Getting to the Core of California’s HMOs with Our Annual Survey : How Do They All Measure Up? – Part II
California Broker surveys health maintenance organizations (HMOs) in the state with direct questions about their plans. We then present the answers to such questions here for you—the professional agent or broker. .

Evidence-Based Dentistry – How Dental Treatment Keeps Pace with Current Research
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Healthcare Reform – Employers Caught in the Crosshairs?
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Cross-Border Healthcare: A Creative Option for Self-Insured Employers
by José Aroeste and Jim Arriola  • One of the advantages of self-funding for employers is the ability to include cross-border healthcare.

Self-Funding: Think Of It From A Renewal Perspective
by Mark Reynolds, RHU • This article will demonstrate how and why brokers should consider and market self- funded plans from the renewal perspective.

Long-Term Care: If Necessity is the Mother of Invention Simplicity is the Father of Sales Success!
by Barry J. Fisher  • Economic uncertainty has done one good thing for the life and long-term care insurance business: the need for planning has increased.

Overcoming the LTCI Challenges: Tips For Producers On Addressing The Key Objections Of Long-Term Care Insurance
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by Leila Morris  • Premium financing is gaining popularity in today’s environment with lenders charging very low interest rates and insurance companies offering more competitive products.

How Changing Benefit Trends Affect Your Clients
by Allison Farris Wendelberger • For many employers and HR decision-makers, the recession has created a struggle between the needs of the business and the needs of employees.

California’s Resurgent 403(b) Marketplace
by Steve Koza, CSA, LUTCF  • The market for tax-sheltered annuities (TSA) has absorbed an incredibly rugged and bumpy ride.

Getting to the Core of California’s HMOs with Our Annual Survey – Pt. II

How Do They All Measure Up?

Welcome to Part II of the 15th annual agents’ guide to managed care. Each year California Broker surveys health maintenance organizations (HMOs) in the state with direct questions about their plans. We then present the answers to such questions here for you—the professional agent or broker. We hope that this valuable information will help you serve your savvy healthcare clients better.

29.  Describe the utilization process.

Aetna: Information is gathered from the physician and patient. The nurse consultant or physician reviewer and the attending physician discuss whether a test or treatment is appropriate. The physician reviewer can recommend alternative treatment and further testing. Protocol is reviewed annually. The consulting specialists, who are most familiar with procedure, review and approve any changes.

Anthem Blue Cross: The utilization managment process is delegated to the PMGs/IPAs for our HMO product. They must have established review mechanisms, such as evidenced-based decision criteria and guidelines, which align with accepted medical practice. PMGs/IPAs maintain processes for referral management, pre-service, concurrent, and post-service review. Routine and active oversight is conducted to ensure compliance with regulatory and accrediting agency standards.

Blue Shield: Blue Shield of California delegates utilization management to our contracted IPAs/medical groups. We audit these processes annually to ensure compliance with our medical policy guidelines.

CIGNA: CIGNA physicians and nurses perform utilization management for inpatients in coordination with medical groups. To help ensure appropriate care and facilitate discharge planning, CIGNA reviews medical records for hospitalized members and consults with physicians via nurses located on-site at hospitals or by phone. Utilization review for most outpatient services is delegated to IPAs/Medical Groups. CIGNA HealthCare reviews inpatient procedures and hospitalizations, outpatient surgical procedures performed in a facility, transplants, and investigational therapies using Milliman Care Guidelines and CIGNA Coverage Positions. CIGNA utilization nurses (RNs) also conduct case management. Most outpatient referrals for specialists and procedures do not require prior authorization as long as the primary care physician requests them. However, CIGNA performs utilization review of select outpatient services when there is demonstrated value.

Health Net of CA: Health Net provides a multi-dimensional utilization case management (UM/CM) program to direct and monitor health care services. It involves pre-service, concurrent, and post-service evaluation of the utilization of services provided to members. The UM/CM program is structured to ensure that qualified health professionals make medical decisions using written criteria based on sound clinical evidence without undue influence of Health Net management or concerns for the plan’s fiscal performance.

Kaiser Permanente:  Our physicians plan our patient’s care and work collaboratively with their peers to ensure appropriate treatment plans and use of resources. Utilization Management staff are available to support doctors in the management of member’s health care needs throughout the continuum of care and provide a variety of services such as discharge planning, utilization review, and care management, and ensure compliance with internal and external regulatory requirements related to utilization management.

The majority of utilization management, including reviews, is conducted internally as part of our integrated system of health care delivery. Kaiser Foundation Health Plan, Inc., Kaiser Foundation Hospitals, and the Permanente Medical Groups work in partnership to provide and coordinate medical management and review for our Health Plan members. Please note that department chiefs at the regional and facility levels handle utilization reviews. Members from Palm Springs, Ventura, and the Coachella Valley area receive utilization review via contracted physicians within our affiliated medical groups.

PacifiCare: We use industry-leading medical management programs to ensure that each enrollee receives the appropriate care necessary and that we control unnecessary health care costs for our clients. Our medical management programs focus on reducing variation, improving the quality of care provided and ensuring cost effectiveness. We base medical decisions on scientific evidence and all of our medical management services include physician guidance and input. We developed online, science-based and objective utilization management criteria as well as technology-based clinical decision support systems related to case, utilization and disease management.

30. Describe the Case Management Process.

Aetna: The following are some ways in which cases are identified: through the PCP or pharmacy, during certification reviews, during PMG/utilization management case reviews, and through other internal reporting and sources including member services, claims, and specialty programs. The case manager coordinates services for members who have multiple and complex needs. The case manager works with the PCP and the member to develop a care plan identifying services, frequency, duration, and goals. A team approach includes the PCP, specialist, member, family, caregiver, healthcare provider community, and internal programs to coordinate care, with a focus on member education and maximizing quality outcomes.

Anthem Blue Cross: The PMGs/IPAs perform in-area case management functions. Anthem case managers support PMGs/IPAs for members with exceptional needs or complex medical conditions. When appropriate, they manage out-of-area emergency admissions and help with transfers to in-area care. They also facilitate communication between healthcare providers and ensure that appropriate follow-up care is arranged with the PMG/IPA.

Blue Shield: Case management focuses on early identification and management of members with potentially long-term and catastrophic healthcare needs. Using claims, authorization, and pharmacy data, we identify potential candidates for case management. The case manager helps identify appropriate cost-effective treatment options, and follows members who are receiving alternative levels of care, such as inpatient rehabilitation, skilled nursing facility care, long-term home health services, and hospice services. Members who are using an acute facility three or more times in a six-month period can also be identified for case management. Utilization management, claims, and other medical operations team members can request case management for specific situations. Family members and providers can also request case management.

CIGNA: Members are identified via real-time and claims-based predictive modeling tools, along with referrals from physicians and medical groups, CIGNA clinical staff, and employers. Case managers collaborate with physicians, medical group case managers, members, and employers to facilitate ongoing treatment plans and support the primary care physician. Case managers monitor short-term and long-term goals for inpatient and outpatient care. They document and evaluate the effectiveness of the services provided. Besides traditional complex and catastrophic case management, CIGNA has a number of specialty case management units. They are staffed with RNs who are dedicated to areas, such as high-risk maternity, neonatal intensive care, oncology, obesity, and transplant. CIGNA has an extensive suite of disease management programs, including those for obesity complications and depression. CIGNA also offers online access to wellness information, care management services, and health coaching programs.

Health Net of CA: Health Net and its delegates provide case management/disease management programs to deliver individualized assistance to members in all lines of business who are experiencing complex, acute, or catastrophic illnesses or have exceptional needs. Health Net’s approach to utilization management extends far beyond traditional oversight. Health Net provides outreach to members with chronic conditions such as asthma, diabetes, COPD, heart failure, coronary heart disease, preference-sensitive conditions, and identification of members with cardio-metabolic risk; uses population-based risk stratification and predictive modeling; and partners with physician groups to improve performance.

Kaiser Permanente: Case management is high-intensity, focused care for our sickest members, including those with high-risk pregnancies, cystic fibrosis, HIV/AIDS, end-stage renal disease, organ transplants, and complications from chronic conditions, as well as the frail elderly and the terminally ill. Members in need of case management are identified through clinical and utilization data from our disease registries, pharmacy records, hospital and outpatient visits, and laboratory results. Members can also self-refer to case management or be referred by a doctor or family member.

Our case managers, who are master’s-level clinicians or registered nurses, work directly with a member and his or her health care team to plan all of the member’s care and provide intensive coordination of services, including inpatient hospitalizations, transitional care, home care, skilled nursing, medications, referrals to community resources, and outpatient care. Using an interdisciplinary approach, case managers help to ensure continuity of care, including utilization management, transfer coordination, discharge planning, and obtaining all authorizations or approvals as needed for outside services for members and their families. They’re also responsible for identifying quality-of-care problems and monitoring utilization issues.

PacifiCare: We designed our case management program to identify, intervene, coordinate and monitor care plans that provide high quality and cost-effective care for covered persons with catastrophic and complex health care needs. Our case managers facilitate communication and coordination of care between all parties on the health care team. This program involves the patient and family in the decision making process to minimize fragmentation in the delivery of health care. The case manager assesses the needs of the patient and educates them and the health care delivery team about case management, community resources, insurance benefits, cost factors and issues in all related topics so that informed decisions can be made. The case manager is the link between the patient, the providers, the payer and community.

31. Can the PCP participate in profits or losses in any way at the plan level or the participating medical group/IPA level?

Aetna: In California, Aetna participates in the IHA/7 health plan program of pay-for -performance. PCPs can participate in that IPA pay-for-performance bonus.

Anthem Blue Cross: Anthem established one of the first pay for performance programs in California. We encourage our PMGs and IPAs to maintain a physician rating system with appropriate rewards for quality medical care. Physicians will get increased compensation for quality care. Our contract is not with the individual PCP. It is with the PMG/IPA with which we have risk sharing arrangements. Through a risk sharing arrangement we share cost savings for in-patient, emergency room, outpatient services and generic prescription rates with the PMG/IPA. The medical group/IPA may get incentives up to 50% of savings depending on the amount of costs saved.

Blue Shield:  Blue Shield establishes shared risk arrangements when there is no capitated arrangement in place for a hospital associated with the medical group. Please note that this does not apply to individual physicians, so the shared risk arrangement does not affect payments to the group for professional services covered under capitation. The shared risk fund is established for the group to pay for services related to institutional fees. Funding is made monthly and is tied to membership. Blue Shield pays for institutional services for group members from this fund. The group and Blue Shield share any money left in the fund at the end of the year. Any negative balance is carried over to the following year.

CIGNA: The primary care physician does not participate in plan profits or losses in any way. The relationship between the PMG/IPA and the PCP is based on the contract between the two parties.

Health Net of CA: In 1993, Health Net of California introduced the Quality Care Improvement Program (QCIP). At the time, it based medical group compensation on member satisfaction scores. This program was enhanced in 1998 by incorporating quality-of-care outcomes into the compensation formula. In addition to contracted compensation, QCIP evaluates medical groups based on member satisfaction rates, quality–o-care outcomes, and collaboration. Additionally, Health Net evaluates medical groups’ cost performance measures. Similar to most health plans, shared-risk pools are incorporated with the compensation details for each Participating Physician Group (PPG). When the budget is established for the PPG’s medical services and hospital care, the PPG shares in the savings if costs do not consume the budget. Conversely, the group shares in paying for additional costs if the cost of care exceeds the budgeted amount. However, at no time does Health Net favor cost performance over quality. Recently, other California health plans have added programs similar to Health Net’s QCIP.

Kaiser Permanente: All of our physicians are eligible for an incentive payment based on the performance of our organization. Performance is measured by the collective results of each medical center. Each individual at the medical center can enhance the performance of the entire group. Incentive payments are based on several criteria including quality of care and member/patient satisfaction.

PacifiCare: We use a QIP (Quality Incentive Program) through which medical groups and IPAs can earn additional revenue by improving and maintaining patient safety, patient satisfaction, and quality of care. The QIP measures key indicators of quality in hospitals and medical groups based on the groups’ service and clinical quality. The QIP rewards medical groups and IPAs for attaining the required performance. The better a provider group performs in these categories the more QIP dollars they can earn.

In 2003 the QIP was funded with $14 million and rewarded seventy-fifth percentile performers in 16 measures. Over 140 medical groups received rewards in 2003 and we achieved average mean score improvements in 12 of the 16 measures. In turn, average improvement for these measures increased 30 percent, a remarkable achievement. In 2004 our QIP expanded to include 20 measures, of which 17 improved an average of 20 percent. The incentive pool was $18 million in 2004 and is $65 million in 2005. In 2006, we paid out more than $96 million.

32. How are premiums and risk shared among the plan, MG/IPA

Aetna: The premium is not shared with providers. In California, we have some IPA risk share arrangements and an IPA or medical group share in savings if a target budget is not exceeded.

Aetna: The premium is not shared with providers. In California, we have some IPA risk share arrangements and an IPA or medical group share in savings if a target budget is not exceeded.

Anthem Blue Cross: Anthem has a capitated arrangement with the PMG/IPAs, which are responsible for payment of professional services. We promote clinical efficiency through a program of shared savings between the PMG/IPA and Anthem for expenditures related to capitated professional services. We have a program to share the savings for non-capitated inpatient care, outpatient care, and generic pharmacy prescription. Anthem is the largest sponsor of the IHA performance measures in the state and has the second largest pay for performance program in world behind only the United Kingdom’s.

Blue Shield: Blue Shield establishes shared risk arrangements when there is no capitated arrangement in place for a hospital associated with the medical group. Please note that this does not apply to individual physicians, so the shared risk arrangement does not affect payments to the group for professional services covered under capitation. The shared risk fund is established for the group to pay for services related to institutional fees. Funding is made monthly and is tied to membership. Blue Shield pays for institutional services for group members from this fund. The group and Blue Shield share any money left in the fund at the end of the year. Any negative balance is carried over to the following year.

CIGNA: Most medical group and IPA arrangements are capitated. Capitation does not contain provisions for withhold payments. For example, a lump sum is withheld and distributed later if the provider meets certain utilization targets. The standard contract is shared risk with CIGNA retaining risk for inpatient facility charges.

Health Net of CA: The majority of HMO physician services are paid under a pre-paid capitation payment to the contracted participating physician group (PPG). The PPG, in turn, reimburses the physician directly for services.

Kaiser Permanente: Kaiser Foundation Health Plan (KFHP) contracts with the Permanente Medical Group (TPMG) in Northern California, and the Southern California Permanente Medical Group (SCPMG) to provide comprehensive medical services to KFHP members. The contractual arrangements are reimbursed at negotiated capitation rates as set forth in itemized budgets. The medical groups are reimbursed at negotiated capitation rates. A small portion is paid on an actual cost basis for specific items. Subject to limits on risk sharing, the medical groups are fully at risk for the capitated portion. They share the risk equally with the health plan for the actual cost portion.

PacifiCare: Currently all of our contracted medical groups and independent physician associations (IPA) participate in a risk-sharing arrangement. In addition, we contract with several networks of individual physicians in rural areas that do not participate in risk sharing. We contract with multi-specialty medical groups and independent physician associations (IPAs) primarily through split or professional capitation contracts. Both contracts provide a monthly age, gender and benefit adjusted capitation.

33. What happens when a member provider bills a participant for services? How do you deal with the fact that the participant is at financial or credit risk when the dispute is between the provider and the plan?

Aetna: Participating providers are required to accept payment (plus member’s co-payment) as payment in full. Balance billing is not permitted.

Anthem Blue Cross: Our first priority is to protect our membership from inappropriate billing. Our HMO providers are contractually required to refrain from billing members except for co-payments. If a participating provider bills a member, it is brought to the attention of the PMG/IPA liaison and the PMG is directed to pay the claim. If the PMG does not pay the authorized claim in 45 days from receipt, the plan pays the bill and debits the PMGs capitation payment for the ensuing period.

Blue Shield: Our member service representatives typically resolve these cases by contacting the provider’s office to clarify the correct member liability. Our providers are contractually prohibited from holding members responsible for any charges other than deductibles, co-payments, or non-covered services.

CIGNA: Yes, CIGNA offers a 24-hour health information line staffed with licensed nurses.

Health Net of CA: Health Net’s HMO contracts have a hold-harmless clause that prohibits medical groups from billing or collecting from members, except for standard co-payments and non-covered services. In the event a provider balance bills a member, Health Net removes the member from the situation and resolves the matter directly with the provider.

Kaiser Permanente: We are a prepaid, group practice HMO. Kaiser Foundation Health Plan (KFHP) contracts with The Permanente Medical Group (TPMG) in Northern California and the Southern California Permanente Medical Group (SCPMG) to provide comprehensive medical services exclusively to KFHP members. Providers do not bill members for services. Our providers are reimbursed at negotiated capitation rates; therefore, no disputes between the providers and the health plan would put members at financial or credit risk.

PacifiCare: Yes, at the plan level there is a 24-hour nurse line and medical audio library. Members can listen to pre-recorded health topics or speak with a licensed registered nurse. The nurse line staff can provide general counseling and triage recommendations. At the PMG/IPA level, PCPs are contractually required to provide after hours call coverage.

34. Do you have a nurse or RN on call 24 hours for questions at the plan level? At the PMG/IPA level?

Aetna: Yes, the Informed Health nurse-line is available to members. Network doctors are required to be available 24 hours a day.

Anthem Blue Cross: Anthem has a 24/7 Nurse Advice Line that is available for members. The member’s PCP or other covering practitioner is available to the member after hours and on the weekends if needed for non- emergent issues. The member may access the emergency room as needed for emergencies.

Blue Shield: Yes, as part of Blue Shield’s NurseHelp 24/7 program, members can get around-the-clock online and telephone access to a registered nurse for confidential advice and information about minor illnesses and injuries, chronic conditions, fitness, nutrition, and health related topics.

CIGNA: Yes, CIGNA offers a 24-hour health information line staffed with licensed nurses.

Health Net of CA: Health Net’s Decision Power program includes Health Coaches who are available 24 hours, 7 days a week. Members may call or email through Health Net’s website,, with questions or requests for information regarding chronic diseases, significant medical conditions, and medical questions. The Health Coaches are experienced clinicians who are ready to give individualized support through any medical situation.

Kaiser Permanente: We are a prepaid, group practice HMO. Kaiser Foundation Health Plan (KFHP) contracts with The Permanente Medical Group (TPMG) in Northern California and the Southern California Permanente Medical Group (SCPMG) to provide comprehensive medical services exclusively to KFHP members. Providers do not bill members for services. Our providers are reimbursed at negotiated capitation rates; therefore, no disputes between the providers and the health plan would put members at financial or credit risk.

PacifiCare: Yes, at the plan level there is a 24-hour nurse line and medical audio library. Members can listen to pre-recorded health topics or speak with a licensed registered nurse. The nurse line staff can provide general counseling and triage recommendations. At the PMG/IPA level, PCPs are contractually required to provide after hours call coverage.

35. Do you include treatment by a physician’s assistant (PA) or nurse practitioner (NP), rather than by a physician? Do you guarantee a physician exam for adults when requested by the patient?

Aetna: Yes, but physicians using Pass or NPs are required to oversee services. Members have a right to request a PCP.

Anthem Blue Cross: Treatment by a physician’s assistant or nurse practitioner is included in our coverage, if available at the PMG/IPA level. Members always have the right to see a physician, rather than a PA or NP, if desired.

Blue Shield: Yes, Blue Shield members can elect to be treated by the NP or PA practicing in their PCP’s office; however, the physician partners are responsible for managing treatment decisions. We also guarantee a physician exam for adults.

CIGNA: Yes, when appropriate, physician’s assistants or nurse practitioners can work together with a physician. Yes, members can request an annual physical examination.

Health Net of CA: As long as a physician’s assistant or nurse practitioner is under the physician’s guidance and providing treatments under the scope of his or her license, treatment is covered. Members have the right to have exams conducted by physicians rather than physician assistants or nurse practitioners.

 Kaiser Permanente: Yes, members can request a PCP, physician’s assistant (PA), or nurse practitioner (NP). PAs and NPs are licensed health care practitioners who work in a variety of specialties, including pediatrics, obstetrics/gynecology, cardiology, pulmonary medicine, and gastroenterology. PAs work under the supervision of physicians and NPs work collaboratively with and, when required, are supervised by doctors. NPs and PAs can diagnose and treat illnesses and in most states can order medications.

PacifiCare: Yes, treatments by Physician’s Assistant (PA) and NursePractitioner (NP) are included. However, the member has the right to request a physician examination.

36. Can doctors be terminated for over utilizing services?

Aetna: When inappropriate use of services, under/over utilization or quality issues are identified, the provider is counseled; an action plan for improvement is developed; and service activity is monitored. The provider could be terminated if performance does not improve.

Anthem Blue Cross: Anthem contracts with the PMGs/IPAs, which contract with the individual providers. If a physician does not correct inappropriate utilization after counseling, they may be subject to discipline, including possible termination, by either the PMG/IPA or Anthem Blue Cross.

Blue Shield: No, typically Blue Shield providers are not terminated based on utilization issues. However, as part of our quality review, as well as during recredentialing, we request providers to supply us with information around any complaints, quality of care, or utilization issues as part of their contract with Blue Shield.

CIGNA: CIGNA has never terminated a physician’s contract for over
utilizing services unless there was evidence that it was hurting the quality of care or was fraudulent.

Health Net of CA: A Health Net peer review team measures and rates adverse action material submitted by providers and various primary source agencies, including the Medical Board of California, the National Practitioner Data Bank, the Healthcare Integrity and Protection Data Bank, Medicare/Medicaid Sanctions, Office of Inspector General, opt-out Medicare reporting, and the claims history for credentialing and re-credentialing. Health Net also investigates allegations made in the community and by the media. The provider has a right to appeal the decision through a fair hearing. Health Net uses quality data in physician management and evaluation to help identify potential provider issues.

Kaiser Permanente: Our integrated health care system ensures that not only our doctors, but also our entire network functions at optimal efficiency to manage utilization by implementing best practices. Outcomes from HEDIS and internal utilization reports are available online to doctors and administrators to help them assess appropriate care and access levels, capture long-term performance trends, and identify areas of potential over utilization and underutilization. The reports are also used to drive improvements in quality, access, and member services that result in improved outcomes, increased member satisfaction, and lower costs. Exceptions to best practice guidelines are identified, investigated, and corrected as needed.

PacifiCare: Yes. We have terminated a small number of contracts with participating practitioners as well as delegated providers for failing to adhere to quality standards, typically less than one percent annually. The precipitating events included behavior presenting a potential risk of imminent harm to PacifiCare members and behavior contrary to the requirements of state and federal law. Our termination procedures adhere to contractual and regulatory requirements, and include informing the provider with required appeal rights and description of the appeal process.

37. How do you determine with which providers to contract? Do providers get incentives for refusing to contract with other plans (for example, to maintain a semi-exclusive relationship with a managed care plan)?

Aetna: It is monitored based on geographic access with the necessary mix of physician specialties and hospital services. An annual study determines the availability of PCPs relative to residence of member population. Providers don’t get incentives for refusing to contract with other plans.

Anthem Blue Cross: We consider geographic factors, experience of PCPs and specialists, board certification, and quality/reputation factors. We do not provide incentives for refusing to contract with other health plans.

Blue Shield: Blue Shield provider contracting uses criteria based on national guidelines, which address credentialing, licensure, accreditation, affiliations, disciplinary actions, access, cost effectiveness, and quality of care. Blue Shield does not give providers incentives to limit contracting with other managed care plans.

CIGNA: Provider contracting is based on geographic, business, and member needs. Providers must meet credentialing criteria including verification of education and license status. There are no exclusive or semi-exclusive relationships.

Health Net of CA: To ensure the quality of the Health Net network, all potential Participating Physician Groups (PPGs) are subjected to intensive reviews to ensure they meet or exceed Health Net’s guidelines in the areas of medical management, financial viability and stability, and network accessibility. No incentives are given for refusing to contract with other plans.

Kaiser Permanente: We contract exclusively with the Permanent Medical Groups in Northern and Southern California to provide comprehensive medical services to members including primary care, specialty care, laboratory, and imaging services. Our doctors do not contract with other plans.

PacifiCare: Once we determine that network expansion is necessary, we research available providers in that area. We contact prospective providers for detailed assessments on their credentialing, quality assurance, and administrative capabilities. Before contracting, we assess area needs and hold initial discussions to gauge mutual interest. If this initial assessment is satisfactory, a provider delivery systems team begins contract negotiations. The length of the process varies depending on the urgency of need for additional providers and the availability of these providers during the auditing and contracting process. The process usually takes from two to six months. We do not offer anti-competitive incentives to any physician.

38. How can a member get information about a doctor’s schooling and malpractice suits?

Aetna: Plan service professionals have access to the plan’s national provider database, which generally includes the medical school of graduation; also member can view DocFind, our online provider directory at  Malpractice information is not available.

Anthem Blue Cross: Members can get information about a doctor’s\board certification status on the Anthem Blue Cross ProviderFinder directory web-based tool. Members can also request information about a doctor’s malpractice and schooling from the Medical Board of California via the Website, phone, in writing or they can contact the PMG/IPA directly.

Blue Shield: Members can access information about a provider’s education on our award-winning Web site, To get information about malpractice suits, members can contact the National Practitioner Databank in Washington, D.C. for a fee.

CIGNA: Members can call our Member Services department or look up the information on Malpractice information is available to the public through the state medical board website. A peer review committee, which is staffed by CIGNA doctors and non-CIGNA doctors, reviews individual physicians’ histories before credentialing and re-credentialing the physician into the CIGNA network.

Health Net of CA: To ensure the quality of the Health Net network, all potential participating physician groups (PPGs) are subjected to intensive reviews to ensure they meet or exceed Health Net’s guidelines in the areas of medical management, financial viability and stability, and network accessibility. No incentives are given for refusing to contract with other plans.

Kaiser Permanente: Each medical center maintains physician information, which members can access to verify licensure, medical school graduation, residency, and fellowship training, and board certification.  For facility and contact information please see Members may also contact the California Medical Association for malpractice information.

PacifiCare: The member can call customer service for educational history, licensing information and board certification. The member can call the Medical Board of California for malpractice information.

39. What are your grievance procedures?

Aetna: Our customer service professionals can respond to most issues by phone. If the issue cannot be resolved during the call, the customer service professional researches the inquiry and then responds to the member. Our goal is to respond to all inquiries in 15 business days. Members who are not satisfied with the response can file an oral or written grievance. We will forward a written notice stating the result of the review to the member in 30 business days of receiving the grievance. The decision is final and binding unless, in 30 days, the member submits a written request of the notice of the grievance decision for a hearing by the hearing panel/grievance committee. The member’s next course of action is to request an external review. The external reviewer decides in 30 days of the request. Expedited reviews are available when a member’s physician certifies that a delay in service would jeopardize the member’s health. Once the review is complete, we abide by the decision of the external reviewer. The Complaints and Appeals Tracking System was developed to support our national grievances and appeals process.

Anthem Blue Cross: Anthem is responsible for registering, investigating, and responding to member grievances and appeals. The appeal process is not delegated to the PMGs/IPAs. To file a grievance and appeal, the member should call the toll-free Anthem Blue Cross customer service number listed on their ID card or they can also submit a grievance in writing to the Anthem Blue Cross Grievance and Appeals P.O. Box. Members can also file an appeal or grievance online After we review the member’s grievance and appeal, the member receives a written statement of the resolution within 30 calendar days. The member has the right to request an expedited appeal if their condition is acute or urgent. Expedited appeals are resolved within three calendar days.

Blue Shield: We assign a grievance coordinator to call any member filing an appeal so we can gain a clear understanding of their concern. The coordinator researches and forwards the grievance to all appropriate parties. Once a resolution has been made, the coordinator calls the member to inform them of the decision and their available options if they are dissatisfied with the resolution. Members who are dissatisfied with the resolution can request a second-level initial appeal review. During this review, members can appoint a representative or a provider to act on their behalf. If the member succeeds in their appeal and reimbursement is required, the coordinator will complete a payment request and submit it to the Grievance Resolution Department manager or supervisor for approval. All appeals are to be resolved within 30 calendar days.

CIGNA: Members can call Member Services or file a written complaint appeal. The complaint is investigated and reviewed in 30 days (when appropriate) and the member is notified of the decision. An expedited appeal can be filed when the member or provider is concerned with potential loss of life or health or the ability to gain maximum function. When necessary, procedures are modified to meet or exceed applicable regulatory and accreditation guidelines.

Health Net of CA: When members complain about the quality of service provided by the plan or its participating practitioner, the grievance is documented and researched and an acknowledgement letter to the member is sent within five days. The hospital/ PPG/practitioner has seven days to respond to the grievance. The final resolution letter will be sent to the hospital/PPG/practitioner. If it takes longer than 30 days to resolve, a letter of explanation will be sent to the member. The grievance is documented when members complain about the direct provision of care or the quality of care by a participating practitioner. If the matter is urgent, it will be forwarded to a clinical specialist for immediate attention and resolution (if required, care will be provided to the member). An acknowledgement letter and medical records release form will be sent to the member within five days. The hospital/PPG/practitioner has seven days to respond to the grievance. Health Net will determine if the grievance can be resolved with the records at hand if the member does not provide out-of-plan records or if the medical record release form is not signed. If it can’t, the case is closed until all necessary information is provided. After review, a letter to the member will communicate the disposition. The final resolution letter will be sent to the hospital/PPG/practitioner. If the matter takes longer than 30 days to resolve, a letter will be sent to the member to explain the delay and provide an estimated resolution date.

Kaiser Permanente: Our members can submit complaints to the member service representative at the facility through the call center. The complaint is acknowledged within seven calendar days. A response is made within 30 days after it has been submitted. A complaint or grievance will be resolved within 60 days from the date it was received by the plan. An external, independent, third party review process is available to non-Medicare members who have completed the internal grievance/appeals process.

PacifiCare: Our top priority is for members to receive the services they need. If a problem occurs we encourage members to contact our Customer Service department as their first source for resolution. This team will make every effort to find a solution to the member’s situation. If the situation requires additional action, the member may submit a formal complaint requesting an appeal or quality review. The following is a summary of our formal process for appealing a health care decision. The member must submit a grievance in writing within 180 days of the initial decision to: PacifiCare of California Appeals and Grievance Department. Additionally, members in California may file an appeal using the online grievance form available at

40. What systems are in place for assessing participant satisfaction?

Aetna: Member satisfaction is measured yearly at the network level
using CAHPS 2.0H survey. The plan administers the most recent survey required by HEDIS to assess satisfaction. We also participate in the Consumer Assessment Survey to evaluate member satisfaction with IPA and Medical Groups.

Anthem Blue Cross: We conduct a variety of surveys each year to
measure our members’ health and satisfaction to improve the quality of care and customer service. Each year, Anthem collects feedback from the various constituents that impact our business. We listen to all customer groups (members, employers, health care providers and insurance agents/brokers) and take into account the entire health care experience. Our research efforts provide us with a glimpse into the minds of our customers, telling us how best to deliver superior quality and service. We look at the experience through their eyes.
We also collect feedback from our members and providers on an ongoing basis to get an even deeper look at the service experience. A key component of this ongoing survey program is the diagnosis and root cause analysis performed on each call where the surveyed member was neutral or negative about his experience. We use the Member and Provider Call Center Transaction Survey Programs as part of our strategy to improve customer satisfaction. The survey obtains solid, actionable operational-level measures of our customers’ needs and an evaluation of our performance at all key touch points. More than 100,000 surveys are conducted with members annually.

Blue Shield: Our Quality Management and Improvement Program is
designed to comply with recognized industry requirements and standards established by the National Committee on Quality Assurance, Knox-Keene regulation, Department of Managed Healthcare, and the Center for Medicare & Medicaid Services. Our Quality Management Committee and the Board Quality Improvement Committee review and amend the program annually. We use HEDIS measures to monitor member satisfaction surveys, member inquiry analysis, disenrollment, member appeals, access to care and quality of service, and medical record audits and office site reviews.

CIGNA: CIGNA uses the HEDIS CAHPS member satisfaction survey.
The health plan participates in the Consumer Assessment Survey, which analyzes member satisfaction with medical groups and addresses utilization management, appointment wait times, office staff, etc. We continually monitor and improve member satisfaction.

Health Net of CA: Three online customer satisfaction surveys are
conducted among primary constituents: members, employer groups and brokers.

Kaiser Permanente: We conduct ongoing surveys to evaluate
member and patient satisfaction with doctors, access to services, and quality of care. Survey feedback is disseminated throughout the organization to target areas for improvement.

PacifiCare: PacifiCare uses the NCQA CAHPS annually to assess pa-

tient satisfaction with their care. Our satisfaction results are reported in our annual HEDIS results. CAHPS is a mail survey, which fulfills a component of the NCQA accreditation process. A telephone follow-up and interview occurs among non-responders per NCQA specifications.

 41. Do you participate in outcomes research? Do you provide physician performance review data to the public?

Aetna: Yes, HEDIS is available for public review through the California Cooperative HEDIS Reporting Initiative.

Anthem Blue Cross: Yes, we have tools that support predictive modeling, provider profiling, hospital profiling, disease management, network analysis, quality assessment, regulatory reporting, and HEDIS submission. Additionally, Anthem has acquired HealthCore Inc., a leading outcomes research company. Performance review data for our PMGs/IPAs is available publicly on our website and in provider directories.

Blue Shield: Yes, Blue Shield conducts outcomes research for disease management programs and participates in broader research efforts. Blue Shield is a sponsor/participant in IHAs Pay for Performance project. Collaborative studies may be published. For example, the California Cooperative Healthcare Reporting Initiative and California’s Office of the Patient Advocate provides public reports of medical group performance and information technology measures.

CIGNA: CIGNA is accredited by the NCQA and participates in reporting HEDIS clinical outcome data, which is available for public review. CIGNA HealthCare participates in the Integrated HealthCare Association’s Pay for Performance program. It provides data at the medical group level, which is reported to the public annually through the state’s Office of Patient Advocate. CIGNA also participates in the California HealthCare Foundation’s CHART hospital quality initiative. Through, the company offers an array of information about provider and hospital quality for its members.

Health Net of CA: Medical groups are rated on wide-ranging quality-of-service and quality-of-care measurements. Results are available at, where members can view the Hospital Comparison Report and Participating Physician Group Report on a number of quality-of-care and service measures.

Kaiser Permanente: The most recent developments in medical outcomes research are incorporated into our evidence-based Clinical Practice Guideline program, assessed by our New Technologies Committee, and incorporated into our extensive library system with online capabilities. In addition, our clinicians are involved in a broad scope of clinical, epidemiological, and health services research projects. We earned ratings of “Excellent” in the latest review by the National Committee for Quality Assurance. We also routinely get high scores in many outcomes based surveys, such as HEDIS, Leapfrog, and METEOR, which measure our member satisfaction. Physician performance reviews are not available to the public.

PacifiCare: Yes. Outcome results are incorporated into our provider group profile, which compares each provider group with network averages. We release these performance results to the public through our quality index profiles. The reports look at clinical, service and administrative quality measures. PacifiCare motivates provider compliance by intervening aggressively when deficiencies are found and by sharing best practices when excellence is identified.

42. Do you notify members when their PCP is no longer a member of the plan? How?

Aetna: Yes, members are notified by letter. They are apprised of transition of care issues and instructed on how to select a new PCP.

Anthem Blue Cross: Yes, PMGs/IPAs are required to provide 90 days notice to the plan when a physician within the PMG/IPA leaves the group or is terminated from our network. The PMG/IPA must offer the services of another PCP within the group. The plan provides at least 60 days’ notice in writing to all members enrolled with the terminating PCP. This letter includes the name of their new PCP or medical group.

Blue Shield: Yes, Blue Shield provides written member communication of any network changes 60 days before the effective date of the change, as per Department of Managed Healthcare regulations.

CIGNA: If a PCP is no longer a member of our health plan, members are notified by mail about 60 days before the effective date and are encouraged to choose a new PCP.

Health Net of CA: Health Net Participating Physician Groups and individually contracted physicians are required, by contract, to notify us of any changes to the provider network including new physicians joining the PPG, address and telephone number changes, and physician terminations. Health Net notifies members when their PCP leaves the network or becomes affiliated with a different contracting PPG. Members can follow their PCP to a new contracting PPG. Members can choose a new PCP within the network or remain with their PPG if their PCP is no longer available in our network. When possible, members will receive a written notice within 30 to 60 days of the provider’s decision to leave the network. Provider listings are available at and are updated daily.

Kaiser Permanente: Yes, each medical center has developed general protocols to facilitate the transition of care to another doctor and members assigned to a PCP are provided notice of the PCP’s departure 60 days in advance when possible. All patients who are scheduled to see the physician for outpatient care are contacted to reschedule with another plan doctor if prior notice to a member is not able to be provided due to timing of the physician’s departure.

PacifiCare: Yes. PacifiCare sends a notification letter to all affected members 30 days prior to the termination date of a physician or medical group. The member selects a new PCP or medical group. If the member does not select a PCP or medical group within 30 days, we automatically assign a PCP or medical group that is geographically closest to their residence. If the member is unhappy with the assigned provider, he or she may request a change at any time by calling customer service.

43. What action is the plan or the IPA/MG taking to have online eligibility, administrative changes, referrals, etc?

Aetna: We participate in the Work Group for Electronic Data Interchange, the Computerized Patient Record Institute, and the American National Standards Institute. A monthly eligibility file is provided to IPAs and Medical Groups.

Anthem Blue Cross: Through our Internet application,, group administrators can process eligibility transactions including additions, changes, and cancellations. (Changes are processed in real-time, assuming a confirmation response is received.) The administrator can also order ID cards; perform quick inquiries on employees; and locate providers via our provider finder. The “” application features confidential and secure data through user ID and personal identification numbers, drop-down menus for easy point-and-click operation, and easy to follow hyper-link steps to guide the administrator through electronic enrollment, benefit changes, and maintenance processes.

Blue Shield: In addition to the consultative services our account management teams provide their client groups, employers and members also have access to our online employer and member portal,, which contains a wealth of information, including current claims and eligibility information.   This online resource is available 24/7.

CIGNA: CIGNA recently enhanced the provider website offering easy access to online eligibility, detailed benefit information, claims tracking, and a new claim coding disclosure tool, which offers an immediate response to inquiries. For members, offers online eligibility tools, claims support, and other tools that allow members to select or change their PCP and get personalized medical information and provider quality data. In addition, provides a single point of access to online tools and services to help make benefits administration easier. is a resource for employers in employee support, benefits administration, and security administration.

Health Net of CA: At, brokers, employers, providers, and members can perform wide-ranging administrative functions, including eligibility verification. In September, Health Net announced that it is moving into the mobile space with iPhone capabilities that allow members to conduct a wide variety of business transactions with us with the push of a button. In addition, our Broker Solutions site provides online applications, product and rate information, provider directories, email access, and more. Members can access secure information about their coverage, and correspond with Member Services, order ID cards and forms, file grievances, change addresses, check eligibility/benefits, change PCPs/ PPGs, view a pharmacy drug list, search for providers, look up information for their specific needs, get pharmacy refills, and more. In addition, Health Net uses the Internet to help employer groups make processing eligibility changes and pay bills. It is a free service to employer groups. Employer groups can log onto or

Kaiser Permanente: Eligibility files are processed by our extensive mainframe system, which is linked to our California Service Center in San Diego. Account representatives update membership online and nightly (via electronic media files from purchasers). When the membership is updated, eligibility is updated automatically. Nightly interfaces supply membership eligibility information to other clinical systems. These files feed all claims and membership systems. A computer tape back-up is maintained.

PacifiCare: PacifiCare providers can check eligibility and claim status; print common forms; and view the specialty referral list at We offer a paper and electronic referral process. In California, providers can access iExchange via the Web for electronic preauthorization requests and hospital admission notifications. The process varies for networks that are delegated and managed by contracted providers. Some providers have electronic referral systems in their own specialist network and others use paper submission. We do not track electronic referrals for these providers since they track these statistics internally.

44.  How has your plan changed from last year?

Aetna:  Our CA. HMO plan now reflects all PPACA/HCR requirements.

Kaiser Permanente: The following changes occurred as contracts renewed in 2011: Kaiser Permanente is in compliance with the new legislation for Health Care Reform including the Affordable Care Act (ACA) and the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). We will continue to make changes as legislation warrants. For more info please see:

PacifiCare: There are no significant changes to the general plan structure from last year; however, there is flexibility on how plans are quoted. Clients requesting customization work closely with their broker to determine the best possible options for their company.

Evidence-Based Dentistry–How Dental Treatment Keeps Pace with Current Research

by Stanley Ayers, DDS

Your clients’ dental plan can have an important, positive influence on how its participating dentists make treatment decisions. By offering front-line information and sources of new research, the dental plan can help its dentists balance the most  up-to-date research with patient considerations when recommending treatment.

For dental plans, evidence-based dentistry offers an opportunity to create more value for its members by emphasizing proven treatments, rather than following popular trends.  For example, one trend is for plans to cover third and fourth cleanings.  However, best evidence shows that the bacteria in your mouth returns to the same level within a matter of a couple days, so these extra cleanings are unnecessary, barring any periodontal symptoms. The dental plan can offer tools to help identify increased susceptibility to cavities through a simple screening such as the one offered by CariFree. Far more effective in preventing cavities is controlling the pH and bacteria level in the mouth.

Working up to Evidence-Based Dentistry

Dental treatment is advancing at a rapid pace. Not long ago, there were no x-rays, no method for preventive care or oral hygiene, and no knowledge of microbiology to know anything about the causes of cavities or tooth pain. The first metal amalgam fillings had to be 200 degrees Fahrenheit before they could be poured on the exposed nerve. Pain management is a relatively recent development as well, so you can imagine what boiling metal on an exposed nerve with no medication might feel like.

Evidence-based dentistry helps dentists recognize developments in the field to bring the latest in dental treatment from the research labs to the dental chair. It is a recent practice that helps dentists take a broad-based view when planning and recommending patient treatment. It was first introduced in the 1990s by Gordon Guyatt through the Evidence-Based Medicine Working Group.

The American Dental Association (ADA) defines evidence-based dentistry as “an approach to oral health care that requires the judicious integration of systematic assessments of clinically relevant scientific evidence, relating to the patient’s oral and medical condition and history, with the dentist’s clinical expertise and the patient’s treatment needs and preferences.”

In other words, evidence-based dentistry is an approach to dental treatment that combines research with the dentist’s skills and the patient’s needs and desires and centers on a question of whether a particular treatment is the best option for a specific patient.

One thing to keep in mind is that the practice of evidence-based dentistry often leaves room for interpretation. Part of the challenge for the dentist is to make sure the quality of the research they are taking into account is sound. It’s important to see how a study was funded and reviewed to help judge whether a recommendation is well founded and what biases could be contained in the outcome.

Where to Start?

The first thing a dentist needs is a question such as, “Should I encourage my patients to chew gum sweetened with xylitol?” From there, a dentist naturally needs evidence to support or refute the question he or she is trying to answer.  Good sources for research conclusions include peer-reviewed journals, large scale research studies, and some scientific journals focused specifically on evidence-based dentistry. Evidence-Based Dentistry from Nature Publishing Group and the quarterly publication, Journal of Evidence-Based Dental Practice are great examples. The most “widely” used free database is called Medline and is an excellent resource to access and research best current evidence for a question. One of the most respected sources for current information is the Oral Health Group with the Cochrane Collaboration. It is an international network of people who prepare, disseminate and sort the randomized controlled trials in oral health to help practitioners keep current.

Evidence-based dentistry has guidelines for how to qualify research for how much stock to put into a particular study. “Best evidence” refers to information gained from studies and trials and is given a strength depending on the objectivity of the study and how conclusive the findings are. Some of the best kinds of evidence are randomized controlled clinical trials, non-randomized controlled clinical trials, cohort studies, case-control studies, cohort studies and crossover studies.

These can all supply strong evidence to help provide a convincing answer to a dentist with a treatment question. These can be split generally into “interventional” and “observational” evidence.

Interventional is when a study was conducted as an intentional experience; and observational takes data and draws conclusions from it.

A randomized, systematic controlled trial is a strong method for gaining unbiased conclusions. This is a clinical trial in which participants are assigned at random to either an experimental or control group. Outcomes are found through follow-up, and this creates a very neutral, objective study.

What Isn’t Evidence?

It’s important to be aware of what cannot be considered good evidence as well as what can. A case report is an example of poor evidence, as it shows the treatment plan for an individual patient. Good evidence should be based on a study with a larger sample size.

Another example of bad evidence is epidemiology, or the study of health patterns in society. It is an interesting topic, but in the arena of evidence-based dentistry, it provides only corollary evidence, where the dentist should be looking for causative evidence.  A final example of bad evidence is animal testing. Ethical convictions aside, animal testing has no bearing on what will happen in circumstances involving a human and should not be leaned on for clinical or treatment decisions.

How Do You Identify Bias?

Bias can be as subtle as the wording of a survey question, or as overt as a company with an obvious incentive to make sure that findings point in a certain direction.

There are two types of bias relevant to evidence-based dentistry. One is selection bias, which is a problem with the sample of the group being studied. This can be a non-representative sample of the population or a sample that isn’t large enough from which to draw a meaningful conclusion. Selection bias happens when there is an outcome distortion because of the method of sampling.

The other bias is measurement bias. Measurement bias refers to a problem with measuring the data incorrectly. This can be with an incorrect baseline or data measured with equipment that isn’t calibrated properly. As bias can skew research results, it must be considered as a factor when evaluating evidence.

How do you Find Good Evidence?

In order to find good evidence, there are practices to help dentists qualify research. Before beginning research though, it’s important to have a well-defined clinical question. One useful tool for defining the question is called  Population, Intervention, Comparison and Outcome (PICO). Population is the answer to the question, “Who was surveyed?” It should include some geographic and demographic information to help define the study. Intervention is what treatment or exposure was administered to the experimental group; comparison is about what happened between the control group and the experimental group; and the outcome is the difference between those two groups.

Evidence-based guidelines help define evidence-based medicine on a macro level. Included in this approach are guidelines, protocol, standards and parameters of care. This lays framework for ensuring the soundness of evidence analysis.

Applying Evidence-Based Dentistry

Dentistry technology and research is moving at an accelerating pace. Evidence-based dentistry is a proven technique for applying sound research in the dental office and from a plan design standpoint for dental plans to deliver more efficiency. From teeth being grown in a laboratory and repairing cavities by restoring tooth enamel, the available tools are improving to the point where there will be several options available for someone with a cavity including reversing early tooth decay. The dentist drill may be obsolete in the not too distant future. Just be glad your dentist has proper training, can recommend some preventive treatments and if need be can administer an anesthetic if you need to have some treatment done in the meantime.


Stanley Ayers, DDS, is director of Dental Services and Compliance for Dental Health Services. Dr. Ayers is responsible for ensuring quality, timely, and appropriate application of Dental Health Services plan benefits and overseeing the development of systems to proactively prevent issues from arising. He carries a wide-reaching background in compliance. He was a private practice dentist in Switzerland and San Francisco before moving into regulatory and quality assurance with Pacific Dental Benefits. As a team survey with Managed Health Care Unlimited, he assisted with dental plan surveys for the California Department of Managed Health Care.

As a dental benefits company founded by Godfrey Pernell, DDS, 36 years ago, Dental Health Services carries a long-standing and wide ranging experience in delivering quality dental benefits by managing plan design, holding to rigorous quality assurance standards for dentists, and providing incentives to encourage preventive care and holistic coverage.

Afraid Health Reform Will Leave You “Up the Creek Without a Paddle?”

Self-Funding Sales to the Rescue!

There’s no question that healthcare reform is shaking up the insurance world. In these articles, the experts give brokers the tools to navigate the currents. For one, self-funding allows the employer to offer a competitive health insurance plan at a fraction of the cost of a traditional plan. Self funding plans can also be a great tool when the waters get really choppy at renewal time. And, in California, employers with self-funded plans have the added benefit of taking advantage of cross-border healthcare options in Mexico.

Healthcare Reform – Employers Caught Without a Paddle?

by David Zanze 

By now, it’s common knowledge that the Patient Protection and Affordable Care Act will have a significant impact on the ability of employers to provide health insurance for employees. Employers are already bracing for a spike in healthcare costs. Total U.S. health spending is projected to rise 9.2% in 2014. That’s up from the 6.6% projected by economists at Centers for Medicare and Medicaid Services before the law took effect.

The increase in healthcare costs is attributed to the number of mandates brought on by healthcare reform, which are forcing insurance carriers, providers, and pharmaceutical companies to increase premiums to cover their margin of risk and the added cost of doing business.

The landscape has changed since the healthcare reform law passed in 2010. Lifetime maximums are prohibited and annual maximums are restricted on essential benefits. Pre-existing conditions for enrollees under 19 have been eliminated. Plans that offer dependent coverage for children must extend eligibility to age 26 with no student status requirement. By 2014, employers must offer minimum essential coverage of health benefits or potentially pay monetary penalties regardless of whether they are self-funded or fully insured. To compound the problem, minimum essential coverage has yet to be defined, but will likely be comprised of a robust combination of the essential benefits described under healthcare reform.

Employers with more than 50 full- time employees or full time equivalents will be required to provide minimum essential coverage or face non-deductible penalties of $2,000 per employee, per year (calculated monthly). However, the penalty is only imposed if at least one full-time employee seeks healthcare insurance through a state health insurance exchange and receives a low income tax credit for that coverage. It is the receipt of the tax credit that triggers the employer penalty. The penalty is softened somewhat because the first 30 employees are removed from the penalty calculation.

With regulators still crafting new rules to implement the law, there’s no question that healthcare reform is having a significant effect on the insurance world. So, where does a broker send a client for refuge?  Self-funding allows employers to offer a competitive health insurance plan at a fraction of the cost of a traditional, fully insured plan. A self-funding arrangement allows the employer control health plan expenditures, even when caught in the crosshairs of healthcare reform.

The primary benefit of self-funding is that employers only take on the fiscal responsibility for paying claims as they arise rather than paying a premium to an insurance carrier for benefits that an employee may or may not utilize. Self-funded employers have access to their employee’s health data, which allows them to implement cost containment, disease management, or health management programs and modify the plan to address the needs of their population.

Administrative and network fees are likely to increase as a result healthcare reform in the conventional and the self-funded environment. It is important to remember that any dollar that an employer saves on claims costs immediately benefits their bottom line; this is not the case if the employer is fully insured. With conventional insurance, the employer’s money is spent on a fixed, monthly premium that encompasses administrative fees and risk margins. Yet, the employer is unable to prevent exorbitant renewals due to the limited data available on the plan’s claims experience. If an employer does have a good year relative to risk, it is unlikely that the insurance carrier will give a refund or any rate relief at the plan’s renewal.

Self-funded employers have an advantage. They can evaluate their claims data and utilization. They can also customize all components of their benefit plan to provide targeted programs to mitigate risk and create savings. Self-funded employers have control. Fully insured plans cannot offer this advantage. So, how does this work?

Ask yourself, “What can my self-funded client do to save money?” First and foremost, the client should evaluate employees’ health data. Reviewing key metrics will help assess whether the client is saving money or if there are changes that need to be made to lower costs. Data indicators include the biometrics of high-risk employees (for example, blood pressure, cholesterol, glucose levels, stress, body mass index). Are these numbers improving? Is there an increase or decrease in productivity and worker absenteeism? What is driving high utilization and claims costs? For example, there is a direct correlation between wellness and sick time. Wellness programs encourage behavioral and lifestyle changes that increase productivity and time on the job. If your client’s wellness programs are effective, sick time should be reduced and the employer should benefit from more productivity onsite.

As the broker, it is your responsibility to provide employers with valuable insight and the guidance that will steer them towards savings and reduced costs whenever possible. Provide solutions that help curb spending. The employer can reduce claims expense and see measurable long-term gains with simple plan design changes and wellness and disease management programs that provide incentives to encourage the utilization of preventative care benefits. You or they need to be reviewing claims data on a monthly basis to identify where and why the claims occur. Are there preventable high-dollar claims? What incentives or outreach initiatives does the employer provide to encourage proper utilization? Does the employer offer the most innovative wellness tools and programs? If so, are they using programs that address the specific needs of their population, and most importantly, how are they measuring success? All of these questions help the client determine if they are seeing a return on their investment.

In this era of healthcare reform, self-funding allows the employer the ability to control the plan and prepare a cost-effective strategy for reigning in health benefit costs while providing a competitive healthcare benefit package for employees. Employers that have access to claims, utilization, and eligibility data can tailor their plan offerings to best match their unique employee base. Even with the threat of healthcare reform looming on the horizon, the self-funded employer can offer initiatives that encourage productivity, health, and reduced absenteeism, which directly affects their bottom line.


David Zanze has nearly 30 years experience serving as a leader and innovator in the healthcare industry. He joined Pinnacle Claims Management Inc, a full service TPA in 1996, and is now its president. Pinnacle administers benefits for a diverse range of small to large sized employer groups from all business sectors of the marketplace. For more information call 866-930-7264 or visit them online at

Self-Funding Sales to the Rescue!

Cross-Border Healthcare: A Creative Option for Self-Insured Employers

by José Aroeste and Jim Arriola

One of the advantages of self-funding for employers is the ability to include cross-border healthcare. What this means is that self-insured employers are able to include medical providers from Mexico. This obviously begs the question, why would any employer choose to include medical providers from Mexico? Here are the three major reasons:

• Employers may have Latino workers who may prefer their healthcare from Mexican medical providers.

• The cost of care in Mexico is significantly less expensive than in the United States, so any health plan utilization that can be rendered in Mexico will have a lower expense than in the U.S.

• In some rural U.S.  communities along the border, there is a long wait for access to some medical specialties.

The case for cross-border healthcare is not new. Take California’s experience with cross-border healthcare. Because of the consumer demand, laws were enacted and regulations were developed to allow for cross-border healthcare coverage. The Department of Managed Health Care, the regulatory agency for HMOs in California, approved several plans that allow for cross-border healthcare, including Blue Shield of California, Health Net, CIGNA, Aetna, Delta Dental as well as a Mexican health plan. Some of these health plans have been operating for over 10 years. Needless to say, the concern for quality has been adequately addressed to the point that cross-border health care is now an established option with consumer appeal for its affordability.

Family Size 38 year old Employee, Spouse, and 2 Children
Plan Name Aetna AVN HMO $10/$20 Plan Vitalidad HMO $10 Plan
Healthcare Delivery San Diego County, CA Baja California, Mexico
Benefits PCP Office Visit -$10 Copay
Specialty Office Visit – $20 Copay
Hospital – $100/Day; 3 day max
Rx (Gen/Brand)- $20/$40 Copay
ER- $100 Copay
PCP Office Visit -$10 Copay
Specialty Office Visit – $10 Copay
Hospital – $100/Day; 7 day max
Rx (Gen/Brand) -$10/$20 Copay
ER- $100 Copay
Monthly Premium $1,311 $465
Annual Premium $15,732 $5,580

The cost of healthcare coverage is largely a function of the unit cost for hospital services, physician services, and medications. Since the unit cost of healthcare in Mexico is much less than in the United States, the cost of healthcare coverage for similar benefit plans would also be significantly less. The cost differential can be seen in the Aetna health plan offerings. Aetna is one of the approved carriers in California that offers cross-border health coverage plans. Take the Aetna small group HMO Plan offering for San Diego employers with a standard 1.0 Rate Adjustment Factor based on October 2010 Rates. For this illustration, an employee is 38 years old with a spouse and two children. The Aetna HMO offering for care delivery in San Diego County is $1,311 per month. The Aetna HMO Plan offering for care delivery in Baja California, Mexico is $465 per month or just over one-third of the cost of a similar Aetna offering in the United States. Under this comparative illustration, the co-payments are slightly more favorable for care delivery in Baja California than in San Diego.

Unlike California, other state laws do not allow their insurance carriers to contract with Mexican providers. The Univ. of Texas conducted several studies in the early 2000s to look into the merits of cross-border healthcare for Texas after California had allowed cross-border healthcare plans. Unfortunately for insurers, employers, and consumers, the Texas medical community convinced Texas legislators that patients could be seriously harmed if insurance carriers were allowed to contract with Mexican providers. So for the millions of workers from El Paso to Brownsville who may have preferred employer-sponsored healthcare benefit services in Mexico, such a product is not available, at least not through a Texas Dept. of Insurance fully insured health plan.

For employers that might be considering the merits of going self-insured, access to cross-border health care might be a positive tipping point factor. Under ERISA and federal law, a self-insured employer is not prohibited from establishing benefit plan services that would allow participants to access healthcare services in Mexico. Such a plan could be developed to offer much more healthcare benefit bang for the employer’s allocation buck.

There are several well-known examples in California where some agriculture employers and union trusts have formed ERISA self-funded plans that include cross-border healthcare benefits. The Western Growers Association, United Agriculture Benefit Trust and the United Farm Workers RFK Trust are but a few ERISA programs with cross-border health care benefits.

Yet, interestingly, other markets have been largely void of any self-funded employer benefit program with integrated cross-border healthcare benefit services. This is not entirely surprising given the relative complexity of an employer going self-insured versus the easier fully insured health plan model.

Introducing cross-border healthcare benefits into the self-funding coverage offering increases the complexity since self-funding has more moving parts than fully insured coverage. The biggest challenge, by far, is the lack of credible information and basic knowledge related to cross-border healthcare expenses, utilization frequencies, medical management processes, quality of care standards, provider networks credentialing and operations, the legal framework, and operating environment.

Cross border healthcare is an idea whose time has come, as the cost of care continues to increase in the United States, notwithstanding the good in-ten-tions of the Healthcare Reform Act and of other such initiatives. For those who live close to the border with Mexico, it is no news that the price differential for the same procedures is very significant and continues to widen between the two countries.

The same model can be applied to companies that are not located directly across the border with Mexico, but that are willing to give their members access to Mexican healthcare providers for non-emergency high-cost procedures. These would be procedures such as hip or knee repairs or replacements, heart function repairs, kidney or gall bladder stone removal, etc. These procedures can be very costly for the self funded group in the U.S. while they become manageable in Mexico. After all, the function of any health insurance plan is to mitigate risk, and provide access to a qualified pool of medical care providers in Mexico turns out to be a superb risk mitigation tool for these groups.


Sekure Healthcare is a California-based company that provides healthcare solutions to U.S.  employers with special emphasis on Latino and cross-border healthcare services. For more information, contact Jim Arriola, CEO, 619.210.4836,, or José Aroeste, CFO 619.318.1734,, or visit the company website at:

Self-Funding Sales to the Rescue!

Self-Funding: Think of it from a Renewal Perspective

by Mark Reynolds, RHU

Too often we hear, read, and think about self-funding for small to mid-size employers only from the new sales perspective. It is true that self-funding provides brokers one of the best opportunities for writing new business and for building one’s block of business. Self-funding for new sales is not what I am going to talk about here.  This article will demonstrate how and why brokers should consider and market self- funded plans from the renewal perspective.

Why? It’s simple; self-funded plans can give a broker and client more options and alternatives at renewal time than any other type of healthcare financing in the market.

Current Status With Fully Insured Plans

Let’s look for a moment at what happens in fully insured group health plans for groups with 51 to 150+ employees. The employer chooses the fully insured plan or plans it wants to offer its employees; enrolls; pays the premium each month throughout the year; and waits for the renewal, usually anticipating premium increases often tied to benefit decreases.

Brokers usually see the fully insured renewal 45 to 60 days in advance; try to negotiate a lower renewal; and then meet with the employer to deliver the renewal news. The broker typically will not have any claims data or utilization reports and won’t have a loss ratio to share with the employer to explain the plan’s renewal action. Basically, the broker goes to this renewal meeting with their hat in hand hoping for the best. Why plans do not release claims data is a major source of broker frustration these days but that is a topic for another article.

Most brokers shop the market to determine if there are better alternatives for the employer, but this can be a challenge since the number of carriers in the 51 to 150+ market is relatively small. Plus, let’s face it, the broker, the employer, and the employees would prefer not to move. So premium increase are often accepted with the extra cost they bring.

The Self-Funding Market Provides Better Alternatives 

Again, we are discussing this from the renewal perspective so just assume that the self funded plan in which you enrolled your client made more sense than any alternatives, and renewal time is approaching. Remember, one of the appealing aspects of self-funding medical plans is that the broker and employer have access to all of the group’s claims data in complete detail.

To continue the assumption, let’s say the stop loss carrier issues a 9% increase on both the premium for the specific and the aggregate pieces of the plan (you can assume a higher increase if you want). With self-funded plans, brokers have more methods to address premium cost at renewal than just simply premium. Let me explain.

The broker may negotiate many aspects of the plan without affecting the member’s benefits:

1.The specific deductible can be adjusted for the entire group, which means that the employer can increase the specific from say, $10,000 to something higher. Increasing the spec will decrease the premium. Since the employer has all of its claims data, considering this alternative is easy. This does not affect member benefits.

2. The specific deductible could be “lazored,” which means increased, on individual members who present a greater probability of having higher claims utilization. We often see employers that choose a $10,000 specific deductible for their group, choose to increase the specific deductible on one or more members to something higher say, $30,000, to lower the group’s premium cost. This is an excellent way for employers to maintain or lower fixed cost, such as premium, without increasing the employers overall total cost. It is very common to see brokers help their clients manage the group’s monthly plan cost by lazoring without increasing the employer’s total cost. This does not affect member benefits.

3. The plan’s insurance contract can be modified. You have learned from previous articles that an employer that is self-funding its plan will be on a reinsurance contract, such as a 12/18. This means that the employer has insurance protection for six additional months for claims incurred during the 12 month contract. The broker may lower the renewal cost by modifying the contract to a 12/15, for example. Since the employer has access to all of its claims data this is easy to consider. This does not affect member benefits.

4. It is clear to see that one of the most important aspects of a self-funded plan is the employer’s ability to access it claims data. If the employer can see what is being used, when and how, then the employer can make plan changes that do not affect members, but does help the employer control its cost.

We are not implying that fully insured plans do not provide advantages nor do we imply that the renewals by in-force plans are not required and appropriate.  Our point is that self-funding benefits does provide brokers with tools to help their clients that are not yet available from fully insured plans.

We know of a 53-life case that is self insuring its benefits and recently renewed with no increase or change in any way, but look at the facts. One year ago, this case was offered a renewal by the fully insured plan with an 18% increase. During the group’s first year of self-funding, the claims paid by the employer for medical and Rx claims would have produced a loss ratio of 69%, not counting broker commissions and premium tax on its old plan. What premium increase would a fully insured plan give a 53-life case with a 69% loss ratio?

Well, the rest of the story is that this group had just one member exceed its specific deductible which resulted in the stop loss carrier paying out less than $20,000. So the carrier’s loss ratio was very very low and resulted in no rate increase at renewal, not even trend. This means that the claims data that would have produced a 69% loss ratio on the previous fully insured plan had no effect on the employer’s renewal or its rates.

Finally, it is easy to understand why self-funding is increasing in popularity for groups in the 50 to 150+ employee range. Self funded plans provide employers the flexibility to design benefits the way the group wants; get access to claims information; and lower cost. But, the next time you consider presenting a self funded arrangement for your client or prospect, remember this: renewal time is just around the corner, so set the employer’s expectations for what you will bring at renewal time. The client will appreciate you for it. In other words, give them a renewal perspective!


Mark Reynolds is part of the team at BEN-E-LECT. BEN-E-LECT’s corporate office is located in Visalia, California. BEN-E-LECT provides MERPs, HRAs, and traditional self-funded plans to thousands of employers throughout California and the Southwest United States. BEN-E-LECT’s Employer Driven Health Plan™ model has been lowering employer cost since 1996.  Mark can be reached at 559-250-2000

LTC–If Necessity is the Mother of Invention Simplicity is the Father of Sales Success!

by Barry J. Fisher

Economic uncertainty has done one good thing for the life and long-term care insurance business: the need for planning has increased. Many consumers have learned that they cannot use their home as a personal ATM machine or rely on their 401(k) plan. A 2010 survey by Age Wave (Ken Dychtwald, Ph(D) reveals the following:

• All age cohorts are worried about becoming impoverished: 50% of Silents (ages 65-85), 55% of Boomers (age 46-64), 63% of Gen-X’ers (age 34-45), and 53% of Millennials (ages 23-33).

• Their greatest fear is having a long-term illness.

• They don’t want to be a burden on their family.

• The top worry for the age 55+ group is having medical expenses not covered by insurance.

• Alzheimer’s Disease is their greatest fear.

Being able to pay for the unexpected costs of acute and chronic illness is a generational concern with far-reaching effects. With the pending collapse of the social safety net, more people will rely on their families physically, emotionally, and financially.

Until recently, agents and consumers have been somewhat limited in the insurance tools they could use to solve this risk-management problem. And, while traditional long-term care insurance has the best benefit-to-cost profile, the product is not attractive or suitable for all. How many times have you heard the following objections? “What if I never need long-term care?”  or “I’ll set aside some money in a rainy day fund.” “I have limited funds, so I need to choose between life, disability and long-term care coverage.”

While we often comment that traditional long-term care insurance market penetration has stagnated at 7% to 9%, a closer examination points to a different conclusion. Maybe we’ve done a better job than most people think. Consider this: a percentage of the population can self-insure the long-term care risk. It may not make economic sense, but they can. Then, at the lower end of the income/asset spectrum, LTCi is unaffordable and inappropriate. They will be forced to rely on what’s left of the social safety net. Today, most traditional long-term care insurance is purchased by people in their mid-50s who are planners, reasonably affluent, and business owners who are taking advantage of the tax advantages of traditional products. This is a great market segment and we’ve done a good job for these clients.

However, two significant market segments continue to be underserved:

• Affluent people (average age 67) who have said no to traditional LTCi because they think they won’t need long-term care or they are willing to self-insure part of the risk.

• Middle-class people who know they need life insurance and liquidity for a chronic LTC illness and a critical or terminal illness as well in some cases. These clients can benefit by making their premium dollars multi-task.

Today, consumers can choose from a growing variety of life insurance products that will accelerate the death benefit in the event they need long-term care. Each of these products is suitable to a distinct market segment and the option is not between traditional LTCi and life insurance with accelerated benefits: the choice is between self-funding the risk or leveraging assets or premium dollars to do part of the job.

At this point most agents are asking, “Which is the best choice?” The better question is, “Which is the most suitable solution for my client?” When it comes to LTCI, the word “best” is subjective and often hinges on the planner’s prejudice. “Suitable” or “appropriate” rests on the prospect’s age and health, ability to support the premium required, and other financial considerations. With this in mind, let’s review the target markets and the long-term care planning solutions best suited to their needs.

Traditional Long-Term Care Insurance

As mentioned earlier, traditional products are best suited and embraced by the following types of consumers:

• People in their late 40s to early 60s – average age of issue is 57

• Those who are upper middle-class and affluent planners – people who are willing to pay the premium required for comprehensive peace of mind

• Those for whom $3,000 to $5,000 per year per insured won’t change their lifestyle

• Business owners who take advantage of tax-deductible premiums, tax-free benefits, and sometimes simplified underwriting

If you have a prospect or client who fits this profile, they need to look at traditional long-term care insurance. The benefit-to-cost ratio cannot be beaten. They should consider a minimum pool of money of $300,000 ($6,000 per month benefit) and 5% compound protection. Several top carriers are “refreshing” their new business rates, so now’s a great time to ask the question, “Have you done your long-term care planning yet?”

Single Premium Linked-Life + Chronic Illness Riders

One group of affluent consumers has considered traditional long-term care insurance and said no. Here are the common objections:

• What if I never need long-term care?

• Maybe I should self-insure the risk.

• At this point in my life I just don’t want to pay an annual premium.

There is good news for these consumers: single-premium life insurance policies with accelerated benefits for chronic illness. The profile of these prospects, according to one of the leading insurance carriers, is as follows:

• Ages 62 to 85 – average age of issue 67

• The value proposition of traditional LTCi does not resonate with them.

• $800,000 of investible assets.

• They are willing to self-insure part of the risk have and set aside $100,000 or more in a rainy day fund for medical or long-term care expenses.

• They have old cash-value life insurance policies they can 1035 exchange.

Prospects or clients with this profile are open to repositioning rainy day fund into a single premium UL or WL product that will provide them with a tax-favored life insurance benefit and some coverage for long-term care expenses. While the benefit-to-cost ratio of this long-term care planning solution is not as robust as a traditional policy, it allows this consumer to leverage their cash for LTC expenses and leave something for their heirs if they don’t use the policy.

Aim for the Big Target in the Middle!

As a trained life insurance agent, I was stunned to learn from a 2010 LIMRA study that life insurance ownership is at a 50-year low, even though interest among consumers is at a 50-year high. LIMRA’s conclusion was that the middle market, which makes up 42% of the population, is woefully underserved by an aging and shrinking life-insurance sales force. LIMRA believes that this mid-market gap will be filled by financial planners, health insurance and property casualty agents and community banks.

How does LIMRA define the middle market?

• $50,000 to $250,000 annual income
• Less than $1,000,000 of assets

In a follow-up study, this year, Genworth Financial  found the following:
• 40% of married households have no life insurance
• 69% of single adults with children are uninsured
• 33% of those who do own life insurance purchased their policy more than 10 years ago
• 60% want to meet with an advisor to help them
• 88% wanted help determining their needs

An example of this consumer is the school teacher or supermarket clerk who is married to the fire fighter, truck driver, or small business owner. They have children and struggle to make ends meet. They want to plan, but they have limited discretionary income and must choose among life, disability, critical illness, or long-term care insurance. The good news is that you can help these mid-market consumers with high quality life insurance products, some of which offer accelerated benefits for chronic (LTC), critical, and terminal illness. In essence, these policies allow middle-class consumers to make their premiums multi-task.

It is really quite simple. We should continue to help consumers plan for the probability of needing long-term care. Greater sales success will come if we expand our thinking beyond traditional products and market segments; learn new planning options and technologies; and implement a systematic marketing plan to existing clients and new prospects. Agents need to become fluent in long-term care planning. This doesn’t mean that you need to be an expert. There are many resources that can provide you with the basic tools and knowledge.

Finally, don’t be a product zealot. Traditional and linked long-term care planning options are suitable for specific consumers. Learn to identify the client’s exact circumstance and match the solution to their needs. It all starts with a simple straightforward question, “Have you taken care of your long-term care planning?”


Barry J. Fisher is the president and CEO of Barry J. Fisher/Paradigm Insurance Marketing, a brokerage general agency based in Southern California. He is also executive vice-president of America’s Long-Term Care Insurance Experts, a national marketing organization with more than 50 affiliated agencies. Barry is the Chairman of NAHU’s Long-Term Care Advisory Committee and serves on the NAHU’s Legislative Council. He has been past president of the Los Angeles and California Association of Health Underwriters, Founding President of the American Association for Long-Term Care Insurance and is a member of the California Department of Insurance Curriculum Board.  You can reach Barry at or at 818-444-7730.

Overcoming LTCI Challenges–Tips for Producers on Addressing the Key Objections of Long-Term Care Insurance

by Colleen Goldhammer

Producers face unique challenges when talking to clients about long-term care  insurance (LTCI). Among the objections to LTCI are a perceived high cost, misconceptions about the government’s role in long-term care,  and the overall health of the LTC Industry.

These reasons coupled with the sensitivity of the topic in general, create a tough environment for producers who are trying to communicate to their clients the benefits and the need for long-term care insurance.

Long-term care  insurance is not what it used to be. Innovation is strong and new products are being introduced to address these key objections. As a producer, knowing how to face these potential challenges, communicate new offerings and clarify misconceptions about LTCI with your clients is imperative as the cost of not selling long-term care  insurance is high both for consumers and producers alike.

Challenge 1 – High Cost

Clients who are concerned about the cost of a long-term care  insurance policy should be advised of the cost of not having a policy. In 2011, the median annual national cost for a private room in a nursing home was $77,745 up 4.35% from 2010; $39,135 for an assisted living facility; and $18 an hour for in-home care, according to Genworth’s annual Cost of Care survey conducted by CareScout in April 2011.

In California, the costs are higher: $91,250 for a private room in a nursing home, $42,000 for an assisted living facility, and $19 an hour for in-home care. Given the costs, self-insuring could deplete a family’s entire savings. And once that happens these costs are then often inherited by the children of the care recipients, whose retirement savings could also potentially take a hit.

Lastly, premiums are based, in part, on age and the longer one waits to purchase a policy, the more expensive the policy will likely be. Clients concerned about cost, should be encouraged to purchase early.

Challenge 2 – Government Benefits

While many believe Medicaid or Medicare will cover them should a long-term care  event occur, that may not be the case. Producers need to be well versed in what is, and what is not, covered by these government run programs and be sure to relay this to clients to clear up any misconceptions. Uninsured medical expenses are the top financial worry among men and women age 55 and over, according to a Genworth survey. As producers, it’s important that clients are fully aware of their coverage and potential needs.

In the same regard, producers should educate clients on The Partnership Product available in California. Those with a long-term care insurance policy can be assured that if and when the need for long-term care  arises, they will have more control over their long-term care  decisions and be able to help protect their assets and resources should they ever need to access Medicaid.

Generally, Partnership plans provide dollar-for-dollar asset protection for policyholders. For every benefit dollar policyholders receive under a Partnership policy, they receive an equal dollar of asset protection under the state’s Medicaid spend-down requirements. As a result, participants are able to retain assets that would otherwise have to be spent down prior to qualifying for Medicaid benefits.

Challenge 3 – Denial

Many people shy away from long-term care insurance all together because of the possibility that they may not use it. However, producers should point out that nearly 70 percent of people over age 65 will need some type of long-term care services during their lifetime. At the same time, long-term care  is not just an elderly issue. In fact, about 20 percent of people currently receiving long-term care services are 18 to 64, according to the survey.

Challenge 4 – Talking to Clients about LTC

Before educating clients on LTCI and debunking the myths, producers must first start the conversation. Given the sensitivity of the topic, this is often difficult. However, there are resources available to producers on how to initiate the long-term care planning conversation and encourage clients to have a conversation with their loved ones. Here are tips to share with clients on talking to loved ones:

• Be straightforward and don’t take family members by surprise. Tell them that you have something important you want to talk about and do it in a comfortable, pleasant setting.

• Use examples. Sharing recent articles and data on the issue of long-term care or sharing a situation with a friend or colleague with a similar background will make the issue more relatable.

• Lay the  groundwork for thinking about future care. Ask questions about the potential game plan for care if the person was hurt at work or fell ill and required long-term care. Be specific on what their wishes would be if they ever did need care.

• Create a written strategy. Financial planning, estate planning, and long-term care  planning are all connected. It’s important to write down specific needs and desires so that everyone involved knows what is expected both today and in the future.

It is no secret that long-term care insurance can be a tough sell, but we cannot deny the benefits and added security a policy provides clients, not to mention the potential for earnings, increased referrals and stronger client relationships for those that include it as part of their offerings. As such, being prepared to meet the LTCI challenges head on and educate clients on the new offerings being developed to better meet their needs is imperative. There are many online resources to help producers build their knowledge about long-term care when talking with clients.


Colleen Goldhammer is senior vice president for Long-Term Care  (LTC) Distribution for Genworth Financial. Genworth has created a site to help facilitate discussion about long-term care

Premium Financing–Meeting Today’s Challenges with Premium Financing

by Leila Morris

CMS – Succession Capital Alliance held its third annual traditional premium financing conference in Las Vegas in August sponsored by Pacific Life. More than 100 advisors attended the two-day invitation-only event. Experts described ways that advisors can take advantage of traditional premium financing to maximize estate and business planning for high-net worth clients.

A premium financing conference could not have come at a better time. Premium financing is gaining popularity in today’s environment with lenders charging very low interest rates and insurance companies offering more competitive products.

With traditional premium financing, the client enters into a fully collateralized loan arrangement with the intention of holding the life insurance policy to maturity. Traditional premium financing arrangements are generally utilized for estate liquidity needs and offer the most advantageous loan rates, fees, and spreads. With premium financing, high net worth individuals borrow money to pay the premiums of a large life insurance policy that is needed for estate and business planning purposes. “Premium financing is not a product, but an alternative funding method for life insurance premiums,” explained Julian Movsesian, MBA, president and founder of CMS & Succession Capital Alliance.

So why would a wealthy client want or need to finance the purchase of a life insurance policy? There are a multitude of reasons including the following:

• The client wants to retain ownership of their liquid assets.

• A significant portion of the client’s wealth may be tied up in a business that they plan to pass on to the next generation.

• The client has assets that are not easily liquidated. For example, they may not want to sell real estate in today’s depressed market to purchase a life insurance policy or they may want to avoid the potential capital gains tax related to the sale of their property.

• The client wants to provide an income schedule to their beneficiaries.

• The client wants to retain assets for charitable giving.

• The client has business needs, such as key person, buy-sell funding, and deferred compensation.

• The client wants to take advantage of discounted cash flow associated with premium financing instead of paying premiums in cash.

• The client wants to retain the use of capital that would otherwise be used to pay premiums.

• The client wants to minimize or eliminate the drain on current investments that would have been used to pay life insurance premiums.

• The client wants to take advantage of favorable interest rates and terms on borrowed funds.

• The client wants to take advantage of potential gift tax savings.

For these reasons and more, Alisha Zaayer, director of premium financing for Pacific Life reports that traditional premium financing is alive and well. “The market has changed. We are post STOLI, IOLI, and hybrid; traditional premium financing remains a popular strategy for high net worth individuals and businesses.”

Andre Blaze, director of Marketing and Training for Succession Capital Alliance said that premium financing is talked about by many, but is done successfully by very few. He stressed that it is essential to have expert support from case inception to closing, and more importantly, service future loan renewals. Ron Shuley, Divisional Vice President of Pacific Life said that a lot of producers want to do premium financing themselves, but without the expertise, it’s not as likely to be a successful sale.  He added that marketing is important and having multiple lenders is a must.

Leveraging Your Book of Business

Julian Movsesian explained how advisors can identify clients from their existing book of business who may be good candidates for premium financing:

• A high net worth individual or business with a minimum of $10 million in assets.

• The client has established a need, and has the ability to pay the non-financed premium for permanent life insurance.

• The client’s first year premium is at least $100,000.

• The client has greater investment opportunities they could take advantage of if they didn’t have to pay premiums in cash.

• The client understands the value of leverage.

• The client is able to post additional collateral using liquid assets or a bank letter of credit.

Communicating With Clients

Andre Blaze said that communicating with clients is important when it comes to premium financing. In fact, advisors face liability if they do not fully disclose the loan strategy before it is implemented. The advisor needs to explain the following:

• Why a multi-lending platform is important to clients and advisors.

• Changes in interest rates or fees and how they may affect future performance.

• Projected collateral needs in the future to maintain the integrity of the strategy.

• Loan exit strategies as a safety net if desired.

Julian Movsesian said, “We see cases where the producer does not ask the right questions of the client. The client’s biggest fear is a liability on their balance sheet. Tell them that you will be creating an asset on their balance sheet, which is the policy’s cash value growth.

Using Indexed Universal Life Insurance

One popular strategy is to use premium financing to purchase an indexed universal life (IUL) policy. IUL offers several advantages including a guaranteed minimum annual interest rate, the potential for long-term cash accumulation, as well as death benefit protection. Stephan Mitchell – IUL Product Marketing Specialist for Pacific Life said, “IUL has taken hold. IUL protects against the downside of the market while offering tax favored gains.”

However, he urged advisors to be aware of insurance carriers that illustrate unrealistic rates and returns.  He explained, “IUL is hot and regulators have not caught up with the product yet…The cap rate is based on three elements (policy changes, options prices, and bond yields) and an insurer can manipulate any of these elements to drive the cap rate higher than it should appear. Companies that initially had very high cap rates have dropped them.

Premium Financing for Baby Boomers

“Baby Boomers are the future of our business,” said Bill Bell, JD, MBA, Director of the Advanced Designs Unit for Pacific Life. In fact, he called Baby Boomers the best market for premium financing. Only 60% of Baby Boomers have life insurance and a large portion of them have term insurance. Baby Boomers have diverse reasons to purchase life insurance:

• Family protection

• Pure insurance planning.

• Business Succession planning.

• Retirement income planning.

• Estate planning.

For a limited time, high net worth Baby Boomers can take advantage of the recently increased lifetime gift and generation-skipping tax exemption. “You can also use the cash value of a life insurance policy to provide a supplemental retirement income,” he said.

Bill Bell also described several other planning tools for Baby Boomers, including split funded defined benefits, which can provide an annual benefit defined by the plan itself as well as a sizable tax deductible benefit.

He noted that there is a real future in phantom stock arrangements using life insurance. The business can reward key executives with the success of the business without giving up ownership of the business.

Steve Oshins, JD, stated a dynasty trust will last 360 years without transfer taxes. Julian Movsesian noted that asset protection is a huge market with potentially huge savings in gift taxes.

In conclusion, experts at the conference revealed that premium financing is more relevant than ever. Only a very specific type of client will benefit from this strategy, but it behooves advisors when identifying these clients that getting the right kind of support to assist them is paramount.


Leila Morris is editor of California Broker Magazine and founding editor of 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 newsletters for life insurance agents and provided insurance industry Website content. Before that, Morris was a managing editor in charge of the successful revitalization of a telecommunications magazine. She also has extensive experience covering Capitol Hills as well as the Defense Dept. and other federal agencies. She has a B.A. in Political Science from St. Mary’s College of Md.


Voluntary Benefits

How Changing Benefit Trends Affect Your Clients

by Allison Farris Wendelberger

For many employers and HR decision-makers, the recession has created a struggle between the needs of the business and the needs of employees. This turbulent financial climate has opened the door for brokers to serve as a resource to help human resource professionals strike a balance between these two competing goals and find solutions that satisfy workers’ needs and meet fiscal objectives. Here are four trends to keep in mind and discuss with HR executives as they face major decisions while developing benefit packages.

Education Is Key for HR Executives and Workers

When it comes to the effectiveness of benefit communications, HR executives and employees are often on different pages, sometimes even on different chapters altogether. According to a 2011 Aflac study of employers and employees, 40% of HR executives believed they were extremely/very effective in communicating with workers about their benefits, but only 40% of employees rated their HR departments somewhat effective in communicating about benefits, and another 27% said they were not very or not at all effective.

Fifty-five percent of employees rely on their HR departments to inform them about benefits and that reliance will only grow in the next year. HR executives are feeling the pressure to understand health reform. They say that understanding the changing healthcare landscape is their second biggest benefit challenge. As a broker, now is an ideal time to help your clients begin closing the communications gap brought on by health reform. Begin educating your clients about the importance of comprehensive benefit awareness.

For example, workers need guidance on how flexible spending account limitations and caps may affect their budgets. Additionally, a major education effort will be needed for employees who are moving from traditional healthcare plans toward high deductible health plans with health savings accounts.

For many employees, this process is often less about what changes are made and more about how those changes are conveyed. According to the Aflac study, 41% of workers said a well-communicated benefit program would make them less likely to leave their job, which is a pretty powerful incentive to close the communication gap.

Benefit Packages Are the Great Differentiator

Despite the number of people who are unemployed, the landscape is expected to shift from an employer’s market back to an employee-driven market with top talent in short supply and high demand. When this happens, demonstrating value and goodwill to workers with a benefit package that is unmatched by competitors will make the difference between high and low retention rates.

Health reform will have an impact. Major medical insurance coverage is likely to become more homogenous with the establishment of minimum benefit standards and the option to move from employer plans to exchange plans. At the same time, HR professionals will be pressed to offer healthcare benefit options that soften the blow for workers who face inevitable cost shifting and higher out-of-pocket costs.

Voluntary insurance policies can require no direct cost to the company, but offer workers the choice in additional coverage that best suits their needs. They can be the differentiator when it comes to maintaining and attracting a talented workforce. These types of supplemental insurance policies and ancillary benefit offerings also position your clients in a better light.

Encourage Wellness Initiatives

Health reform has highlighted the growing trend of wellness programs. The new law includes many provisions to entice companies to build or enhance their wellness programs, but there is still the challenge of getting workers to take advantage of the programs.

Many HR executives who implement wellness programs feel pressured to deliver the much-anticipated cost savings with effective preventive healthcare. The ability to meet those goals likely depends on the employee participation.

Help your clients find the innovative approach to boost worker participation and meet their goals. Money talks. Imagine if employees got paid to go to the doctor for preventive procedures, checkups, or vaccines. An increasing number of HR executives and workers are discovering that some voluntary insurance plans include a wellness benefit that will not only cover the expense of the preventive procedure (i.e., mammograms, vaccines, etc.), but also pay policyholders to use it. Other incentive programs might include an awards program based on points earned when achieving a wellness goal.

X, Y, or Z – Not All Workers Are Created Equal

As if HR executives don’t have enough to juggle, there will be a continued need to manage the new melting pot of a company’s culture — Traditionalists, Baby Boomers, Generation X, and Generation Y. Although these workers have been labeled many things, each generation has its own style of working and abides by different rules and expectations of the workplace. HR professionals will need to develop strategies to keep the workplace cohesive while meeting the varying needs of each generation.

Remind your clients that this is true when it comes to benefit options. The Aflac study found that only four in 10 employers tailor their benefit offerings to their employees based on their needs at different life stages. Yet, there are nuances when it comes to the benefit needs of different generations. Most importantly, 66% of workers would be more likely to take advantage of a benefit package that is tailored to their situations, according to the Aflac study.

Encourage your clients to consider building benefit packages that address the needs of different generations. For Baby Boomers and Traditionalists, a package might include heavy retirement savings plans/incentives, health savings plans, or voluntary insurance policies. These plans help protect their assets in case of serious accident or illness during time of need. The plans are also portable, allowing them to retain their insurance coverage long after they stop working. Companies can even consider fringe benefits, such as grandchild care or flex-time/part-time options.

A recent Aflac study found that 38% of Gen X workers say that having enough money to meet their expenses is a top challenge — more so than any other generation group. In addition, these employees ranked “wages keeping pace with inflation” as one of their top two issues of concern. Gen X consumers are most likely to be enrolled in, or interested in enrolling in, ancillary benefits, such as dental insurance (73%) and vision plans (52%). Benefit decision-makers need to consider the concerns and priorities for the Gen X workforce, building in compensation incentives, bonus structures, and options to purchase voluntary ancillary products, such as dental and vision.

Financial planning and retirement savings are additional areas to address the needs and goals of Gen Y workers. These workers place a high importance on financial security. But often, they are the least likely to be financially prepared. Fortunately, Gen Y consumers have time on their side. Therefore, what will be in high demand are long-term financial planning tools; money management advice and perks, such as bonuses; work/life balance options; and career development paths


Business leaders understand the need to have productive employees in order to achieve new productivity expectations and requirements. And productive employees will deliver tremendous value for their company, but only in return for tangible and intangible value that enhances their lives.

One of the most sought after rewards is having comprehensive benefits. A company’s benefit offerings are not only held in high regard by employees, but they are also indicative of how much employees matter and they speak to how well a company delivers on their brand promise.


Allison Farris-Wendelberger is the California-Bay Area state sales coordinator for Aflac. She is responsible for developing and implementing the Bay Area’s strategic market development plan, including the development of the broker channel for Aflac. For more information about Aflac, visit or send an e-mail at For more information about Aflac, visit or send an e-mail at

403(b)–California’s Resurgent 403(b) Marketplace

by Steve Koza, CSA, LUTCF

Over the past 15 years, I have had the pleasure of writing numerous articles about the 403(b) marketplace. My last one went to print nearly four years ago, and wow, have times changed! The market for tax sheltered annuities (TSA) has absorbed an incredibly rugged and bumpy ride.

Experts in this field estimate that there has been a fall out of nearly 50% of carriers and, likewise, agents. We have seen the financial services arena shrink and shrink to the point in which the average U.S. citizen is hard-pressed to find an expert help them secure their financial future. Sure, there is Internet assistance from a myriad of Web sites that promise everything from a shorter workday to a complete and satisfying retirement with the push of a button. What’s missing is the reason for this article — a live financial professional in the form of an annuity/insurance agent that teachers so desperately need here in the state of California. Yes, there’s “gold in them ‘thar hills” and it is yours for the taking.

There is an old Chinese proverb that states, “May you live in interesting times.” We’ve all heard that Charles Dickens quote, “it was the best of times; it was the worst of times.” In today’s financial arena, I would like to quote Ralph Waldo Emerson who stated so eloquently that this time, like all times, is a good time if we but know what to do with it. Let’s look at some changes that were the cause of this fallout and how you can capitalize and join this niche marketplace.

First, here are a few factoids about the educator marketplace:

• Less than 31% of Educators nationwide own a TSA.

• Teachers are woefully underinsured for life insurance.

• The California State Teachers Retirement System will only account for 50% to 60% of necessary retirement dollars.

• Most teachers are under the assumption they can receive full Social Security benefits.

• Most teachers do not know anything about a retirement plan.

• Most teachers spend less than one hour per year in discussing or reviewing their retirement plan.

• Only a small fraction of teachers who own a TSA have a completion feature to their plan

Any of the abovementioned facts should spell out the word “opportunity” for you, the professional. Here are a few more facts for those of you who are new to the 403(b) marketplace:

• A TSA plan is a voluntary retirement plan for specific employees of public schools, tax-exempt organizations, and ministers.

• Historically, the employers who offered these retirement programs had limited responsibilities regarding the plan.

• If a teacher wished to participate, the school would forward elected salary deferrals to the particular insurance carrier or selected fund provider.

• The participant or the funding provider was seen as the owner of the individual annuity or custodial account.

• The teacher and funding provider engaged in a range of actions including electing and changing investments, making loans, taking hardship distributions, and transferring contracts from one provider to another.

As a result, there were issues with non-compliance concerning the rules governing 403(b) programs. This led to a watershed date for the TSA industry of July 26, 2007 when landmark changes went into law, sponsored by both the IRS and Department of Labor. Most of these major changes went into effect on January 1, 2009. Why? Most pundits agree these changes placated the Internal Revenue Service, which wanted the 403(b) industry look more like the 401(k) industry.

To be candid, these changes were long overdue. Many in the industry were running fast and loose. Many old timers will disagree, but the system was broken and any sort of checks and balances were negligible. What are these changes and what happened to cause such fallout? It all revolves around increased fiduciary responsibility for 403(b) plan sponsors. Traditionally, schools did little more than collect and remit funds, but under the new IRS rules, they are required to do the following:

• Form a written document covering provisions of the plan.

• Generally, form an alliance with third party administrators.

• All documentation must now be measurable, definable, and quantitative.

• Increased monitoring, including catch-up contributions, verifying accuracy of processing, loans and hardship distributions, administering QDRO, and on and on and on

There is an entirely new bottom line with new rules and new worries for school officials. As a result, many schools are reluctant to work with many insurance companies, fund providers, and most importantly, agents. So where’s the opportunity for you, the financial services professional? Four long years have gone by with a lot of fallout. Teachers really need your help. They see their colleagues let go and they wonder how they will provide for their families if schools continue to cut back. They are all wondering about their future and if they will be able to retire with dignity. Now is the time to be an annuity advisor and an insurance advisor for them and now is the time for you to discover this educator marketplace niche than can be both rewarding and lucrative for you.

How do you the field agent, financial advisor, insurance agent, annuity agent or whatever you call yourself enter this market? The answer is really quite simple. It’s like the old concept of mining a field of diamonds. Simply put, you need to do the following:

• Align yourself up with an existing educator agent who probably has more leads than they can handle.

• Learn, learn, learn. You must understand the educator marketplace and the rules and regulations that govern it.

• Understand what teachers do and the struggles and battles they face on a daily basis.

• Visit a school or two and learn the ins-and-outs of their internal system and how to get around on a campus.

• Read articles about 403(b).

• Be aware that there are really only five or six excellent insurance carriers that are still marketing to teachers; find out who they are and make the call.

• Understand that this is the age of specialization and that the educator niche is one that can sustain you for your entire career.

• And finally, ask questions.

I hope this article will stimulate you and get your creative juices flowing. If your current income has diminished drastically and your leads or market have dried up, I implore you to investigate the resurgent 403(b) marketplace. Remember, education counts!


Koza operates EdComm Marketing, an IMO dedicated to the Educator Marketplace, from his offices in La Quinta, Calif. He has been involved in the insurance/financial profession for more than 35 years. He was regional sales director and national sales director of two life insurance carriers as well as chairman of the Alliance of Financial and Marketing Professionals. Mr. Koza can be reached at 714-788-6992.