HMO Hole-In-One
Ace the Competition with Our Annual Survey

Welcome to the 14th 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.

The Value of Group Life Insurance for Executives Is in the Options
by Christopher R. Kristian
You should consider group life insurance alternatives when evaluating your client’s life insurance benefits since they are cost-effective, tax-efficient, and can provide portable long-term coverage for the selected class of employee.

Managing Lifestyle through Retirement with Guaranteed Income Solutions
by Daniel Herr
Variable annuities have evolved into solutions that allow for control and access to assets while providing a lifetime income with protection from inflation and longevity, nursing home benefits, flexibility and tax-efficiencies.

529 Plan News
529 Plans in 2010 and beyond

Can You Answer These Common HSA Objections?
by Kristin Komen
Some of the most common objections I hear from both business owners and brokers in California and some ideas for how to respond.

Innovation in Healthcare: It’s the Right Time for Value-Based Insurance Design
by Martin Watson
The next revolution in healthcare has taken off with the emergence of value-based insurance design. Many in the industry believe that value-based insurance design is the latest and perhaps last opportunity for private health insurance plans to control escalating health insurance costs.

Voluntary Benefits in the New Era Health Reform
by Mark Sylvester
As we look at the world of insurance and speculate about what health reform will mean to our business and those we do business with. One thing, I think we’ll see is an increase in voluntary or worksite benefits.

Healthy Vision for a Healthy School Year: Seeing Opportunities in Vision Coverage
by Patrice P. Bergman, CEBS
Carriers that offer comprehensive vision benefit plans often cover annual eye exams at little or no cost as well as affordable frames and contact lenses to improve visual acuity.

Vision and Dental Coverage
by Chris Swanker
During enrollment season this year, it’s more important than ever to help guide your clients towards getting more value out of their dental and vision benefits.

Helping Mom Get as Much Life Insurance as Dad: Closing the Gender Gap
by Howard Koransky
Helping employers promote the need for adequate life insurance coverage and helping them design a comprehensive offering are two steps brokers and consultants can take to enhance the value of the benefit program while addressing the larger societal issue of underinsurance.

The Super Index Annuity Explosion
by Michael G. Ferguson
Don’t be fooled by what you may have been told about life settlements investing.

Healthcare Reform: Driving a Trend Toward Medical Travel
by Keith Mendoza
Medical travel is a highly attractive healthcare option for businesses and employees and it has been getting more interest from U.S. residents.

Disability Insurance: A Necessity In Today’s Economy
by Karen Riedel
Brokers have an opportunity to shed light on an area that garners little attention, but represents an area of insufficient protection for most American workers – disability insurance.

HMO Survey Part I

HMO Hole-In-One
Ace the Competition with Our Annual Survey

Because of deadlines, we were not able to include Kaiser’s answers for part one. Look for their answers next month.

1. Do you guarantee a time limit on getting referral/treatment routine, urgent, emergency? If not, how many days does it take?

Aetna: Our internal policy is five days for routine, three days for urgent pre-certification, and one day for urgent concurrent. No referral is required for emergency care.

Anthem Blue Cross: Authorization by the PMG/IPA requires a decision in the following time frames: 72 hours for an urgent request; 14 calendar days for specialty referrals; and no prior authorization is required for emergency services.

Blue Shield: Our appointment wait time standards are: 30 days for preventive care, seven days for non-acute and routine care with a personal physician; 14 days for non-acute or routine care with a specialist; 24 hours for urgent care; immediately for an emergency (acute, life-threatening). Targets for plan-wide compliance with these standards for contracted HMO providers are: 90% for preventive and regular/routine care, and 100% for urgent and emergent care.

Health Net of CA: For urgent pre-service requests, a decision must be made in a timely fashion appropriate for the member’s condition, not to exceed 72 hours after receipt of the request. The practitioner needs to be notified within 24 hours of the decision, not to exceed 72 hours of receipt of the request (for approvals and denials). The member is to be notified within 72 hours of the request (for approval decisions). For routine/standing referrals, a decision must be made in a timely fashion appropriate for the member’s condition, not to exceed three business days from receipt of the request.

PacifiCare: Optimally, the specialist referral process should take less than 30 days from referral to appointment. We monitor this standard annually using the Consumer Assessment of Health Plans Survey (CAHPS) member satisfaction survey. We adjust our goals by market depending upon past performance and national percentile benchmarks. Our standards are as follows: Routine Appointment <30 days, specialist appointment <30 calendar days, and urgent care <24 hours. We also have the Express Referrals program that streamlines the referral process. A primary care physician (PCP) in a participating Express Referrals provider group may refer a member to a specialist in one of many specialties in their group without prior authorization from the group’s utilization review committee. Members pay their normal office visit co-payment for a referral to a specialist.

2. Do you have any conditions/diagnoses/symptoms that are referred automatically?

Aetna: Yes.

Anthem Blue Cross: The PCP, PMG/IPA determines automatic referrals for conditions, diagnoses, and symptoms. Members can self-refer to a contracted OB/GYN provider. Provider groups can participate in the Speedy Referral and Direct Access programs for referral of certain types of specialties for initial consultation and evaluation. There are also requirements for standing specialist referrals for chronic conditions and HIV/AIDS diagnoses.

Blue Shield: The personal physician and the corresponding IPA or medical group are responsible for coordinating referrals and authorizations for specialist care. We ask our HMO physicians to refer members to specialists within their IPA or medical group as these in-network referrals help control cost and institutional utilization through capitation. Blue Shield’s mental health service administrator assists members in locating appropriate referrals and issuing authorizations for mental health and substance abuse services.


Health Net of CA: Health Net delegates medical management activities to participating physician groups (PPGs). Each PPG has its pre-certification requirements and systems, which may include direct access to specialty care. For members who are not delegated to a PPG for management, such as Health Net’s Direct Network HMO membership or other fee-for-service membership, authorization for specialty consultations is not required.

Members with a chronic condition or disease that requires continuing specialized medical care are eligible for a standing referral to a specialist. A standing referral allows extended access to a specialist for members who have life-threatening, degenerative or disabling conditions.

PacifiCare: Yes.

3. Can a pregnant member go directly to a gynecologist without waiting for approval?

Aetna: Yes.

Anthem Blue Cross: Yes, pregnant members can self-refer to an obstetrician/gynecologist in the PMG/IPA.

Blue Shield: Yes, women may self-refer to an OB/GYN or family  practice physician in their PCP’s IPA or medical group for OB/GYN services. The member pays the regular office visit co-payment since this is not considered an Access+ Specialist self-referral. Additionally, if a network IPA or medical group contracts with the OB/GYN as a network primary care physician, the OB/GYN may be available to be chosen as a primary care physician.


Health Net of CA: Yes.

PacifiCare: Yes.

Do you have self-referral to a gynecologist for an annual well-woman exam?

Aetna: Yes.

Anthem Blue Cross: Yes

Blue Shield: Yes.


Health Net of CA: Yes.

PacifiCare: Yes.

5. Can a member with severe back pain get an appointment with an orthopedist immediately?

Aetna: The PCP determines this.

Anthem Blue Cross: The PMG/IPA/PCP will evaluate the member’s conditions and symptoms and assess the need for a specialist visit following the group’s process for referrals as necessary.

Blue Shield: Yes.

CIGNA: Members in our Open Access Plus and PPO products can go directly to any specialist. Other members should confer with their primary care physician who can contact an orthopedist or other specialist (neurosurgeon, neurologist) to arrange for an immediate appointment. At the direction of the physician, a member can also be enrolled in CIGNA HealthCare’s WellAware disease management program for lower back pain. A registered nurse helps coordinate timely care.

Health Net of CA: Yes, as an emergency.

PacifiCare: Yes, with a PCP referral.


6.  How long does it take to get an MRI or equivalent test when a lump is found in a member’s breast or uterus?

Aetna: The PCP determines this.

Anthem Blue Cross: The PMG/IPA/PCP determines whether to make an urgent referral for diagnostic tests and whether an authorization is needed. When a member faces an imminent and serious threat to her health, the time frame for making the decision .

This is an emergency situation in which according the Prudent Lay Person  Rule the member is instructed to seek care in an ER. For urgent non-emergent situations it is 72 hours.

Blue Shield: Seven days or immediately in an emergency.

CIGNA: The member’s physician determines the exact time frame. But, an appointment can be made immediately if medically necessary.

Health Net of CA: Health Net delegates utilization management activities to medical groups. Therefore, if the member belongs to a delegated participating physician group (PPG), the PPG has its own pre-certification requirements, and an MRI may or may not require pre-certification. If the member does not belong to a delegated PPG and Health Net is responsible for conducting utilization management, MRIs require pre-certification. Health Net processes urgent pre-certification requests within 72 hours of receipt of all information. Requests for elective MRIs are processed within five business days.

PacifiCare: Immediately.

7. Can the member get a second opinion outside of the IPA or the medical group?

Aetna: When medically appropriate.

Anthem Blue Cross: Yes, members have the right to a second opinion from a qualified healthcare professional in the Anthem network, as long as they have already received one from their PCP or a SCP in the group’s network.

Blue Shield: Yes, all Access+ HMO members have the right to get a referral for a second opinion from their personal physician. A physician in the same medical group/IPA generally provides second opinions of care from a personal physician. Any specialist of the same or equivalent specialty in Blue Shield’s HMO network can provide second opinions of care from a specialist. All second opinion consultations require Blue Shield authorization.


Health Net of CA: Yes, a member’s authorized representative or provider may request a second opinion for medical, surgical or behavioral health conditions.

PacifiCare: Members can get a second opinion in accordance with the specifications of the evidence of coverage (EOC) and disclosure form, as summarized below.

A second medical opinion is a reevaluation of your condition or health care treatment by an appropriately qualified provider. This provider must be either a primary care physician or a specialist acting within his or her scope of practice, and must possess the clinical background necessary for examining the illness or condition associated with the request for a second medical opinion. Upon completing the examination, the provider’s opinion is included in a consultation report. Either the patient or the treating participating provider may submit a request for a second medical opinion. For additional information, please refer to “evidence of coverage” brochure.

8. Where are decisions made about specialist referrals, testing, treatment, surgery, and hospitalization?

Aetna: For our delegated groups, the PCP makes decisions with their PMG/IPA. The health plan makes this determination for non-delegated groups.

Anthem Blue Cross: Delegated PMGs/IPAs make decisions about utilization management approval and denial. The provider group’s medical director makes all denial decisions.

Blue Shield: These decisions are made at the IPA/medical group level. Blue Shield can be involved if there is a dispute about appropriateness or if a member is dissatisfied.

CIGNA: Primary and specialty care providers make decisions about referrals, testing, and treatment. At times, they can coordinate care with their medical groups or IPAs. Hospitalization can require CIGNA authorization.

PacifiCare: Our contracted PCPs act as the single point of contact, resource, and consultation for all health services provided to members, including specialty referrals. We believe this approach promotes familiarity with the member’s medical history and permits a single physician to monitor the member through complete episodes of care. These physicians look at the whole medical picture, as opposed to looking at symptoms from a specialist’s point of view. This method reinforces a strong doctor-patient relationship, provides early detection of medical problems, and ensures that medical referrals are appropriate and necessary.

9.  What criteria are used to authorize or deny specialist referrals, treatments, or tests?

Aetna: There are a variety of reference tools, including Milliman and many that the plan has developed and copyrighted. A medical director must make all denials for medical necessity. In addition, the plan has adopted an external review process for all fully insured members.

Anthem Blue Cross: Referral processes are delegated to PMGs IPAs. Provider groups are required to use evidence based utilization management criteria, which has been reviewed annually, approved, and adopted for use by their utilization management committee. If Anthem Blue Cross has a medical policy concerning a specific service, test or procedure, the provider groups are required to follow these policies.

Blue Shield: In addition to their own medical necessity criteria, Blue Shield’s contracted IPA/medical groups refer to the Blue Shield Medical Policy and HMO Benefit Guidelines in authorizing/denying specialist referrals, treatments, or tests. The IPA/medical groups’ criteria must be consistent with Blue Shield’s criteria. Blue Shield uses nationally recognized utilization management criteria, such as InterQual Criteria, to determine medical necessity. Medical literature and patient clinical information are also considered.

CIGNA: CIGNA uses Milliman care guidelines. In addition, CIGNA continually assesses developing technologies using evidence-based medicine and independent expert opinion to develop coverage positions, which are posted on the Internet. All medical decisions are based on clinical guidelines. A physician who is knowledgeable in the area makes the decisions.

Health Net of CA: A Health Net member’s participating physician group (PPG) authorizes all treatment, including specialty referrals for testing, treatment, surgery or hospitalization. A member with a chronic condition or disease requiring continuing specialized medical care is eligible for a standing referral to a specialist. A standing referral allows extended access to a specialist for members with life-threatening, degenerative or disabling conditions. The member’s PCP will refer the member to practitioners who have demonstrated expertise in treating a condition or disease involving a complicated treatment regimen requiring ongoing monitoring.

PacifiCare: We require our provider groups to demonstrate the use of appropriate medical management guidelines. We conduct annual reviews of written procedures and consider the following factors for cases that may not meet criteria: age, co-morbidities and complications, response to treatment, the psychosocial situation, and home environment. We use written criteria based on sound clinical evidence and specific procedures for applying the criteria to make utilization decisions. In addition, we apply objective and evidence based criteria and consider individual circumstances and the local delivery system. We require our delegated providers to do the same.

10.  Are you monitoring the length of time for referral authorizations? What are you doing to reduce or eliminate delays?

Aetna: Yes, timeliness of decisions is part of a monthly case assessment audit. Turn-around time is monitored by annual audits and quarterly report submissions. Audits and training are used to address performance gaps.

Anthem Blue Cross: PMGs/IPAs must have systems to monitor utilization review activities. Anthem evaluates compliance with standards for regulatory and accrediting timeliness through annual on-site audits. If there are issues with non-compliance, the provider group is educated at the audit and a corrective action plan is requested. A subsequent audit is conducted in 180 days. Anthem also monitors this process through the member grievance process. Anthem and the PMGs/IPAs further evaluate this through provider satisfaction surveys. This survey is administered annually to a randon sample of PMG/IPA members. The results are included in a medical group quality score which is used with other quality metrics as the basis of a quality bonus. Groups with higher scores receive larger bonuses.

Blue Shield: Blue Shield’s contracted IPA/medical groups are responsible for the timeliness of decisions about referral authorization. They must comply with our standard of two working days to get all necessary information for a non-urgent referral, one calendar day for urgent referral/treatment, and immediately for emergency care. Blue Shield-delegated oversight consultant nurses perform annual audits to ensure that standards for timeliness are met. An IPA/medical group that does not meet timeliness standards for utilization management must take corrective action.

CIGNA: CIGNA works closely with physicians and medical groups to expedite referrals and measures member satisfaction regularly with the referral process.

Health Net of CA: Yes, it is done through access audit reports, member satisfaction surveys, HEDIS indicators, physician profiles, medical group comparison reports and member complaints. Delays are remedied through corrective action.

PacifiCare: Yes. We perform annual utilization management assessments of delegated providers, including re-audits as needed to ensure provider groups are compliant with our standard. As part of the assessment we review a random selection of up to 30 pre-service denials, 30 concurrent denials and 30 retrospective denials (primarily emergency room services) to allow for a full review of authorization patterns, including those for authorizations for referrals. We review for evidence of the following:
• Physician review of denial for medical appropriateness
• Alternative direction for follow-up care when service is denied
• Timeliness of non-urgent, urgent and concurrent decisions
• Timeliness of notification to the practitioner
• Timeliness of written notification to the member and to the practitioner
• Provision of expedited appeal information for urgent or concurrent denial to the Member and to the practitioner
• Consistent gathering of relevant clinical information to support utilization management decision making
• Notification to practitioner of reviewer availability to discuss decision
• Clear documentation of the reason for denial in the written notification, including specific utilization review criteria or benefit provisions used in the determination
• Inclusion of information about the appeals process in all denial notifications

Additionally, we require provider groups to submit for our approval all changes to their denial notices prior to issuance. The groups must submit utilization data at least quarterly. Where organized provider groups are the predominate system of care, we monitor quarterly provider information related to under-utilization, appeals and grievances to identify trends in delays or denial of service.

11. What are the criteria and processes for getting a referral to a specialist outside of the MG/IPA or plan?

Aetna: Out-of-plan approval is done if one or more of these criteria are met: required services are not available in the group or network; required non-emergency service is available in the plan option, but is not accessible in reasonable timeframe; or the patient is a new member and was receiving services from an out-of-plan provider (reviewed on case-by-case basis).

Anthem Blue Cross: If a needed specialty is not available in an a signed PMG/IPA, the provider group arranges for the member to be seen by the appropriate specialist. The Anthem Transition Assistance Unit facilitates second opinions outside of the provider group when the member or provider requests it and a PCP or specialist in the provider group’s network has already seen them.

Blue Shield: Personal physicians can refer patients out of the network with the agreement of the IPA/medical group or authorization from Blue Shield. Blue Shield is involved in referrals only when an IPA/medical group wants to refer out-of-network and not be financially responsible. The IPA/medical group would then contact Blue Shield for authorization and request that Blue Shield be financially liable.

CIGNA: A primary care physician can request referral for service outside the medical group or plan when the service is not available. Members can also contact CIGNA directly to arrange a second opinion.

Health Net of CA: Health Net’s contracted participating physician groups (PPGs) are delegated to provide member care, including all specialty referrals. If the PPG does not have a particular kind of specialist with which it contracts, the PPG is still responsible to find a specialist out of its network for the member. The PPG has the financial responsibility for paying the specialist. The PPG may deny the request if it has a particular kind of specialist within its network and a member requests to see a specialist that is outside the PPG’s network. The member has the option to appeal the denial with Health Net.

PacifiCare: Our contracted provider network is comprehensive and provides a qualified specialist for every covered benefit. When a service is not available within a member’s provider group, the member receives a referral to a qualified provider or specialist outside the member’s provider group, but contracted with PacifiCare. Either the provider group or we will assess the medical necessity for these requests and authorize care as necessary.

Referrals to non-contracted providers rarely happen, generally only in emergencies or for specialized services not available through a contracted provider; therefore, we do not track this statistic.

12. Which complementary medical disciplines are covered or will be covered?

Aetna: Chiro rider. Acupuncture is covered when administered.

Anthem Blue Cross: We cover physical therapy, occupational therapy and outpatient speech therapy .  Physical therapy and spinal manipulation may be performed by a licensed chiropractor if in the scope of their license.

Blue Shield: Complementary medical disciplines available include: substance abuse rider; chiropractic care rider; acupuncture services; specialty dental care coverage; discount programs for chiropractic, acupuncture, and massage therapy; and vision supplies and services. Resources are available to members on the phone, online ( and in person including nurses and counselors and health-management programs for chronic diseases, childbirth, newborns, and recovery from surgery.

CIGNA: When medically necessary, some members can access acupuncture and chiropractic services as a component of short-term rehabilitation. Other benefit plans offer homeopathic and naturopathic services as riders. In addition, CIGNA’s Healthy Rewards program offers members alternative/complementary medicine and other health related discount programs for the following services: acupuncture, chiropractic services, fitness club membership, hearing care/instruments, laser vision surgery, massage therapy, vitamins, herbal supplements, non-prescription medications, Mayo Clinic books on health, and smoking cessation programs.

Health Net of CA: Health Net offers chiropractic and acupuncture benefits as supplemental benefit riders to its traditional medical benefit plans. The riders may be purchased with the HMO and POS medical plans. They are designed to complement the benefits plans, rather than replace them. The rider is only available to groups. A variety of benefit plan designs is available, including chiropractic only, acupuncture only, and a combination of chiropractic and acupuncture.

PacifiCare: PacifiCare of California does not offer alternative medIcine benefits as part of its design. However, all members have access to discounts on alternative medicine benefits through an affinity program. Employer groups can purchase supplemental plans that cover acupuncture and chiropractic benefits.

13. Do you cover blood tests for prostate cancer for non-symptomatic men? If so, at what age?

Aetna: Yes, age 40+.

Anthem Blue Cross: Yes, preventive care guidelines address the appropriate frequency of different testing schedules. We cover prostate cancer screenings including, but not limited to, prostate specific antigen (PSA) testing when medically necessary and consistent with good professional practice, regardless of age.

Blue Shield: Yes, regardless of age.

CIGNA: Yes, for men over 50 annually or more frequently when medically indicated.

Health Net of CA: Yes, as determined by the PCP.

PacifiCare: Yes, these blood tests are covered benefits. The member’s primary care physician determines the necessity of this and all other blood tests.

14. Do you cover mammograms for women with no history of breast cancer?

Aetna: Baseline at age 35, annually 40+.

Anthem Blue Cross: Yes, Anthem Blue Cross covers Preventive Services for our members in accordance with U.S. Preventive Services Task Force Guidelines.

Blue Shield: Yes, with a personal physician referral.

CIGNA: Yes, for women over 40 annually or more frequently as directed by their physician.

Health Net of CA: Yes, typically, every one to two years from ages 40

to 65+, but the PCP may authorize mammograms at his or her discretion.

PacifiCare: Yes. Mammograms for women with no history of breast cancer are covered in accordance with U.S. Preventive Services Task Force Guidelines.

15. Do you have an open drug formulary?

Aetna: Yes.

Anthem Blue Cross: Yes, Anthem offers a comprehensive formulary with various benefit designs. Options may include an open formulary, a closed formulary, and a selective or partially closed formulary.

Blue Shield: Blue Shield’s Access+ HMO plans include a two tier (generic and brand) closed formulary benefit that requires prior authorization of non-formulary drugs or a three-tiered open formulary benefit.

CIGNA: We traditionally use a closed drug formulary. However, employers can choose a three-tier or two-tier pharmacy plan if specified and agreed to in the contract.

Health Net of CA: Health Net offers a recommended drug list, which can be closed, open, or three-tier (generic, brand, and non-recommended).

PacifiCare: No, we use several managed formularies at different tier levels, but we do not offer an open formulary.

16.  If a closed formulary, what happens if a non-formulary drug is necessary?

Aetna: Not applicable.

Anthem Blue Cross: Non-formulary drugs may be approved upon review through a prior authorization process when a medical need exists.

Blue Shield: The physician can request prior authorization of nonformulary drugs for medical reasons, such as documented treatment failure or adverse drug reactions to formulary drugs. The three-tier HMO plan provides the same coverage as does a two-tier benefit, but it includes coverage for non-formulary brand name drugs. In all plans, select formulary drugs, non-formulary or drug dosages/quantities require prior authorization for medical necessity.

CIGNA: The member or their physician can ask for an exception to get a non-formulary drug. CIGNA HealthCare’s clinical staff reviews the request.

Health Net of CA: Drugs not listed in our recommended drug list may be covered through our prior approval process when medically necessary, unless specifically excluded or limited in the Evidence of Coverage. The normal process is to have the prescribing physician provide the medical reasons for the non-formulary medication. While physicians can prescribe non-recommended drug list medications, some drugs may require prior authorization to determine appropriate medical indications. If a medication is denied, members are notified that they are entitled to appeal the decision according to the procedures set forth in the Evidence of Coverage. Every member can appeal a non-formulary, non-covered request. Members with a three-tier benefit can get drugs that are not on the recommended drug list at a higher co-payment.

PacifiCare: Medically necessary non-formulary medications can be approved through our preauthorization exceptions process.

17.  Do you have an experimental/investigative exclusion? If so, how does it work?

Anthem Blue Cross: Yes, however, all treatment decisions are based on medical necessity as it applies to a member’s condition. A request would be denied for a procedure that is considered experimental or investigative for a member whose condition has no unique or discerning characteristics. The member can request an independent medical review if we determine that a requested procedure does not meet our medical necessity criteria. The IMR is administered through the State Department of Managed Health Care and the decision is binding on the healthplan. Our Corporate Medical Policy and Technology Assessment Committee evaluate new procedures for incorporation into benefit plans.

Blue Shield: Yes, the plan has adopted BlueCross BlueShield Association technology assessment criteria to evaluate whether technology improves health outcomes. Blue Shield’s formulary does not cover drugs that are considered experimental or investigational or that are not recognized in accordance with generally accepted medical standards.

CIGNA: CIGNA medical directors make evidence-based decisions about an experimental/investigational request based on medical literature, expert opinion, and the facts of the case. Coverage positions are developed regularly, which assess emerging technologies. They are posted on the Internet. Providers can access CIGNA HealthCare’s Web-based provider portal to request reviews of technologies for which coverage positions have not yet been developed. CIGNA HealthCare also uses a formal independent expert review process when appropriate.

Health Net of CA: Health Net does not cover experimental or investigational drugs, devices, procedures, or therapies. The member can request an independent medical review of Health Net’s decision from the California Department of Managed Health Care if Health Net denies or delays coverage for a requested treatment on the basis that it is experimental or investigational. The member can request the review if the following criteria are met:
• The member has a life-threatening or seriously debilitating condition.
• The member’s physician certifies to Health Net that the member has a life-threatening or seriously debilitating condition for which standard therapies have not been effective or are otherwise medically inappropriate.
• There is no more beneficial therapy covered by Health Net.
• The member’s physician certifies that the proposed experimental or investigational therapy is likely to be more beneficial than available standard therapies. As an alternative, the member may submit a request for a therapy that is likely to be more beneficial than available standard therapies based on documentation presented from the medical and scientific evidence.

PacifiCare: Yes. We have an experimental/investigative exclusion. Experimental and/or investigational procedures, items and treatments are not covered unless required by an external, independent review panel as described in Section Eight of the Combined Evidence of Coverage and Disclosure Form. Unless otherwise required by federal or state law, decisions as to whether a particular treatment is experimental or investigational and therefore not a covered benefit are determined by a PacifiCare medical director, or his or her designee. For the purposes of the Combined Evidence of Coverage and Disclosure Form, procedures, studies, tests, drugs or equipment will be considered Experimental and/or Investigational if any of the following criteria/guidelines is met:
• It cannot lawfully be marketed without the approval of the Food and Drug Administration (FDA) and such approval has not been granted at the time of its use or proposed use.
• It is a subject of a current investigation of new drug or new device (IND) application on file with the FDA.
• It is the subject of an ongoing clinical trial (Phase I, II or the research arm of Phase III) as defined in regulations and other official publications issued by the FDA and Department of Health and Human Services (DHHS).
• It is being provided pursuant to a written protocol that describes among its objectives the determination of safety, efficacy, toxicity, maximum tolerated dose or effectiveness in comparison to conventional treatments.
• Other facilities studying substantially the same drug, device, medical treatment or procedures refer to it as experimental or as a research project, a study, an invention, a test, a trial or other words of similar effect.
• The predominant opinion among experts as expressed in published, authoritative medical literature is that usage should be confined to research settings.
• It is not Experimental or Investigational itself pursuant to the above criteria, but would not be Medically Necessary except for its use in conjunction with a drug, device or treatment that is Experimental or Investigational (such as, lab tests or imaging ordered to evaluate the effectiveness of an Experimental therapy).

The sources of information to be relied upon by PacifiCare in determining whether a particular treatment is Experimental or Investigational, and therefore not a covered benefit under this plan, include but are not limited to the following:
• The Member’s medical records.
• The protocol(s) pursuant to which the drug, device, treatment or procedure is to be delivered.
• Any informed consent document the Member, or his or her representative, has executed or will be asked to execute, in order to receive the drug, device, treatment or procedure.
• The published authoritative medical and scientific literature regarding the drug, device, treatment, or procedure.
• Expert medical opinion
• Opinions of other agencies or review organizations, e.g., ECRI Health Technology Assessment Information Services, HAYES New Technology Summaries or MCMC Medical Ombudsman.
• Regulations and other official actions and publications issued by agencies such as the FDA, DHHS and Agency for Health Care Policy and Research AHCPR.
• A Member with a Life Threatening or Seriously Debilitating condition may be entitled to an expedited external, independent review of PacifiCare’s coverage determination regarding Experimental or Investigational therapies as described in Section Eight: Overseeing Your Health Care, Experimental or Investigational Treatment.

18. Which requested procedures are denied most frequently based on experimental investigative or not medically necessary exclusions?

Aetna: This information is not readily available.

Anthem Blue Cross: N/A

Blue Shield: The following are the most frequently denied procedures due to the absence of medical necessity or because they are considered experimental/investigational:
• Bariatric surgery – morbid obesity surgery
• Reduction mammoplasty
• Treatment of varicose veins
• PET scan of the breasts
• MRI of the breast

CIGNA: This data is not available.

Health Net of CA: The most frequently denied requested procedures
are those that are not FDA approved/accepted in the medical community as standard, safe and effective.

PacifiCare: This information is not available. We do not track the
number of most frequently denied investigational/experimental or not medically necessary procedures. We do track appeals and grievances. If a member appealed a denial, and it was due to one of the above reasons, we may be able to provide that procedure; however, it would not apply to our book of business.

19. What is the standard hospitalization for vaginal and Caesarean births?

Aetna: The physician determines it.

Anthem Blue Cross: Four days for Ceaserian

Blue Shield: Two days for a normal birth and four days for a


CIGNA: Typical hospitalization is at least 48 hours for normal vaginal
delivery and at least 96 hours for a Caesarian section. But, this can be modified based on the physician’s recommendations.

Health Net of CA: Standard hospitalization for normal birth is two
days and four days for Caesarean birth

PacifiCare: The average length of stay is two days for a normal birth
and four days for a Caesarean.

20. How many hospital days are utilized in a year for every thousand members?

Anthem Blue Cross: N/A

Blue Shield: 181.0 inpatient days per 1,000 members, as reported in Blue Shield’s 2010

Health Net of CA: 2009: 215.7 days per 1,000 HMO members

PacifiCare: Our total in-patient utilization in 2008 was 160.92 per 1,000 members.

21. What are your loss ratios, administration/medical?

Anthem Blue Cross:

Blue Shield: For 2009, Blue Shield’s loss ratio was 11.5% for administration and 86.4% for medical.

Health Net of CA: In 2009, the medical care ratio was 86.86% and
the administrative loss ratio was 10.00%

PacifiCare: As of December 31, 2009, our commercial medical loSs ratio for PacifiCare of California is 85.3 percent. The administrative ratio is 7 percent.

22. Is your plan NCQA accredited?

Aetna: Yes, Aetna Health of CA Inc is accredited and has got Quality Plus distinction in Care Management, Physician and Hospital Quality.

Anthem Blue Cross: Anthem Blue Cross and Anthem Blue Cross Life and Health Insurance Company have achieved a Commendable Accreditation rating from NCQA. NCQA awards a status of Commendable to organizations with well-established programs for service and clinical quality that meet rigorous requirements for consumer protection and quality improvement.

Blue Shield: Yes, the National Committee for Quality Assurance awarded Blue Shield its highest rating of Excellent Accreditation for Commercial HMO/POS products.

CIGNA: Yes, CIGNA HealthCare has an excellent accreditation designation.

Health Net of CA: Yes. Commercial HMO and POS and Medicare lines of business have received the excellent accreditation status from the National Committee for Quality Assurance (NCQA), and Health Net’s PPO received the “Commendable” accreditation status.

PacifiCare: Yes. PacifiCare of California maintains an excellent accreditation rating.

23. What is your ratio of PCPs vs. specialists?

Aetna: 1/3.7

Anthem Blue Cross:

Blue Shield: 1/1.82

CIGNA: 1/2.72

Health Net of CA: 2010: 1 to 2.7 specialists

PacifiCare: As of June 30, 2009, our ratio of PCPs to specialists is 1 to 3.1.

24. What is your ratio of members to PCPs?

Aetna: 31.1/1

Anthem Blue Cross: 1:2

Blue Shield: 98.73/1

CIGNA: 35/1

Health Net of CA: 2010: 81 members to 1 PCP

PacifiCare: As of June 30, 2009, our ratio of members to PCPs is131 to 1.

25. Does your contract include binding arbitration?

Aetna: Yes.

Anthem Blue Cross: Yes, our HMO contracts include binding arbitration language.

Blue Shield: No, Blue Shield members are not subject to binding arbitration and there is no arbitration provision in the Evidence of Coverage (EOC) provided to members. However, the majority of our contracts with providers include binding arbitration to resolve disputes.


Health Net of CA: Yes

PacifiCare: Yes. Our contract includes binding arbitration.

26. How often can members change their PCP at will?

Aetna: There is no limit.

Anthem Blue Cross: Our HMO member may change to another PCP without restriction. Members may change to a PCP at another PMG/IPA by completing a membership change form and submitting it to their employer, or by calling customer service directly. Because we are concerned with continuity of care, members cannot switch medical groups during a “course of treatment;” however, based on individual need, changes to a PMG assignment can be made effective the first day of the following month after the request is made. Please note: members may only change to a medical group that is within 30 miles of their residence or work address.

Blue Shield: Access+ HMO members can change their personal physician without cause once a month. This change is effective the first day of the month following notice of change.

CIGNA: There are no specific limits. However, we encourage our members to stay with one primary care physician to ensure more effective care management. We also recommend that our members do not change their doctor while in the middle of care to the extent possible. Otherwise, a member can change their primary care physician effective the first of the month following the request.

Health Net of CA: Members may change PCPs within a physician group or from one physician group to another once per month.

PacifiCare: Members may request a change of individual provider or provider group at any time, for any reason. Requests received between the first and the 15th of a month take effect on the first day of the next month. Requests received between the 16th and the end of the month take effect on the first day of the second month. Members must select participating providers accepting new patients within 30 miles of their home or work and can identify which providers are accepting new patients by calling our Customer Service department, looking in our provider directory or visiting our Web site.

27. Do you offer a performance guaranty, such as employees will be on the computer by a certain date or have ID cards by a certain date, for example?

Anthem Blue Cross: Yes, we can offer standard performance guarantees to our clients; guarantees may also be customized on a case-by-case basis, based on client size thresholds.

Blue Shield: Yes, we offer performance guarantees for groups with qualifying minimum subscribership.

CIGNA: Yes, in most instances, we can work with a company to develop appropriate performance guarantees.

Health Net of CA: Yes, Health Net of California negotiates performance guarantees with clients based on our Corporate Performance Standards, which are derived from marketplace expectations balanced with internal administrative capabilities. An employer group must have and maintain after the plan’s effective date a minimum of 1,000 subscribers in a Health Net of California plan to qualify for performance guarantee consideration. Once the client has been deemed eligible for performance guarantee consideration, Health Net is willing to discuss and negotiate the specifics of a performance guarantee package including appropriate target levels for standards of concern
Health Net of California provides customers with specific performance guarantees in the area of claims administration, including processing turnaround time (measured within 30 calendar days) and transactional accuracy (i.e. financial, payment, coding and overall). In addition to claims administration, Health Net of California offers corporate performance standards that span all aspects of our business in the areas of: implementation (i.e., identification card production, timeliness and accuracy), member services, provider network, medical management, member satisfaction, customer reporting, and HEDIS reporting. All products can potentially be covered, with the exception of our Medicare HMO due to strict guidelines already in place by the Centers for Medicare & Medicaid Services (CMS). All performance standards are evaluated on an annual basis for compliance. An annual performance standard report, including the calculation of any applicable penalties, is produced approximately 90 days after the close of the plan year.

PacifiCare: We may agree to performance guarantees upon approval and if the client meets our standard requirements for enterprise-wide performance standards. However, we typically do not agree to performance guarantees for fully insured groups.

28. When a member moves out of state, is any transition coverage available?

Anthem Blue Cross: The utilization management 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 structured 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: Yes, if a subscriber moves out of state to an area served by another Blue Cross and/or Blue Shield plan, the subscriber’s coverage can be transferred to the plan serving his or her new address. The new plan must offer the subscriber at least its group conversion policy.

CIGNA: Yes, if we offer similar coverage to the account in that state.

Health Net of CA: Yes, through PPO, POS, and indemnity lines of business.

PacifiCare: If a member moves out of the state permanently, they are no longer in our service area and would be terminated from the plan. Members must live within our service area to be eligible for continued enrollment in our health plan. Members traveling outside their PacifiCare service area for a limited time are covered for emergency services. This also applies to out-of-area student dependents who must also maintain a permanent residence within the service area in order to enroll in the health the plan.

Life Insurance

The Value for Executives Is in the Options Group Life Insurance

You should consider group life insurance alternatives when evaluating your client’s life insurance benefits since they are cost-effective, tax-efficient, and can provide portable long-term coverage for the selected class of employee. Employer-paid group insurance generally works well in providing basic coverage for all employees.

However, this coverage can have unintended consequences. All too often, when a company provides a life insurance program for its employees, little thought goes into answering the question, “What is it that we’re trying to accomplish for our employees with our life insurance program?”  Most firms take the easy way out when executives seek more insurance. The response is quite predictable, “We will increase the amount of our group insurance. Why not? It’s inexpensive.”

While group life insurance is a low-cost benefit for a company, it may have disastrous tax consequences for the people it covers, particularly for older employees. Suppose the firm increases the coverage and adds a supplemental program on a pre-tax basis. Without recognizing it, the company may increase the older executives’ tax burden by as much as $2,000 a year and this situation may only get uglier with pending tax increases.

Most employees with large group life insurance death benefits don’t understand how Table 1 costs affect them financially. Table 1 is the government’s method of calculating the taxable premium of employer-provided life insurance, which is commonly known as “imputed income.”

Suppose that an employer provides $950,000 of group insurance for the vice presidents. Under Section 79 of the Internal Revenue code, the first $50,000 of employer-paid group term insurance can be excluded from the employee’s gross income. So the employee would owe imputed income taxes on $900,000 of benefit ($950,000 minus $50,000 equals $900,000).

The executives are being taxed just as if they had received an amount of cash that’s equal to the taxable value of their coverage. Using Table 1 government rates and assuming a vice president is age 55, the value of this $900,000 of employer paid coverage will be the tax on an additional $4,644 of income. Assuming a 40% tax rate, that’s an additional $1,857.60 in tax liability. The tax bite only gets worse as an employee ages.

Since older executives often have an eye toward retirement, there’s a common assumption that higher compensated executives are using highly competent financial planners and have supplemental life insurance strategies in place. But, in most instances, they do not. Typically, they have been spending their time making money for the company and have not taken care of their personal needs for retirement.

In many instances, they are looking for their employer to take care of them. Some executives assume that they can convert their group plan or carry over a portion of it. More often than not, this is not the case or it’s just not practical to do so. So the group product they have come to rely on and have paid high taxes on every year, typically will not be part of this planning after they leave the firm since it is not portable.

The story does not have to end with the retiring executives waking up to the fact that their group life coverage has disappeared. There are life insurance programs that cover executives while they are working and become portable, at current rates, when they retire. Most of these products are cost-effective, portable, and can become part of an executive’s estate plan. These plans usually save the executive from unnecessarily higher income taxes while they are working. Typically, these alternative products fall into three main categories:

Alternative One — Group universal life insurance is a permanent product with a cost of insurance component (term costs) that is usually paid for by the employer and included as income to the executive. Many times, this cost may be lower than the current cost of group insurance coverage. Usually, it will reduce the executive’s current income tax liability significantly. The product also features a cash-value component, which allows the executive to add funds through payroll deduction. Generally, these funds grow on a tax-deferred basis. This product is fully portable at current rates when an executive separates from service.

Alternative Two: Individual universal life insurance that’s written on a guaranteed issue basis is a slightly less popular option. It comes with all the benefits of the group universal life product, but the cost of insurance (term cost) may be significantly less when an employee becomes older.

Alternative Three: convertible term insurance can be written on a guaranteed issue or guaranteed acceptance basis. Guaranteed acceptance means that the executive will be subject to medical underwriting. However, no one can be turned down for coverage. In most cases, this is the least expensive option for the firm and the most flexible for the covered executive. The product can be fully or partially converted to a permanent product with no further medical underwriting.

All three of these programs should be considered when increasing coverage on a select group of employees and executives. Tax savings, portability, conversion options, and cost savings, will go a long way in attracting, satisfying and retaining key talent.


Christopher R. Kristian is executive vice president and managing director of The Westport Group. Chris may be contacted at 781-380-1017 or


Managing Lifestyle through Retirement with Guaranteed Income Solutions

by Daniel Herr
Alot has been written about the state of retirement, particularly with the state of the economy. People are at a crossroads trying to balance saving for retirement and being able to maintain the lifestyle they are accustomed to living. Only 20% of Americans say that they are “very confident” that they will have enough money in retirement to last their lifetime, according to April 2010 EBRI Employee Retirement Confidence Survey. Core expenses that cost $50,000 today are likely to cost two or more times that amount in 20 to 25 years.

Variable annuities with guaranteed income features have been helping people protect their lifestyle in retirement for more than a decade. When these various innovations first came to market, they filled a need to help clients accumulate, protect, and provide for guaranteed retirement income. Over the years, these offerings have evolved into solutions that allow for control and access to assets while providing a lifetime income with protection from inflation and longevity, nursing home benefits, flexibility and tax-efficiencies.

Anyone who is looking to maintain their lifestyle in retirement should be looking at the following factors, which may affect the future. They should have a plan in place:

Market Volatility


No one can predict what the market will do or when it will do it. The market has experienced annual returns ranging from increases of over 50% to declines of 40% or more. Your clients’ income in retirement needs to be predictable and sustainable to remove the angst of having to drastically alter their lifestyle when markets are down. It is critically important to make sure that you’ve guaranteed that your clients will sustain a minimum level of lifetime income in retirement. Guaranteed income solutions will enable your clients to convert their accumulated retirement dollars into guaranteed lifetime income dollars, even long before they are ready to retire.


They’ll need to maintain their purchasing power. The average annual inflation rate since 1944 is 4%. According to a June 2009 report the Bureau of Labor Statistics, the costs of goods and services will double in 20 years if that rate continues. It’s important for clients to plan for their income to keep up with inflation or buying power could erode over time. Guaranteed income solutions on variable annuities have the potential for growth. Clients can sustain and even have the potential to grow their guaranteed income both before retirement and well into retirement. Your clients’ minimum level of income in retirement needs to be able to increase and lock-in growth in order to combat inflation.


Retirements can last 20 to 30 years or more. One member of a 65-year-old couple today has a 50% chance of living to age 92 and a 25% chance of living to age 97, according to The Society of Actuaries 2000 Annuity Tables. Your clients’ income needs to be guaranteed to last as long as they do. Their worst fear is being in good health, but having to drastically change their lifestyle to reduce their income needs in order to make their retirement nest egg last. Variable annuities with a guaranteed income features can turn a portion of their assets into an income stream that is guaranteed to last the rest of their lives.



Everyone needs it and it can be expensive. The costs are rising faster than inflation. Approximately 70% of Americans age 65 or older will need some type of long-term care in their lifetime, according to a January 2010 study by Lincoln Financial. People need to consider the unexpected and protect their assets from being decimated by a critical healthcare event or the need for long-term assistance with activities of daily living. Changes in the tax law with the Pension Protection Act of 2006 now allow long-term care benefits to be made available within annuities, enabling your clients to protect their income against a future long-term care need with an annuity with long-term care coverage.


It can take a big bite out of their income. The top marginal tax bracket is 35%, which is likely to go higher soon, so minimizing their tax burden can help stretch their savings.

For non-qualified accounts, there are variable annuities with guaranteed income solutions that qualify for the annuity tax-exclusion treatment, affording people additional tax advantages while keeping the control, access and flexibility that historically had been forfeited for such benefits.

Providers are offering guaranteed income solutions that don’t require your clients to give up total asset control. These solutions offer equity exposure to provide growth potential while providing an effective hedge against inflation. (Providers may have restrictions on the percentage of equity exposure allowed with guaranteed income solutions.)

They’ll retain control and access to assets even after income is drawn while mitigating longevity risk through a guaranteed lifetime income stream. Additionally, more customized income features provide minimum income guarantees, but also provide for better upside potential for the income. This benefit can be even more important as today’s retirement accounts may be lower due to the fluctuating market. Keep in mind that there are costs associated with these features, but the value is there for those who need this type of protection.

Next Steps

The market is so cluttered with information about guaranteed income features in variable annuities that it can be overwhelming and confusing for clients. Take the time with them to understand the basics:

• Learn about the core value that these solutions can bring.

• Understand the basics of how all of the features work so clients can get the most out of these solutions as they continue to evolve.

• Weigh the costs associated with these guarantees against the benefits they offer.

• Understand which of your clients can benefit the most from a guaranteed income solution that can help maintain their lifestyle through retirement.

• Recognize that a valuable benefit of a variable annuity lies in the strength of its investment line-up and the potential for their assets and income to grow.

Other Considerations

When talking with your clients about guaranteed income solutions, go over some additional considerations they need to be aware of including the following:

• Discuss the importance of finding an insurance company with a history of financial strength.

• Have clients read the product prospectus before investing in any variable annuity with a guaranteed income rider.

• Make sure they understand the expenses, commissions, applicable fees, and surrender charges.


Daniel Herr is AVP, Product Research & Development, Retirement Solutions, Lincoln Financial Group. To get a printed copy of  “LifePlans, Long-Term Care Market Summary,” call 877 Ask-Lincoln.

529 Plan News

IRS Describes 529’s New Tax Benefits

The Recovery Act of 2009 includes two key changes to 529 plans that may help students and parents in 2010, according to a reminder from the Internal Revenue Service. “There are significant expanded credits and deductions in education. Taxpayers are encouraged to review their situation and take the tax benefit that offers the most savings,” said IRS Spokesman Christopher Miller. One change allows 529 plan users to pay for a student’s computer-related technology needs, such as Internet access. The other change means that more taxpayers will be eligible to claim a new education credit to offset cost of college and maybe even get a bigger refund.

The American Opportunity Tax Credit (AOTC) modifies the existing Hope credit for tax years 2009 and 2010, making it available to a broader range of taxpayers.  Those eligible may qualify for the maximum annual credit of $2,500 per student. The AOTC generally offers greater tax savings than existing education tax breaks. Here are some other key features:

• The tax credit is available for the first four years of post-secondary education, expanding on the two years allowed by the Hope Credit.
• Tuition, related fees, books, and other required course materials generally qualify. In the past, books were generally ineligible.
• The credit is equal to 100% of the first $2,000 spent and 25% of the next $2,000. That means the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualified expenses for an eligible student.
• The full credit is available for taxpayers whose modified adjusted gross income is $80,000 or less ($160,000 for joint filers). A smaller credit is available for incomes above those limits, but it eventually phases out. These limits are higher than under the existing Hope and Lifetime Learning Credits.
• Forty percent of the tax credit is refundable, so even those who owe no tax can get up to $1,000 back as a refund for each eligible student. Existing education-related credits and deductions do not provide a benefit to people who owe no tax.

For more information, visit,,id=213044,00.html or call 800-TAX-FORM.

Parents With 529s Save More For College

Parents who have been using 529 college savings plans are more successful savers than those without them, according to a survey by The College Savings Foundation (CSF). Twenty percent of parents with a 529 plan have saved $5,001 to $10,000 compared to 10% of those without a 529; 17% have saved $10,001 to $25,000 compared to 6% of those without a 529; and 15% have saved $25,001 to $50,000 compared to 4% of those without a 529.  While every 529 holder had saved something, 46% of those who did not use a 529 college savings plan had saved nothing at all.

Overall, more parents have increased their savings. Fifteen percent say they are saving more for college this year over last, almost double the 8% from one year ago.

More importantly, those parents are saving significantly more. Twenty-four percent are saving 10% to 15% more than they did last year and 17% are saving 10% to 20% more.

The appetite for student loans appears to be waning. Although student loans still make up the lion’s share of financing vehicles for college, they have dropped in importance. In a question that allowed multiple answers, 62% anticipate using them – down from 71% last year. For more information, visit

“As a result of the economic crisis of the last several years, American families are aware of the need to save more, minimize debt and increase their financial literacy. It is clear from the survey findings that parents are shifting their behavior toward greater and more consistent savings,” said Peter Mazareas, Chairman of CSF. Sixty-five percent of parents of college-bound children are saving for their children’s college education, up from 59% last year. Conversely, the number of parents who weren’t saving at all has fallen to 35% this year, down from 41% in 2009.

Parents’ confidence in their ability to reach their college savings goals is improving, with those who are completely, very, or somewhat confident rising to 66% over 56% last year and those who are not confident falling to 34%, down from 44% last year.

Tips on College Savings

Few parents have a plan on how to pay for their children’s college, according to research conducted by Sallie Mae and Gallup. Sallie Mae offers the following tips to meet the challenge:

• Sallie Mae’s free Education Investment Planner helps calculate future college costs and an age-based estimate how much to save. Families can create a savings goal and set up automatic deposits of $25 or more each month or deposit money annually as budgets allows.

• Most 529 plans are sponsored by a state and many offer a state tax incentive or other benefits to residents. Family members can enroll in any 529 plan, regardless of the state of residence, and the account is easily transferable to another beneficiary who is a family member (as defined in federal tax code) without taxes or penalties. Earnings grow free of federal income taxes as long as withdrawals are used for qualified education expenses, and many states offer residents a tax break or matching grants for investments made.

• Contributions to a 529 can be up to $13,000 for a single person or $26,000 for a married couple filing jointly in a single year without incurring a gift tax. An individual can also make a five year contribution at one time for $65,000 if single or $130,000 if married and filing jointly to a 529 plan account beneficiary without incurring gift taxes in most circumstances.

• Grandparents, aunts, uncles and friends can open a 529 college savings plan on behalf of a future student or, in most circumstances, contribute directly to an existing 529 account. Upromise Investments account holders can easily encourage family members and friends to contribute a gift of college savings through Ugift. Since 2008, more than $12 million has been gifted using Ugift.

• Many companies offer employees the ability to contribute to a 529 plan through ongoing payroll deduction. If not, talk to them about providing company-wide education and a benefit to help employees contribute to a 529 plan through payroll deduction.

• FDIC-insured high-interest savings accounts and Certificate of Deposit accounts from Sallie Mae are low-risk investment options with competitive interest rates, no monthly fees and no minimums. In addition, the High-Yield savings accounts offer the ability to earn extra Upromise rewards to bolster your savings.

• Joining Upromise is free and rewards members for eligible everyday spending with hundreds of participating merchants or making purchases with the Upromise World MasterCard. Earnings can be invested in certain tax-deferred 529 plans, deposited in a high-yield savings account, used to pay down an eligible student loan; or simply used for college or other expenses. Even friends and family can sign up to help.

• Kids as young as school-aged can contribute to their future by setting aside money from a weekly allowance for college. For older kids, suggest depositing money earned baby-sitting, from summer jobs or working part-time into their college savings account.

• Earnings on non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. The availability of tax or other benefits may be contingent on meeting other requirements.

• When you invest in a 529 college savings plan you are purchasing municipal securities whose value will vary with market conditions. Investment returns are not FDIC insured, and carry no bank guarantee, and you could lose money by investing in a 529 college savings plan.

For more information, call 877-529-2980 or visit

T. Rowe Price Cuts 529 Fees

T. Rowe Price and the Education Trust of Alaska reduced fees on their college savings plan, which is available nationwide. Program fees have been cut by nearly one-third to 0.20% and the annual account fee by 20% to $20.

While the annual account fee has been reduced to $20, the fee is waived for customers who do any the following:

• Invest regularly with payroll deductions or Automatic Asset Builder.

• Have $25,000 or more invested for one child.

• Have a total of $75,000 or more invested for multiple children.

Fees will be lowered on the T. Rowe Price College Savings Plan and the University of Alaska College Savings Plan. Both offer enrollment-based portfolios that adjust periodically to reflect the beneficiary’s investing time horizon as they get closer to expected college entry, as well as five Static Portfolios. For more information visit or call 800-369-3641.


Can You Answer The Most Common HSA Objections?

by Kristin Komen

Cost conscious California business owners are asking about alternatives to long-dominant HMOs and PPOs, such as consumer-directed health plans and health savings accounts (HSAs). But, for many employers, the HSA is still a relatively new concept and represents a major change from their current plan.

Not surprisingly, many employers and benefit advisors ask challenging questions and express doubts about the merits of offering a consumer-directed health plan paired with an HSA.

Here are some of the most common objections I hear from business owners and brokers in California and some ideas on how to respond.

1. Objection: HSAs Don’t Really Save Money for Employers or Employees

HSA-eligible health plans typically have lower premiums than do other plans because of their higher deductibles. Premiums for family coverage with an HSA-qualified high-deductible health plan average $2,350 less than family coverage under a PPO plan, according to the 2010 Employer Health Benefits Survey by The Kaiser Family Foundation and Health Research & Educational Trust.

Doug Ramsthel, a benefits consultant with Burnham Benefits in Orange County said, “Employees’ biggest fear is the high deductible. To address their concerns, I emphasize net costs. I use a health cost estimator and other tools that compare the costs of HSAs, HMOs, and PPOs. I also show them hypothetical examples of the overall costs of an HSA for an employee with low, medium, and high claims.”

Today’s heightened focus on cost control can make HSAs an easier topic to broach because their affordability is a key attraction. Fifty-six percent of 500 HSA owners surveyed nationwide last year by OptumHealth said they selected a high-deductible health plan with an HSA because it was the most affordable health insurance choice.

HSAs also offer significant tax advantages and savings for employers and employees. It’s important to get expert advice or consult your state department of revenue for the specific rules since tax treatment of contributions to the accounts differs among states. For example, California taxes eligible HSA contributions. Generally, earnings on the accounts are not included in gross income and distributions from HSAs that are used to pay for qualified medical expenses are excludable from gross income.

2. Objection: HSAs Are Too Complicated for Employees to Understand And Use


It takes education and patience to get employers and employees on board, says benefits advisor Sonny Peach with Professional Choice Insurance in Irvine, Calif.,  “Employers worry that employees will tie up the human resources department all day long with HSA questions.” Peach goes the extra mile to make the process simpler. He hired a staffer to help field questions from his clients and their employees. The staffer also helps with claims processing and explanation-of-benefits forms.  “We walk employees through the process; help set up their accounts with debit cards or checks; and even provide cost comparisons of local hospitals.”

One tried-and-true approach, during open enrollment season, is to focus first on the health plan. Next, introduce the HSA separately as a bank account that enables employees to spend and save for qualified medical expenses. Comparing HSAs to 401(k) plans may be useful for some groups.

Benefit advisors should select HSA custodians and carriers based on the educational and enrollment support they can provide, from printed materials to online support. First-rate, ready-to-go marketing brochures not only relieve advisors from having to create materials themselves, but they also enable polished presentations during benefit enrollment meetings.

3. Objection:  Brokers’ Commissions Will Suffer Since Consumer-Directed Health Plans Typically Have Lower Premiums

“HSAs may indeed mean lower commissions for brokers. But if your client is best served with a high-deductible plan, that’s how you retain the client. This business is about doing what’s best for your client, not just what’s best for your pocketbook,” Peach said.

Peach notes that nearly all of his clients have high HSA participation rates, particularly law firms, accounting firms, consultants and high-tech companies. “And we have a very high retention rate with our clients,” he adds. Peach says that HSAs can give brokers an edge over competitors who sell more traditional high-priced, high-premium plans to a shrinking market.

Ramsthel of Burnham Benefits says, “In this tough economy, employers are desperate to lower their healthcare costs. If you don’t introduce HSAs to your client, someone else will. And then you may find yourself losing more than just the client’s health insurance business to that other broker. If you are truly a benefits consultant, then be one.”

4. Objection: High Deductible Health Plans Are Best Suited for the Young, Healthy or Wealthy. We Employ Mostly Middle-Aged Workers, Some Of Whom Have Heart Aliments And Other Serious Medical Conditions

HSAs primarily serve families and individuals across a wide age distribution, not just those in their 20s and 30s. More than 10 million Americans are covered by HSA-eligible plans including more then 2 million children, according to a 2010 report by America’s Health Insurance Plans.

In 2007, OptumHealth Bank matched more than 300,000 HSA holders, by zip code, to U.S. Census tract data with an average household median income of $69,000. Seventy-five percent of such households have income of less than $84,000 and 25% have income of less than $49,000.

Even those with chronic conditions can benefit from HSAs. Ramsthel, who is 46 years old and a cancer survivor himself, notes that even during his cancer follow-up, when he had substantial medical bills, his healthcare costs actually decreased when he switched from a PPO plan to a high-deductible health plan paired with an HSA. While his deductible increased after making the switch, he saved through lower premiums and no co-payments for doctor visits.

5. Objection:  I’d Rather Keep The Premium Savings Instead of Contributing Them to My Employees’ Accounts


Peach urges his clients to contribute at least some portion of the savings to their employees’ HSAs – first, because of the tax advantages. “A $100 contribution may actually be the equivalent of $70,” he explains. Beyond the tax savings, employer contributions generate good will among employees and motivate them to engage in the plan, he adds.

Statistics bear him out. The presence of an employer contribution significantly affects how many eligible workers will open an account. When an employer contributes, 86% of the employees open an HSA, compared to only 27% without an employer contribution, according to a 2008 United Healthcare and OptumHealth Bank study.

Roughly 40% of firms that offer high-deductible health plans with HSAs contribute to their employees’ HSAs, according to the 2010 Employer Health Benefits Survey by the Kaiser Family Foundation and Health Research & Education Trust. The average contributions are $858 for single employees and $1,546 for family coverage, the survey reported.

Ramsthel offers creative ways for clients to make contributions. For example, he suggests that, instead of contributing $50 per month, business owners make quarterly contributions of $150 to help offset the initial cash flow crunch in the beginning months of the plan year as employees go through the deductible.

Another recommendation is for employers to make the entire year’s contribution up front at the beginning of the plan year to help defray employees’ costs. “After the first year when employees have adjusted to using the HSA, the employer can go back to making monthly HSA deposits,” he says.

Ramsthel and Peach admit that they sometimes run into resistance when discussing HSAs. But the key motivation behind their HSA marketing and sales campaigns is the payoff in client loyalty and retention, as well as the new referrals that HSA sales generate.


Kristin Komen is the regional sales director in California for OptumHealth Financial Services. She can be reached by email at or by phone at 949-251-9540.

OptumHealth Financial Services helps individuals and employers plan, save and pay for health care with tax-advantaged health accounts, benefits and COBRA administration and retiree solutions. It is a division of OptumHealth, one of the nation’s leading health and wellness companies.

Health savings accounts (HSAs) are individual accounts offered by OptumHealth Bank, Member FDIC, and are subject to eligibility and restrictions, including but not limited to restrictions on distributions for qualified medical expenses set forth in section 213(d) of the Internal Revenue Code. This communication is not intended as legal or tax advice.  Please contact a competent legal or tax professional for personal advice on eligibility, tax treatment, and restrictions.  Federal and state laws and regulations are subject to change.



Innovation in Healthcare: It’s the Right Time for Value-Based Insurance Design

by Martin Watson

Healthcare innovation becomes increasingly important as healthcare costs continue soaring to all-time highs. A fresh new idea is critical. Clever ideas are relatively easy to come by. But, to be successful, a new approach needs the right context and has to come at the right time.

Apple famously introduced a handheld computing device in 1993 called “the Newton” — one of the first PDAs. Apple invested several millions of dollars into bringing this innovation to market. By 1998, Newtons entered history as a failure. Today, Apple’s iPad, iPods, and iPhones are historic successes. Starting an industry revolution is game changing and timing is everything.

Early versions of wellness programs focused on helping insureds stop smoking, exercise more, and lose weight. Their impact has been the subject of some debate, but it’s safe to say they have a positive outcome. What’s not to like about healthier more energetic employees? But while worthwhile, these programs have been far from revolutionary.

The next revolution in healthcare has taken off with the emergence of value-based insurance design (VBID). Many in the industry believe that value-based insurance design is the latest and perhaps last opportunity for private health insurance plans to control escalating health insurance costs. And the timing is perfect! This innovative approach, focuses on benefit redesign and proactive health management. It’s becoming increasingly popular among large employers that self-insure their coverage. Recently, however, value-based plans have become available to smaller, fully insured groups.

The most influential industry experts readily acknowledge that recently passed healthcare reforms will increase the cost of coverage, especially for individuals and small employers. Yet most political observers acknowledge that reform won’t get the blame for premium increases – health insurance carriers will. Given this dynamic, it is imperative for the industry to find ways to sustain upward pressure on premiums. Value-based plan designs are a game changer.

Rewarding Healthy Behavior

Value-based insurance design rewards individuals for taking certain steps to manage their health. First generation wellness programs required members to self-report their healthy activities. But today’s value-based insurance design approach requires the insured to see a doctor, answer a health questionnaire, and perhaps complete basic lab tests. Early detection and management of chronic conditions will save money and enable a healthier workforce.

To a significant extent, this approach is the opposite of many of today’s traditional health plans. Instead of discouraging members from seeing their doctors, value-based plans reward people for doing so. And the rewards can be substantial including reduced out-of-pocket expenses and significant contributions to a health incentive account. (A health incentive account is similar to health reimbursement accounts, but it’s funded by the carrier, not the employer).

This carrot approach to value-based plan designs is also a departure from stick-based plans. A recent Hewitt Associates survey reveals that, over the next three to five years, almost half of large U.S. employers will use financial penalties for employees who do not participate in certain health improvement programs or they are already using these penalties. Possible penalties include requiring less healthy workers to pay higher premiums.

These harsher approaches to value-based plans highlight several serious problems. First, employees with chronic conditions may face penalties for conditions they cannot control. Second, this approach likely violates California small group insurance reforms (popularly known as AB 1672) because of the discriminatory reduction in benefits. And lastly, these programs focus only on the sick (the 20% of the population that is already driving 80% of the cost). What about the other 80% of the population? What is being done to ensure they remain healthy? Value-based insurance design acknowledges and rewards the total population and not just those who are chronically ill. It provides proactive healthcare versus existing health insurance plans that focus on reactive sick care.

The carrot approach rewards insureds for completing healthy actions. By focusing on proactive health management instead of becoming fixated on results, all employees have the same opportunity to achieve their reward. Because coverage is enhanced for employees who complete their health actions, there is nothing contrary to the letter or spirit of laws that prohibit discrimination.

The Dollars and Sense of Health

What makes value-based plans timely is that they work. Solaris Health System, a major New Jersey based hospital system, is measuring success with its 2,500 members enrolled in a value-based program. Since 2008, Solaris Health System reduced its costs 17% among diabetic employees who participated in the program. Additionally, 27% more individuals were screened for colon cancer and 20% more women were screened for breast cancer.

Increased screening leads to earlier detection of cancer, resulting in lower treatment costs and greater survival rates. Within the Solaris Health System population, the calculated difference for early versus late stage cancer detection is $66,500 for breast cancer and $169,750 for colon cancer per employee, per year.

Given these results, it is easy to understand the growing popularity of value-based insurance design with companies that offer self-insured coverage. Identifying even 10 pre-diabetics in a population of 2,000 employees (and there are no doubt many more) helps these workers avoid developing Type II Diabetes. Also, the company saves significantly on healthcare costs. The increased productivity of these employees also benefits the company’s bottom line.

The win-win nature of this innovative approach to healthcare should not be understated or underestimated. Employers are not the only ones to benefit from value-based insurance design. Individuals who participate in value-based plans enjoy benefits that are far greater than the financial rewards of reduced out-of-pocket costs and contributions to health incentive accounts. Rewarding employees and their dependents for going to their doctor saves lives and increases their quality of life.

A study published by the Disease Management Association of America in 2009 reveals that 20 million Americans have diabetes – 30% of whom are undiagnosed. Also, 16 million Americans have undiagnosed chronic obstructive pulmonary disease. Early detection of cancers greatly increases the chance of survival and the treatment is far less costly when the diagnosis occurs during Stage I or II versus Stage III or IV.

Taking Innovation to a New Level

Value-based health plans are relatively new, although they have been around long enough to develop an impressive track record. Not surprisingly, innovative employers are gravitating to these plans including companies like Pitney Bowes, Safeway, and the City of Asheville, N.C. But, carriers that bring value-based plans to the market are not just sitting back. They continue to create and to build upon earlier healthcare coverage innovations.

It’s now commonplace to see health savings accounts tied to high deductible plans, but they were exotic rarities not long ago. As with value-based plans, they were first established in the large group market, but migrated into the small business community. Value-based plans are following this adoption arc and will also soon be helping HSA arrangements achieve new heights. The first value-based HSA-eligible high deductible plans were launched August 1 of this year in California. Currently available in Fresno and Monterey, they will become more common as the carrier expands into additional markets later this year.

Innovation is critical and when the timing is right, it will allow us to move mountains and markets. Value-based insurance design will be an increasingly important tool as employers, governments, and families seek to control their healthcare spending. Value-based plans are expanding among large employer groups and have only recently become available to smaller and mid-size employers. But that will change and sooner, rather than later. The ability to reduce healthcare costs while enhancing the health of individual Americans is an innovation that cannot and will not be ignored.


Martin Watson is CEO of SeeChange Health Insurance Company, the first carrier to offer value-based plans on a fully insured basis to small and mid-size companies. On August 1, 2010 the company launched the first value-based HSA-eligible plan in the nation. SeeChange Health’s health plans are currently available in the Fresno and Monterey area with expansion into San Jose and Los Angeles expected later this year. For more information, call 888-237-6650 or email

Voluntary Benefits

Voluntary Benefits in the New Era Health Reform

by Mark Sylvester
As we look at the world of insurance and speculate about what health reform will mean to our business and those we do business with, one thing is clear – for the next few months and possibly years, change will abound and we need to be flexible in order to stay relevant. One thing I think we’ll see from an employee benefits perspective is an increase in voluntary or worksite benefits.

These kinds of benefits aren’t new, but they’ve become more important than ever. As more people get health insurance, expenses will increase. Many health plans are likely to move to higher deductibles to keep coverage affordable, accelerating a trend seen over the past few years. Many insureds who are trying to meet these deductibles still have to contend with lost wages, mortgages, medical bills, and other bills. Even with insurance, consumers may face lasting financial implications if they are diagnosed with an illness or are in an accident. That’s why ancillary benefits like cancer, critical illness, gap, and accident will be an important part of our future.

Worksite benefits have changed quite a bit. When they first came on the scene, many had high premiums and did not always provide much added value when purchased alongside traditional medical and disability plans. These worksite benefits have had to fight against the notion that they were not a necessity or an important part of overall coverage.

In recent years, the industry has become more developed. Many versions of these products have been created and the quality has improved, over time, while the premiums have decreased. And as new versions continue to be rolled out, we have seen them increase in value and become a more useful and important part of overall benefit packages.

These worksite coverages provide a cash-in-your-pocket benefit. They usually work pretty simply: If X happens to you, you receive a payout of X. That money can be used to pay for expenses that may not be covered under traditional medical insurance, like travel associated with treatment. But more importantly, these coverages provide cash that can be spent on whatever the insured sees fit.

Cancer insurance is a coverage that most people are probably familiar with, especially those who are middle-aged. One in two men and one in three women will be diagnosed with some form of cancer in their lifetime, according to the American Cancer Society. And as better treatments are developed, survival rates continue to go up. However, these treatments come at a cost. Outside of just the medical expense, there’s travel, accommodations, and usually a spouse who takes time off work to accompany. This could mean up to two lost paychecks as bills, medical and otherwise, mount. Medical insurance won’t pay for all of these additional costs, which is where cancer insurance becomes important.

The same goes for critical illness insurance. There are many of the same costs associated with an illness such as heart attack or stroke. Rehabilitation, medical equipment and therapy can add up and critical illness insurance can provide an additional safety net. It’s almost the opposite of life insurance; it provides for you and your family in the event that you live through an illness to help with treatments and lifestyle changes.

Accident insurance is a great fit for young, active individuals or someone with young kids. Trips to the emergency room can happen and accident insurance will pay a lump sum per incident, such as ambulance trip, x-rays, and follow up visits. The cumulative aspect of this type of insurance is very valuable for people who make frequent visits for things like broken bones, fractures and stitches.

Many of these options also offer portability, so employees can keep the coverage even if they switch jobs. This is a great benefit since it ensures their insurability. A guarantee issue is often available and dependents can be added. From an employee standpoint, these all offer additional value.

The popularity of these products has grown over the past few years and I think we will see that trend continue as the industry continues to change. Consumers are beginning to see the need for them as they witness colleagues, friends, and loved ones survive cancer and other illnesses and then go on to deal with the financial implications. Today’s worksite benefits provide a tangible value -– something brokers can be confident selling.

Most of us have read countless articles, listened to podcasts, attended seminars, and spent nights at home thinking about healthcare reform and how it will affect our businesses. Everyone will eventually be affected in some way — from large insurance companies, to small businesses, to brokers. The challenge is to figure out what changes we need to make to our revenue models to not only stay in business, but also to continue to grow. Healthcare reform will present new opportunities for growth and opportunities for change. No one has all the answers, so it is important to prepare for our future and stay up to date on new developments.

One of the things I think will affect how brokers do business is the minimum-loss ratio. Beginning next year, medical carriers must spend the majority of each dollar on healthcare, leaving less for profit – 85% of each dollar in the large group market and 80% in the small group and individual market.

Because of this minimum-loss ratio, I think insurance companies will restructure their commission rates. Brokers who used to focus primarily on health insurance may not see the same commissions. They will need to look for other ways to supplement health insurance sales in order to keep their businesses profitable.

We know that our industry will see much change in the coming months and years, which will affect all of us somehow. In order to continue doing business, we must consider new products, new distribution models, and new ways of doing things. For brokers, exploring how these benefits fit into their business plan can be a great solution. q


Mark Sylvester is vice president, Sales, at Assurant Employee Benefits. He can be reached at  Assurant Employee Benefits is the brand name for insurance products underwritten by Union Security Insurance Company and for prepaid dental products provided by affiliated prepaid dental companies.  In New York, insurance products are underwritten by and prepaid dental products are provided by Union Security Life Insurance Company of New York, which is licensed in NY and has its principal place of business in Syracuse, NY.  Plans contain limitations, exclusions, reductions and restrictions.  Contact Assurant Employee Benefits for costs and complete details.


Healthy Vision for a Healthy School Year: Seeing Opportunities in Vision Coverage

by Patrice P. Bergman, CEBS
School is back in session and as parents return to the routine of packing school lunches and dropping off the kids at school, there’s one thing they shouldn’t forget to put on their checklist: scheduling an annual eye exam for their child.

Something as simple as a yearly eye exam can catch vision and other health problems early before they become bigger issues. Carriers that offer comprehensive vision benefit plans often cover annual eye exams at little or no cost as well as affordable frames and contact lenses to improve visual acuity. As a broker, you can help ensure that employees’ dependents have an eye-healthy start to the school year. You can do this by discussing the importance of proper vision care and available options with your clients’ benefit administrators.

Invisible Learning Disabilities

The American Optometric Association reports that many children don’t receive annual eye exams, and as a result, vision problems are commonly misdiagnosed as Attention Deficit Disorder (ADD) or Attention Deficit Hyperactivity Disorder (ADHD). What’s more, 60% of students identified as problem learners have undetected vision problems.  Key symptoms that a child may be suffering from poor vision include having trouble finishing written assignments, losing their place while reading, having a short attention span when doing homework, and getting lower grades than expected.

A vision-screening test is no substitute for an eye exam. Schools often provide vision screening tests for children, but the National Association of Vision Care Plans found that school screenings, which generally only test focusing abilities, can detect vision problems in only 20% to 30% of children.

A Glance at Vision Coverage Options

As with medical plans, there are several types of vision coverage options in the market:  Complete managed care vision plans, plans that offer streamlined options in the level of coverage, and discount vision plans.

Complete vision plans typically offer comprehensive benefits that include routine examinations and eyewear (lenses and frames) with a choice of deductibles and frequency of services. Many can be written with health coverage or on a stand-alone basis, on a contributory basis, or on a voluntary basis.

Some carriers also offer eye exam-only and material-only plans to offer flexibility and help employer groups save money. For example, an eyewear-only plan can help eliminate the expense of duplicate examination coverage because some HMOs and PPOs already provide coverage for routine eye examinations.

Under a discount vision plan, employees and their dependents have access to a network of eye care professionals who have agreed to offer services at lower than retail prices, including services for eye exams, prescription lenses, and frames. The employee pays the entire cost of the service at the reduced rate outlined by the network provider. Coupled with a complete vision plan, a discount vision plan can make a second pair of glasses even more affordable.

Seeing Opportunities in Vision Coverage

There are four key selling points for brokers offering vision plans to their clients. First, let the client know that, by offering vision plans to employees and their dependents, they could potentially see a return of $7 for every $1 spent on the plan through a combination of direct cost savings, productivity enhancements, and improved wellness.

Second, brokers should provide plan options to their clients with access to a large network of vision care providers, including boutique eye wear shops and retailers with convenient evening and weekend hours. That way, employees can easily find an eye doctor near their home, work, or child’s school.

Third, brokers should identify plans that offer rich benefits. Kids can be picky, so highlighting plans with rich benefits for frames, lenses, and access to major retail chains will give employees and their kids more options in finding the perfect pair of glasses. Plans that offer coverage for impact-resistant polycarbonate lenses are a good choice for kids who play sports. Adding anti-reflective, photochromic, or polarized treatments also helps filter damaging ultraviolet radiation and glare. With access to a comprehensive vision plan, members can sometimes save up to $300 or more on frames, additional protective lenses, and common vision correction coverage. Brokers should also point out plans with low or zero-cost co-pays for eye exams, make vision coverage even more affordable.

Lastly, let employers know that they have the option of offering vision plans as part of their employee benefit package on a contributory basis or as a voluntary benefit that employees can elect to purchase with no employer contribution required. By offering benefit packages with an array of vision plan options for employees and their dependents, employers can be seen as the employer-of-choice when it comes to recruiting and retaining employees.

Looking Beyond

When choosing a comprehensive employee benefit package, vision coverage sometimes gets a secondary focus. However, it’s important for brokers to help clients see how proper vision care plays an important role in employees’ overall health and can reduce an employer’s total health costs in the long run.  It’s also key for employees to understand the importance of starting the preventive screenings early on in life.  Such early detection for children provides a clear way brokers can help employees and their dependents start the school year off right and focus on a brighter future.


Patrice P. Berman, CEBS, is the director of sales and product strategy for Specialty Benefits at Blue Shield of California, a non-profit health plan dedicated to providing Californians with access to high quality care at a reasonable cost. Blue Shield of California is one of the largest provider networks. Ms. Bergman can be contacted at For more information, visit

Life Insurance

Helping Mom Get as Much Life Insurance as Dad: Closing the Gender Gap

by Howard Koransky

Working parents with minor children have more life insurance coverage on Dad than on Mom, according to MetLife’s 8th annual Employee Benefits Trends Study. The gender gap is this:

married men with children under 18 have, on average, five times their annual household income in coverage if they have life insurance coverage at all. On the other hand, married women with minor children have only three times their annual household income if they have life insurance coverage. This gender gap is particularly striking since men and women express equal concern about the financial effect of their own premature death on their families – six out of ten fathers and mothers say they are very concerned.

These concerns are not unfounded. The premature death of a husband or wife can have a long-term financial effect on the surviving spouse. MetLife’s Study of the Financial Impact of Premature Death surveyed 1,000 widows and widowers and found that even five to seven years after their loss, 36% say they remain financially vulnerable. About three-quarters of beneficiaries did not feel that the amount of the life insurance proceeds they received amply met their needs.

Closing the Life Insurance Gender Gap

The Employee Benefits Trends Study found that only half as many mothers as fathers consult with anyone about their personal financial matters, which is likely to be a contributing factor to this gap. The important thing is to close it. The workplace can be leveraged more effectively as part of the solution.

Helping employers promote the need for adequate life insurance coverage and helping them design a comprehensive offering are two steps brokers and consultants can take to enhance the value of the benefit program while addressing the larger societal issue of underinsurance. Here are three basic steps for employers to consider:

1) Offer employees access to purchasing supplemental life insurance.

2) Educate employees about the role life insurance plays in their financial safety net and family plans.

3) Communicate effectively about the benefit and how to take advantage of the workplace offering.

Year after year, the study has shown a strong correlation among effective benefit communications, improved benefit satisfaction, and improved job satisfaction. For example, working, married women with children under 18 are almost half as likely as working fathers to say their employers’ benefit communications educate them effectively on their options – 26% of mothers compared to 48% of fathers. The study also found that only 38% of married women with dependent children are very satisfied with their workplace benefits compared to 56% of their male counterparts. What messages might resonant more with women? One suggestion is to use “people like me” scenarios. A woman who is balancing career, partner, and children might read benefit materials further if an illustration depicts someone like her.

The study did not ask employees about how benefit communications affect their participation in an employer’s supplemental life insurance program, but the following statistics may have some parallels. Among employees with access to a wellness program, those who think that their benefit communications are effective are nearly twice as likely to participate compared to employees who think the communications they receive are ineffective.

Communication Tips

Communications that clearly explain and reinforce the relevance and value of benefits to each employee, in their preferred medium, may help optimize the value of a benefit program for both employers and employees. One of the most important things to tell clients is that enhancing benefit communications is not necessarily a question of spending more money, but rather, leveraging tools and tactics more effectively.

Here are some ideas for effective benefit communications:

• Developing a benefit blog for the company’s intranet — Blogs can provide frequent updates in layman’s terms. Using a blog to answer frequently asked questions can be efficient and timely.

• Communicating regularly — Ongoing communications can reinforce the employer’s commitment to employees and strengthen employee engagement in the benefit program. Remind employees to update their benefits after life events like marriages and births. Reinforce the availability of online tools and resources.

• Using multiple channels — It stands to reason that a diverse workforce will want to get information in different ways – some like to read things online; some prefer a hard copy. E-mail and post-office mail sent to a home address can be effective depending on employee preferences. Employee surveys could include questions about their communication preferences.

• Keeping it simple — Avoid jargon and industry technical terms. The key is to ensure that the materials are straightforward and easily readable by the employee and their family members.

• Providing personalized benefit information — According to the study, half of working women with dependant-age children agree strongly that receiving personalized information would make it easier to make benefits decisions.

• Providing an off-cycle enrollment period for life insurance — A separate enrollment opportunity allows employees to focus on their life insurance needs, rather than having to make all benefits decisions at the same time, including decisions about their health insurance.

Another point about the importance of conducting an employee survey is that the survey can help employers determine what benefits will be valued as well as whether employees know about the benefits that are already offered and how well they understand them. Employees who don’t know about a benefit or don’t understand the relevance of the benefit to their lives are not likely to be utilizing them, which is a missed opportunity for employers. They are missing an opportunity to use their benefit program for maximum value for both their employees and potentially for their own business objectives. Seeing survey responses put into action can make employees feel like they are being heard and that their opinions are valued and it may increase employee engagement.

Beyond Simply a Death Benefit

When speaking about life insurance, an important message to convey is that it is about income protection. A lump sum death benefit may be difficult for employees to put into context when they are to used to thinking about yearly salary. It could make the benefit more tangible when you explain how life insurance can help ensure that a family’s income can continue for many years into the future. (For example, explaining to employees that life insurance proceeds can help make sure college plans for children remain possible.) According to the study, 64% of women with minor children are very concerned about being able to afford the cost of college. Offering a life insurance program with features, such as will preparation, estate resolution services, and other assistance for beneficiaries can help increase the value of the benefit program and increase its relevancy for employees today, especially when the offering includes face-to-face support.

It will take a concerted effort among all stakeholders to help close the life insurance gender gap. However, everyone wins when that happens.


Howard Koransky is vice president, Group Life Products, MetLife. He can be reached at


Life Settlements

The Super Index Annuity Explosion

Don’t Be Fooled by What You May Have Been Told About Life Settlements Investing

by Michael G. Ferguson

A  few years ago, I was introduced to the concept of “marketing life settlements.” The life insurance industry and the broker-dealer community did a great job of trying to discourage this concept from becoming mainstream. The pervasive attitude among financial professionals is that marketing life settlements is somehow evil or, at the very least, borders on the unnatural and should be avoided at all costs.

I have been rescued from the brainwashing and am now on a personal mission to let everyone who will listen to me know the truth. This article does not refer to the side of life settlements in which agents and brokers seek people who want to sell their policies. My revelation has come from marketing policies to clients who want to purchase a policy as an investment opportunity.

Despite the negative press from the insurance and securities industries, the life settlement market is not only here to stay, but it is also growing exponentially as a traditional investment alternative. In only a few years, life settlements will become as commonplace as mutual funds or annuities. How is this possible? Remember the term “necessity is the mother of invention.” It certainly applies in this case as multi-billions of dollars continue to pour into the life settlement coffers.

So, what’s the necessity? When the stock market, bond market, real estate market, the global market, and virtually every other market takes a sharp nose dive, the public becomes extremely open minded to alternatives that make sound financial sense. In fact, they demand solutions. There just aren’t any solutions to present to clients in today’s economic environment. Right? Wrong!

Index annuities to the rescue! Here’s the pitch to a client, “Doesn’t it make sense to put your money into a vehicle that provides safety and good upside potential earnings?” This logic has accounted for considerable sums of money being re-directed into equity index annuities. The professionals who sell them are making a fine living for the time being.

But, let’s examine the downside of marketing index annuities. While clients realize the safety of their principal, good upside potential earnings average only about 5% in today’s economic climate. Moreover, index annuities have caps on client earnings and/or a limited participation rate. From the agent’s side, you may earn upwards of 8% commission, if you’re lucky.

Now let’s switch gears a moment. How would you react to a super index annuity with tremendous safety and a historic average of double digit annual returns, with no life carrier determined caps, and always a 100% participation rate for your clients? And, oh yes, these returns occur regardless of economic conditions or performance of the stock, bond, or real estate markets or anything that’s happening in the world financial climate. What if you could earn annuity-like commissions that could recur and increase over and over again?

As I hope to prove to you, life settlements are super index annuities in the context of what I’ve described. Life settlements are in the safest sector of the financial planning pyramid and yet the client’s returns equal those found in the much riskier sectors of the pyramid.

When I began researching this new asset class, I found it helpful to learn what life settlements really are. A life settlement is simply the purchase of a life insurance policy death benefit from another party for an amount less than the death benefit. Assume that I am an 80-year old man with a five-year life expectancy. I own a life insurance policy with a death benefit of $1 million and a cash-surrender value of $100,000. My family is well provided for with other life insurance and I would like to receive cash from my million-dollar death benefit policy before I die.

One option, of course, is to cash in my policy with the issuing life insurance company for the $100,000 cash-surrender value. But, I can sell my policy death benefit on the secondary market. Can I get more for it than the $100,000 by cashing it in? The best way to answer this question is to ask you a question, “Would you purchase my policy death benefit of $1 million if I offered it to you for, let’s say $570,000?” In other words, if you could afford it, would you pay me $570,000 today if you were convinced that you would collect $1 million in five years or sooner?  It equates to an annual average return very close to 12%.

Let’s say I defy the odds and live two years longer than a team of medical experts expected. Before you collect my $1 million death benefit, your annual average return is nearly 8.5%. You would still earn over 3.75%, if I turned out to be a medical miracle and lived for 15 years or three times my life expectancy. That is better than most current CD rates.

As a purchaser of my policy, are you pleased with the transaction? I’d have to say you are. You realize double-digit returns with tremendous safety in a program that is not affected by the economy, any of the markets, or any global financial conditions. Your return is determined by one factor and one factor only – the date of when I pass to the other side. In what other financial program do you know the exact amount you will receive as a return? With life settlements, you know the exact figure you will get; you just don’t know the exact date you will get it. As the seller of the policy, am I pleased with the transaction? You bet. I just made more than four times what I would have received by cashing in the policy with the life carrier.

Are life settlements legal and ethical? In 1911, the Supreme Court ruled that a life insurance policy is an asset and, therefore, can be sold, bought, traded, bartered or pledged as collateral, just like any other asset. Over the past several decades, many large international investors, institutions, and pension plans (all of which you would recognize instantly) have participated in a considerable number of life settlement transactions because of the ascertainable results and mitigation of market risk.

While these investment and institutional groups accounted for billions of dollars in life settlements this new asset class did not explode onto the financial marketplace until fairly recently with the concept of owning a proportional share of a life insurance policy death benefit.

As a rule, the individual policy death benefits ran into the multi-millions of dollars, making the annual premiums several hundreds of thousands of dollars. Of course, the smaller investor could not afford to participate. But, the marketplace has opened up to smaller investors who can now buy a proportional share of the policy death benefit. For example, if I can’t afford a $300,000 annual premium to purchase a policy with a $10 million death benefit, I may be able to participate if I can own a small percentage of the death benefit and pay the same percentage for much lower required premiums. Because a policy may have several participants instead of only one, the life settlement industry is now slated to account for more than $170 billion in 2010, making it a major force in the financial services industry.

But, even with this remarkable explosion, the public is generally not aware of this new asset class and the tremendous opportunity it can offer. Now is a terrific time to market life settlements to your clients and prospects.

As with every great financial program, there tend to be abuses and this market is no exception. You have probably heard of stranger originated life insurance (STOLI) and the stigma that surrounds it. In a nutshell, a STOLI transaction involved a senior applying for a new, high-death benefit life insurance policy with the sole purpose of selling it in two years (after the incontestability period).

These transactions did not involve selling a seasoned life policy, but rather creating a policy with the intention of selling it as soon as the life insurance carrier could no longer challenge its validity or true purpose. The life insurance companies have since stopped STOLI transactions, but not before the legitimate life settlement market got a bit of a black eye. Fortunately, such abuses are soon forgotten when the mainstream industry provides such great benefits to consumers.

You have to address what I call “the uncomfortable factor” before you consider selling a policy. Even if your prospect doesn’t bring it up, you can be fairly certain that they are uncomfortable about profiting from someone else’s death. They will be more at ease once you explain that it is merely a business transaction and not a personal issue.

Typically, business policies are involved with life settlements, such as keyman, buy-sell, etc. For example, a corporate executive who retires gets the corporate keyman policy.  It is not unusual for these policies to have a death benefit of $5 million or more with annual premiums due of a couple hundred thousand dollars. Upon retirement, the executive is responsible for the premium payments and many choose not to keep the policy. The executive’s family usually has ample personal life insurance coverage. So, the executive puts the policy up for sale on the secondary market. The buyer is actually doing the executive a big favor. The client’s uncomfortable factor is almost always assuaged when they learn this information.

As positive of a picture as I may have painted about life settlements, like everything else, there are a few risks to be considered. If you begin marketing life settlements or if you already are marketing them I highly recommend that you find life settlements companies that offer the big five imperatives:

1) Accurate Life Expectancy Predictability


Look for companies that can show a history of very high accuracy of expected mortality. Forecasts must be relatively accurate for the average annual returns to be so attractive. The yield will decrease if the insured lives much longer than predicted.

2) Assurance of Death Claims


Only deal with life settlement companies that use legal reserve life insurance companies. By law, they must maintain sufficient reserves to pay death claims. The life settlement participant has a serious problem if the issuing life carrier does not pay the death claim on a policy.

3) Diversification of Policy Purchases


Look for life settlement companies that include several policies in which a participant can put their money. For example, rather than putting $45,000 into one policy death benefit, it is much better to put $15,000 into three policies to spread any risk of extended life expectancies; any time you can diversify in any investment, it’s a good thing.

4) A Third Party Handles All Monies


This is what I call, “Bernie Madoff prevention.” Find a company that never touches your client’s money. You should insist that the money is placed with a reputable and long-standing third party escrow company with a large national bank as the depository.

5) Significant Revenues To the Selling Producer

This one’s a no brainer. Hitch your wagon to a company that pays you a good commission up front and continues to pay for as long as your clients’ accounts are active. Moreover, seek out a life settlements company that will pay you handsomely for sharing your newfound life settlement program with your colleagues.

It may sound way too good to be true, but there are companies that will provide you with all five of these must-haves, plus several more nice-to-haves. So, I hope I’ve done justice to a concept that offers a fantastic new opportunity to present our clients a new, yet not so new, asset class before it becomes mainstream and our marketing story isn’t as fresh and exciting. You can become a top producer of super index annuities or, as I am proud to call them by their rightful name “life settlements.”


Michael G. Ferguson is a principal of an independent marketing organization, Asset Growth and Protection, LLC. Since entering the life insurance business in 1978, he has been a personal producer, an agency owner and national recruiter, and a sales and marketing consultant. In addition, he is a motivational seminar speaker and has created several marketing sales systems for agents and brokers. For more information, call 800-492-7796 or e-mail

Medical Tourism

Healthcare Reform: Driving a Trend Toward Medical Travel

by Keith Mendoza

The Patient Protection and Affordability Care Act (PPACA) is being phased in over many years with many provisions not becoming fully effective until 2014. But, we are already seeing the changes it will bring to businesses, insurance companies, and consumers. It will address access to healthcare, but most healthcare economists agree that medical expenses will keep rising.

As healthcare expenses continue to increase, more employers are being forced to shift a larger portion of healthcare costs to their employees. Medical travel is a highly attractive healthcare option for businesses and employees and it has been getting more interest from U.S. residents.

Understanding Medical Travel

Medical travel, also known as “medical tourism” or “global healthcare,” is not new, but it has become much more popular over the past decade. Simply stated, it is the practice of traveling across international borders to get healthcare. Travelers seek specialized elective surgical procedures, such as joint replacement, cardiac surgery, bariatric surgery, cosmetic procedures, and major dental work.

Some of the world’s emerging economic powerhouses are focusing on medical travel to help drive their economic expansion and employ their highly educated and skilled work force.

The following factors are driving this trend:

• High quality medical care available internationally.

• The ability to reduce out-of-pocket expenses dramatically for high-cost surgical procedures.

• The cultural diversity of the U.S. workforce.

• Easy adoption and integration of global healthcare benefits into healthcare plan designs.

Medical Travel and America’s Healthcare Crisis


Large U.S. employers expect their healthcare benefit costs to increase an average of 8.9% in 2011, up from 7% in 2010, according to an August survey by the National Business Group on Health. More than 60% of large employers will offer a consumer-directed health plan (CDHP) in 2011, typically with a health savings account (HSA) or a health reimbursement arrangement (HRA).

Employers or cash-paying patients can typically save more than 40% to 80% by having a surgical procedure done overseas, making medical travel an obvious option for consumers and businesses. A handful of medical travel facilitators work directly with employers, healthcare brokers, and health insurance plans to offer medical travel to employees.

One innovative model allows consumers to share in the savings for their surgical procedures. This shared savings model utilizes a HRA, an employer-funded benefit account that reimburses employees for qualified medical expenses. It can work in concert with an HSA, high-deductible health plan (HDHP), or other plan designs. Under this model, the patient is eligible for a deposit determined by their plan sponsor/employer. It is usually between $2,000 and $8,000 into a HRA. The amount is derived from the lower cost of the surgical procedure through medical travel. The deposited funds are tax-deductible for the employer and tax-free for the employee. These funds allow the employee to have dollars available to offset future healthcare expenses.

Financially Sponsored Patient’s Choice

Due to a rise in popularity of CDHPs, consumer choice and employee accountability in healthcare is more prevalent. Employers are opening up to the idea of providing a medical travel option that offers quality healthcare to employees. Medical travel affords great cost savings, consumer choice, and accountability. It also allows the employer to offer a new highly valued employee benefit.

Further, there are medical travel facilitators that have done extensive due diligence on hospitals and physicians to find the best of the best that the world has to offer. Their networks feature hospitals that meet or exceed U.S. standards of care, are accredited, and publish performance measures that provide transparency on the quality of care delivered.

Physician Shortage, Wait Time

With more than 32 million more Americans gaining health insurance within a few years, the new healthcare reform law will exacerbate the shortage of nurses and physicians, particularly surgical specialists. The shortage could reach up to 150,000 doctors over the next 15 years, according to the Association of American Medical Colleges. This will lead to an increase in wait-time for medical care.

Rather than waiting six months to get a procedure done domestically, medical travel allows employees to schedule a surgical procedure within a two-week time frame. Many medical travel facilitators coordinate the initial consultation appointment and take care of all scheduling including the surgical procedure, in-country transportation, follow-up physician appointments as well as all travel and hotel accommodations.

Everyday, healthcare consumers are becoming more aware of options that fit their needs for quality and immediacy, value, and cost effectiveness making medical travel a necessary component in every health plan.


Keith Mendoza is director of sales at Satori World Medical. Mendoza has over 17 years experience in the healthcare industry, primarily focused in the sales and service of medical and health and welfare benefits. During the past eight years, Keith was an Aetna senior sales director for large commercial groups. Keith has served in a similar capacity with other large US health plans and insurers in Southern California throughout his career. Keith holds a Bachelor of Science in Business Administration with an emphasis in financial services from San Diego State University.

Satori World Medical provides access to its global network of board-certified doctors and worldwide centers of excellence through an integrated program that is easily added to any health plan. The program can reduce the costs of surgical procedures by an average of 40-80% compared to the same procedures performed in a U.S. hospital. For more information, call 619-704-2000 or visit at

by Karen Riedel

Disability Insurance: A Necessity In Today’s Economy

Many Americans have gotten the message to prepare and protect their short- and long-term finances. Perhaps, what is not as clear is whether they have adequate protection and where they should invest to maintain financial security now and in the future.

Brokers have an opportunity to shed light on an area that garners little attention, but represents an area of insufficient protection for most American workers – disability insurance. With a greater appreciation of the need for a steady paycheck, many workers are beginning to understand the need to secure disability insurance.

What Workers Need to Know

With deafening levels of noise in the marketplace about 401K fallouts, unemployment numbers, and healthcare costs, it’s no surprise workers have little time to think about the financial and emotional ramifications of a disability. Research shows that many Americans underestimate their risk of experiencing a disability and overestimate the resources available to them in such an eventuality. In fact, the financial impact on workers who become disabled can be staggering if they lack adequate disability insurance – as high as 20 times a person’s annual salary, according to LIFE Foundation and America’s Health Insurance Plans.

Further, for many workers, the long-term impact of inadequate coverage on their nest eggs rarely enters the decision-making process. Brokers can offer a full education of what disability insurance can truly protect. Brokers can remind workers that loss of income makes it impossible to build retirement savings and without sufficient income, workers may be forced to withdraw from retirement accounts to pay for current expenses.

Many workers assume that they have coverage through their employer, but a growing number of companies are including disability in their cutbacks as they grapple with rising healthcare costs. While disability insurance has traditionally been a staple of workplace benefit packages, the recession has caused many companies to scale back coverage or remove it altogether. A decade ago, it was commonplace for a company-paid disability plan to pay an employee 70% of income if disabled, but those rates have diminished alongside the economy and employees today often receive less than 40%.

Twenty-seven percent of Americans say they would have difficulty supporting themselves financially immediately following a disability and 74% would face financial trouble within six months, according to a recent Life and Health Insurance Foundation for Education survey. Workers need to maintain disability insurance coverage.

What Employers Need to Know

As employee interest in disability insurance appears to be building, companies face significant risks in cutting disability benefits back or cutting them out altogether. Although companies may benefit from short-term financial relief in cutting back coverage, they may pay a hefty price in the form of diminished reputation as a company that cares for its employees.

The recession has not only driven home the message that employees need to be financially prepared, but it has also inflicted damage on employer reputations. Forty-seven percent of HR executives, surveyed recently by Deloitte, say that employee trust has declined as a result of the way their company has managed its recession-induced cost reductions. Thirty-seven percent say their organization’s handling of the economic downturn will make talented employees much more or somewhat more likely to leave.

In addition, a 2008 Towers Perrin study found that virtually everyone wants to work for an organization with a reputation for social responsibility, citing the number one retention factor for workers across the globe as an organization’s reputation as a great place to work.

For companies that are under financial pressure to cut costs, voluntary short-term disability offers a no-cost solution for employers. It won’t affect their bottom line, but it will keep their reputation and goodwill towards employees intact. As trusted advisors to companies, brokers are in a unique position to present how their clients can offer voluntary disability insurance to demonstrate their commitment to the workforce without breaking the bank.

Protection for All

The bottom line is that weathering an economic depression has opened people’s eyes to the value of disability insurance. Americans are recognizing the financial vulnerability that comes from being under protected and underinsured. Neglecting to secure disability insurance is a prime example of how saving a few dollars in the short term can cost thousands in the long term.

The same applies to today’s employers. Short-term cost savings from disability cut backs can be eradicated quickly as a result of long-term retention and recruitment challenges. Americans are trying to rebuild their portfolios and they are rethinking what investments are necessary. At the same time, companies are implementing strategies to rebound from the recession. Brokers can help each see how voluntary disability insurance helps workers ensure financial protection and helps businesses maintain their reputation as an employer of choice.


Karen Riedel, second vice president and director of Product Marketing at Aflac, oversees all marketing strategies, plans and execution to include product development, product positioning and advertising briefing. For more information on Aflac, call 1-800-99AFLAC or visit