California Broker by Ron Goldstein –
August 6, 2013:
In a business world that’s increasingly filled with me-too products and look-alike companies, finding a way to differentiate is becoming more difficult and more essential at the same time. Hotels, airlines, banks, and even hospitals are looking for new ways to add value, for they know that doing so attracts new customers, builds loyalty among existing clients, and separates them from the pack.
This is also true for health insurance brokers. As the Affordable Care Act takes hold and health insurance exchanges emerge nationwide, brokers need to find new ways to remain an essential part of the equation. But more than that, they need to find new ways to differentiate themselves from the broker down the street. Through products they offer, services they provide and value they add, what can a broker do to stand apart?
New Approaches to Ancillary Benefits
One way smart brokers are differentiating themselves is by offering their clients easy and affordable access to more than traditional medical benefits. By adding dental, vision, chiropractic, and life insurance policies into the mix, brokers can provide added value for their clients and added revenue for themselves.
Historically, many employers and their employees have not considered ancillary benefits for two primary reasons: the high cost and the notion that they would be forced into buying insurance coverage they don’t need or want in order to get what is most important to them. Fortunately, these concerns are no longer true. Today, ancillary benefits can be priced to fit most any budget and can be bundled (or unbundled) in personalized and customized ways that makes sense for an employer’s business and employee needs.
What also makes ancillary benefits increasingly attractive is how nicely they complement the defined-contribution model and the integrity of choice inherent in health insurance exchanges. And when it comes to choice, employers today have three models of how they might offer ancillary benefits to their employees:
• Define a monthly contribution: Consistent with the defined-contribution approach toward health coverage, employers can determine how much they want to spend in this area and then give their employees dollars that can be applied to the ancillary benefits of their choosing. If the plan/benefits that employees choose cost more than their employer’s contribution, employees simply pay the difference just like they do if they choose a healthcare plan that exceeds their allocated amount. Experience has shown that employees understand that enhanced benefits cost more, and most are willing to contribute to the cost so long as they have choice and feel that they are getting a benefit package that is right for themselves and their family.
• Offer benefits on a voluntary basis: Employers who choose to do so can make ancillary benefits available to their workforce without incurring any cost at
all. Under this arrangement, employees get access to all of the voluntary benefits they select and are responsible for 100% of the cost. For employees who want or need these benefits, this is easier and usually less costly than seeking such coverage on their own.
• Mix and match: Through increasing popular programs, employers have the flexibility to combine the two options to find the formula that works best for themselves and their employees. For example, an employer may choose to contribute money to their employee’s dental benefits and then let their employees select and pay for other benefits (such as vision) on a voluntary basis if they so choose.
Health Insurance Exchanges
As insurance brokers in California know, a key part of the Affordable Care Act mandates that every state establish and launch its own state-sponsored health insurance exchange by January 1, 2014 or default to a federal program. Exchanges are designed to provide small employers the same advantages commonly available to larger groups by organizing the private insurance market in ways that create a more stable risk pool, greater purchasing power and more competition among insurers when it comes to price, quality and service.
With a launch date for these exchanges now less than four months away, many employers are understandably confused about what will and won’t be covered through an exchange and how that affects their offering of ancillary benefits (among other things).
Individual consumers are no better off or better prepared for the changes that the ACA will bring. A recent Aflac survey revealed that 76% of consumers are not very knowledgeable or not at all knowledgeable about federal and state healthcare exchanges, and 72% have never heard the phrase “consumer-driven healthcare.” Most telling is the fact that, while 75% expect their employer to educate them about changes to their healthcare coverage, only 13% of employers say that it is important for them to educate employees about healthcare reform.
For California’s brokers, these harsh realities are actually good news. If ever there was a wonderful window of opportunity for sharp brokers to become go-to experts with the answers and the solutions customers are seeking, it is now. But to do so, brokers must take the time to become educated about all of these issues.
As it pertains to the relationship between exchanges and ancillary benefits, there are four important things for brokers and their clients to know:
1. Pediatric dental and pediatric vision benefits are the only ancillary products that are considered part of -the new Essential Health Benefits. Insurance carriers and exchanges must offer these benefits to employers with fewer than 50 employees.
2. While pediatric dental and vision coverage must be offered as a part of Essential Health Benefits, employers and individual consumers are not required to purchase stand-alone dental and vision benefits.
3. Employers and individual consumers who want to purchase stand-alone dental and/or vision benefits may do so whether they’re enrolled in medical coverage through the commercial market, a private exchange, or public exchange.
4. Dental and vision benefits sold in stand-alone policies are subject to most ACA provisions. Currently 98% of dental benefits are provided through standalone dental policies for individuals or families, independent of a medical plan.
As exchanges grab the nation’s headlines, it is important to remember that employers are not required to purchase any health coverage for employees and their dependents through a state’s health insurance exchange. Employers still
have the option to purchase through private exchanges that operate under the same basic principles, but contain some significant differences relative to the use of licensed agents, the administration of COBRA, PPO, flexible benefits, etc., and the degree of field sales and enrollment support offered.
There is one other thing to remember as it applies to healthcare reform’s impact on ancillary benefits. Mid-size employers are looking for creative ways to control their costs while complying with the law, which requires them to offer health coverage to all full-time employees. We are already beginning to see a boost in part-time positions. But these part-time employees need health coverage, too, even if not covered by their employer. This means that there are new, previously untapped markets for America’s brokers who need to bring to these individuals products that meet their needs and budget. Among those products should be a full array of affordable ancillary benefits tailor to an individual’s needs.
Finding the Right Partner
It is important for those who sell ancillary benefits to align with a partner that makes offering such products to their clients as easy and hassle free as possible. Toward that end brokers should look for a company that does the following:
• Provides access to the nation’s premier ancillary carriers.
• Offers an attractive commission on all ancillary products.
• Delivers a single quote that includes dental, vision, chiro/acupuncture, and life.
• Requires just one enrollment application for all benefits.
• Provides one easy-to-understand monthly bill for all of a broker’s clients.
• Has a strong customer service center where trained staff can assist a broker’s every needs.
• Offers a robust website where brokers can quote and manage their entire book of business.
Clearly, the year ahead will be one of many changes for the health insurance marketplace. All indications are that we will see more employee cost sharing, a rise in employer-sponsored wellness programs, increased consumer involvement,
challenges with making health insurance attractive and affordable for younger Americans, and changes in health insurance offerings to comply with new federal mandates. Just 2% of health plans available to consumers in the private
insurance market currently offer all the coverage that will become mandatory next year under the healthcare overhaul.
As the core health insurance products become more highly regulated, selling such products as dental and vision has the potential to contribute more than ever to a broker’s bottom line. Whether you’re already offering such benefits or looking to add them for the first time, brokers seeking new revenue streams and ways to set them apart from the competition should consider the potential of ancillary benefits.