duration of the claim.

Employees appreciate having wellness programs through the workplace. “Wanting good health” is the -reason why 65% of employees say they choose to participate in a wellness program through their employer.

Financial Wellness

Financial health a less obvious wellness factor that can affect absences, productivity, and business outcomes. Fifty-eight percent of employers say that financial stress contributes to employee absences. And 78% say that employees are not as productive when they are worried about personal financial problems.

However, only 34% of employers offer broad based financial or retirement education programs. This is despite the fact that more than half of employees say they are interested in getting financial education or advice through the workplace. Workplace education can offer employees much-needed information, especially considering that nearly 50% of employees don’t consult with anyone about personal financial matters.

Brokers should explore these two questions to help clients want to promote financial wellness among employees:
How can you get your employees to act in their best interests and take on more personal responsibility for their financial security?
How can you give your employees more opportunity to secure their own financial well-being?

Based on the answers, brokers can help clients offer financial education programs and access to financial protection products to help mitigate financial stress among employees.

Returning Employees to Work

It is important to help mitigate some absences before they happen through physical and financial wellness programs. But an effective return-to-work strategy is also and important part of a comprehensive total absence management program. MetLife’s study of the Emotional and Financial Impact of Disability surveyed people who returned to work after experiencing a non-workers’ compensation/non-pregnancy disability that prevented them from working for six months or more. Six out of 10 said that their return to work was challenging.

Brokers can share several steps to help clients create a strong return-to-work culture. First, it’s important to encourage a supportive return-to-work culture that starts at the top and permeates throughout the entire organization. It’s critical for employers to maintain communication with employees who are out on leave. Many employees are not clear on benefits and return-to-work policies. They may worry about losing their jobs while out on disability unless they are in contact with someone from work.  Once an employee is able to return to work, it is helpful to encourage managers to set up a meeting within a few days of their return. This way, managers can provide any new information on initiatives or procedures.  It is also important to ensure that the employee’s work is taken care of in their absence. When reviewing helpful return-to-work strategies with you clients, it can help to point out that they can ease their burden by partnering with an expert – a carrier that specializes in absence administration.  Many carriers provide vocational rehabilitation specialists that can help the company make accommodations or set up a graduated return schedule for employees.

The Bottom Line

Brokers who encourage their clients to take an integrated approach to absence management can highlight the enhanced tracking and reporting capabilities, efficiencies in administration, and the employer’s ability to focus on the workforce issues that affect their business. Employers can help advance productivity, loyalty, and long-term cost savings by mitigating absences in the first place through physical and financial wellness approaches and return-to-work programs. Taking a comprehensive approach to total absence management can be a win-win for employers and employees by helping achieve business objectives and making sure employees’ needs are met.


Paul D. Taylor is vice president, Group Disability Product Management for MetLife. Taylor is responsible for operational capabilities, customer experience, program administration and sales growth. MetLife has been providing employers with quality disability products and services for over 50 years and is a leading disability carrier in the industry, with over $2.35 billion of premiums and equivalents in force, according to the 2009 U.S. Group Disability Survey, LIMRA International. A copy of MetLife’s 9th annual Study of Employee Benefits Trends, referenced in the article, can be found at Information from MetLife’s Study of the Emotional and Financial Impact of Disability can be found at