Health insurance agent troubleshooting guide for 2011

By William Hammet Sr.

Hammett Marketing Group LLC

For more than 12 years, we have partnered with brokers and their employer clients, collaborating on strategies that match them with alternative (non-traditional) health plans.

During the course of those 12 years, much has changed, both tangibly (new laws) and in perception of the value of employer sponsored benefit plans (increases in cost sharing). Most of these changes have had a negative effect on the moderate to low income workforce and their ability to access affordable health services.

To help resolve this inequity and raise the level of value perception, we have aggressively promoted the tactical use of so-called alternative health plans. As of 2011, we believe we have witnessed something of a breakthrough. New guarantee issue federal and state pre-existing health plans have allowed some employers the luxury of offering more affordable limited medical plans without the worry for those that might fall through the cracks healthwise.

The combination of the government safety net along with first dollar base plans (limited med.), self-funding and excess loss (specific and aggregate stop loss) means, for the first time, brokers can design plans that better fit the needs of the majority of the workforce, not just the small percentage with high utilization.

Note: This guide is meant to stimulate out-of-the-box thinking and should be limited to the discussion phase of any sound benefit planning effort. We would encourage brokers to enlist the services of a professional general agency that specializes in these non-traditional plans. This general agency can assist in taking the plans to market and analyzing the results, prior to presentation to the client.

2011 troubleshooting guide: situation and strategies

Group client wants to lower benefit cost by raising deductibles

(1) Employers with between 100 and 800 employees may choose to partially self-fund through a single source carrier. Single source meaning: They provide excess loss (spec/agg) + TPA + limited med. in one package.

(2) $5,000/$10,000 deductible with limited med “GAP” or outpatient plan in front end. Note: These limited medical plans are not creditable coverage and therefore should not objectionable to the high deductible carrier.

(3) $75,000 spec with high end limited medical product underneath (single source carrier for both coverages).

Group client has low participation

(1) Replace current major medical/managed care plan with a base limited medical plan ($75.00 to $150.00 per month) this would be paid for by the employer and cover every eligible employee (100 percent participation).

(2) Offer a critical illness option (highest lump sum amount available on a guarantee issue basis).
(3) Provide a buy-up (payroll deduction) limited medical plan that would cover up to $100,000 in medical claims for those needing more security.

(4) Educate and inform employees about government safety net plans (state or federal) that would be available to them (after six months) for catastrophic illness or injury.

Group client has a mix of highly compensated and hourly employees

(1) Anti-discrimination rules have been relaxed and so has the grandfather clause. It is still permissible (depending on state laws) to offer an executive plan with a lower coverage to hourly or production employees.

(2) For hourly workers, offer a base limited medical plan at $75.00 per month (paid by the employer) with a critical illness rider and a $150 to $200 limited medical buy-up option (payroll deduction).

Group client has a mix of W-2 and 1099 workers

(1) 1099 employees can enroll in a (association platform) limited medical plan or one of the individual limited medical plans available commercially (for example, core benefits insurance).

(2) Depending on the type of W-2 workers, employer may use one or more of the mixed offerings outlined above.

Group client has mix of full and part-time employees

(1) Employers with between 100 and 800 employees may choose to partially self-fund through a single source carrier. Single source meaning: They provide excess loss (spec/agg) + TPA + limited med. in one package.

(2) For part-timers, see any of limited medical options, paid for or voluntary.

Client is an association or affinity group

(1) Offer an association within an association plan. This would simply mean that we would match this client up with an association that allows group benefits to be provided to another association.

(2) Plan sponsors could also promote online individual limited med. plans, available commercially (core benefits insurance, as an example).

Client is a franchise operation

(1) Broker should handle franchise operations using a group strategy, lumping different units together under one common ownership structure.

(2) If each franchise ownership module were too small (under 50 employees) or the ownership group is very small, we would use association membership or individual enrollment options as appropriate.

Group client offers a mini-med with/without waiver

(1) We recommend switching over to a fixed indemnity limited medical carrier. The mini-med plans affected by health care reform are probably going away eventually; at the very least they are dramatically altered or unstable. It is wise to simply replace these plans with an indemnity model and roll all of the employees over into the new plan.
Group client wants to drop current medical plan due to costs

(1) All of the options shown above should be considered as a last chance to preserve the group plan before the employer decides to drop coverage.

Group client is self funded and wants alternatives

(1) Employers with between 100 and 800 employees may choose to partially self-fund through a single source carrier. Single source meaning: They provide excess loss (spec/agg) + TPA + limited med. in one package.

Which plans are subject to health care reform?

2011 preferred benefit plans fall under these three general categories:

A. Expense incurred plans: Defined by the similarity to major medical descriptive terminology such as: deductibles, co-pay, co-insurance (80 percent/20 percent) usual and customary, etc. Usually incorporate a pre-existing condition limitation to control claims costs. Note: These plans are currently subject to PPAA and require waivers to continue to operate (no new sales allowed).

B. Indemnity plans: Also referred to as defined benefit plans in that they provide a fixed dollar amount for each line of coverage (ex: $75 per doctors office visit, $500 per day payable to the hospital). Generally these types of plans are simple, easy to explain and commonly pay out more dollars in claims. Note: The plans are not considered creditable and are filed as supplemental with the states, they are allowed without restriction under new PPACA reform laws.

C. Hybrid plans: Single source combination of (1) base limited med. (2) TPA mid self-funding with administration ($5,000 to $75,000) (3) specific and aggregate stop loss coverage (to $1,000,000). These plans are unique in that they replace multiple entities with one and provide first dollar benefits complementing the major medical component.