Change Generates Opportunity

Reform translates as change. The newest Medical Loss Ratio (MLR) requirement of 80% for the individual and small business market along with 85 percent for large business coverage established by healthcare reform could have increasingly long-term implications for many insurers.

Approximately 47 million folks in the Country are enrolled in Medicare, and about 25% of those are enrolled in Medicare Advantage policies. These policies were hit hard by healthcare reform. The government will severely cut funding to MA plans at the beginning of 2011 to try and match expenses with traditional Medicare. According to a recent government survey of Medicare Advantage insurers through the Energy and Commerce Committee, two-thirds of MA plans fall short of this newly required eighty five percent loss ratio, which suggests more than 15 percent of their premium dollars went to profit, promoting, in addition to other corporate and administrative expenses - not to medical expenses. In contrast, 98% of traditional Medicare’s money is spent directly on medical care. According to committee chairman, Henry Waxman, “This report shows Medicare Advantage insurers are squandering billions of dollars on overhead costs - in reality, they spend 10 times the amount per beneficiary as traditional Medicare.”

Troubles in the 5-Star Rating System
Another issue for MA insurers is the Five-Star Rating System. A few years ago, this government commenced rating Medicare Advantage plans via a range of 1 to 5, with five being the best. The system was produced to assist Seniors when they're shopping for healthcare. In accordance with health care reform, the rating system will be used to award bonuses to the best programs, and MA companies may have an incentive to shed areas with low satisfaction and high complaint ratios, spurring even more dis-enrollments. However the rating system means little, if anything, to most Seniors, who choose their Medicare Advantage plan determined by cost and access, not ratings. The vast majority of MA members aren’t in highly rated programs since the plans are not accessible in their areas, so bonuses make little sense and do not benefit Seniors. They only add into the cost of MA policies. MA plans’ gross overspending and inability to meet the eighty five percent MLR means many more Medicare Advantage insurers will continue leaving the marketplace as several have already. Meaning millions of Seniors can be turning back to Original Medicare and searching for a conventional Medicare Supplement.

As long as they spend money on a Plan F and possess few claims, they have, nonetheless, still paid higher premium. With an HDF lower premium, they've an opportunity to keep the difference in premium and contribute some part of these savings to our optional Reserve Fund Annuity at a 3 percent interest rate, which exceeds the return on most bank accounts and CDs. When you sell an HDF plan (rather than a Plan F) with an optional Reserve Fund Annuity, it allows the client to fund their annual deductible amount through a Company vehicle, while earning a really competitive three percent interest on their deposits. The RFA allows the Company to pay the policyholder’s medical expenses before their policy benefits take effect, using customer funds out of the RFA. Even with the $50 minimum monthly allocation towards the RFA, the prospect spends less overall than if they'd purchased a plan F by itself. That frees up money for them to purchase additional coverage they might need. And that can result in additional commission for you, not to mention a well-cared-for customer!

What is the future for Worksite sales?
The U.S. economy may still be struggling, yet employers’ interest in voluntary benefits isn't struggling. Based on Eastbridge Consulting Group, leading consultants within the worksite marketplace, “As employers’ budgets have been squeezed and health insurance costs have continued to rise, the role of voluntary benefits has grown. We've heard from employers who believe in the need for voluntary benefits, and these employers expect 2010 to be a good year.”

During a survey of over 500 benefit managers in businesses ranging from ten employees to thousands of employees, Eastbridge found the number of employers offering at least one voluntary benefit increased during the last three years. Today, sixty-six percent of all employers offer a minimum of 1 voluntary benefit, and employers with 10 to one hundred employees have seen the most growth in recent years. The Eastbridge survey showed the typical number of products offered by an employer is three to four, but some employers surveyed offered as many as twelve.

The Future of Employer-Sponsored Benefits
For many companies, employer-sponsored benefits are hanging by a thread. Year after year, employers of all sizes have watched their employer-sponsored benefit costs skyrocket. Although cost increases have lessened the past few years, the price and anxiety level is still high. With uncertainties generated by healthcare reform, many employers remain skeptical about their future benefit programs. How will healthcare reform affect them? Will they be fined if they don’t provide benefits? Just how much will they be fined? Do their current benefit offerings meet federal requirements? What are their obligations under the newest law?

The overwhelming majority of the federal government healthcare reform regulations for primary health plans apply to firms with fifty employees or more. Yet, anxiety is high among all employers regarding employer-sponsored benefits. Because of this, due to tax savings, more employers than ever are drawn to voluntary benefits’ variety of plans that enhance employees’ coverage at no cost to the employer. A voluntary benefit offering can give their employees some degree of benefit stability, no matter what happens within the future. In the Eastbridge year-end 2009 Confidence Index Survey, eighty-four percent of those who responded thought voluntary benefit sales would increase in 2010.