Health care reform and voluntary benefits
By Brian Summers
I have said it before and it has never been more poignant than now. If you're not offering voluntary benefits to your client, then who is? Whether you were for health care reform or not, it is here and it is here to stay.
Now that we are getting a clearer picture of how health care reform will impact health benefits, one thing is certain: Voluntary benefits will be a large part of the future. My question to all of you now is very simple. Are you going to sit back and feel sorry for yourself or are you going to take advantage of the opportunity? Many brokers I know have viewed voluntary benefits as the "step-child" of the insurance world. They were an afterthought, or something you offered to your clients when they asked for them.
To reduce premium costs, many brokers have recommended increasing the in-network deductible, in-patient deductible and co-pays, just to name a few of the options. As these types of programs are implemented, the need for voluntary benefits has risen to cover the gaps that these plans create. Many brokers have taken that opportunity to offer voluntary benefits, as company owners become concerned about the financial risk their employees face. Each employee has the option to cover these gaps at no cost to the company. Let's face it, a 22-year-old recent college graduate in good health has a lot less to lose than a 35-year-old with children. They get to choose whether or not they want to pay for a gap plan or disability insurance.
Health care reform will basically guarantee that insurance premiums will increase significantly. Annual and lifetime limits will have to be waived. The age of eligible dependents being raised to 26 along with pre-existing conditions being waived will all contribute to significantly higher premiums. Consider the following scenario: A person will be able to wait until they are sick and then be allowed to purchase insurance at a regulated rate. That one scenario combined with all of the other regulations will mostly likely result in reduced commission.
Maybe you looked at voluntary benefits as a way to generate some extra income in the past. You must start looking at voluntary benefits as a revenue stream and not just extra income. You must create a business plan and commit to offering voluntary benefits to your existing clients and use the voluntary strategy to offer voluntary benefits to your new clients.
Health care reform is going to have a very positive impact on voluntary benefits. The excise tax will require employers to include the value of the health plan subject to the excise tax on an employee's W-2 form. This will take effect for W-2's filed in 2012 for the 2011 tax year. The excise tax will not pertain to most accident and disability policies when deducted on a post-tax basis. Simply stated, you can still enhance your client's benefits portfolio without an impact.
Another part of reform is that health insurance companies will be required to make their policies available to individuals on a guaranteed issue basis a no pre-existing condition exclusions can be applied. This takes effect in 2014. As I understand it now, many voluntary benefit plans are exempt from this market reform.
The need for benefit communications and education will be greater than ever. Health insurance companies or plan administrators of self-funded health plans must prepare and distribute a paper or electronic summary of coverage to all applicants and enrollers for the coverage. The secretary of HHS will establish standards for the summary. HHS must establish the standards within 12 months after the law is enacted, and the summary must be provided within 24 months after the date of enactment.
Benefit statements or total compensation reports are already available as a value added service from voluntary carriers. Do you want to be the broker recommending your clients pay for this service or do you want to be the broker who brings this to your client as a part of your service?
If all of the above aren't enough to convince you to actively enter the voluntary market, you should also consider the following:
- Voluntary benefits will not be offered through insurance exchanges.
- Voluntary benefits will be exempt from the guaranteed issue changes and pre-existing requirements.
One of the best parts of the voluntary world, though, is that the small brokerage can offer the same services of the large brokerage. The same value added services are available, regardless of your company size. Why wouldn't you want to take advantage of these?
I have written articles in the past recommending what you should look for in a voluntary rep and a voluntary carrier. I hope you take the time to review these past articles, but in the meantime, let me give you a few suggestions on what to look for:
- Guarantee issue or post-enrollment guarantee issue for the small accounts, not just the big accounts. If the voluntary carrier doesn't offer a form of guarantee issue, then why offer it? By offering this type of plan, you are simply discriminating against those who may have had an illness or accident in the past
- Flexible underwriting
- Make sure that the carrier and the rep have the same values, ethics and determination that you would expect from a W-2 employee
- Strong face to face benefits, education and enrollment
- Flexible enrollment options
- Innovative and broker-friendly
Earlier this week, Denis Storey, the editor of Benefit's Selling Magazine posted an article on his blog that was simple and to the point. "Stop crying and start selling." I encourage you all to take a look at that article. The changes are here. Now it is up to you to decide what you are going to do.
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