Change Creates Opportunity

Reform means change. The new Medical Loss Ratio (MLR) requirement of 80 percent for the individual and small business market as well as eighty five percent for big business coverage implemented by healthcare reform may have increasingly far-flung implications for a lot of insurers.

Approximately forty seven million folks in the Country are enrolled in Medicare, and about twenty five percent of those people are enrolled in Medicare Advantage programs. These plans were hit hard by healthcare reform. Beginning 2011, the federal government will substantially cut funding for MA plans to try and bring expenses in line with traditional Medicare. According to a recent government survey of Medicare Advantage insurers through the Energy and Commerce Committee, two-thirds of MA programs fall short of the newly mandatory 85 percent loss ratio, which means over fifteen percent of the company's premium dollars went to earnings, advertising, along with other corporate and administrative expenses - not to medical expenses. In contrast, ninety eight percent of traditional Medicare’s money is spent directly on medical care. As per committee chairman, Henry Waxman, “This report shows Medicare Advantage insurers are squandering billions of dollars on overhead costs - the truth is they spend ten times the amount per beneficiary as traditional Medicare.”

Issues in the 5-Star Rating System
Another trouble for MA insurers will be the Five-Star Rating System. Just a few years ago, this federal government began rating Medicare Advantage plans with a scale of 1 to 5, with five being the best. The system was produced to make it easier for Seniors to make more informed decisions. Under healthcare reform, this rating system will be used to award bonuses to the best programs, and MA companies will have an incentive to shed areas with low satisfaction and high complaint ratios, spurring 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 overwhelming majority of MA members are not in highly rated plans because the plans are not obtainable in their areas, so bonuses make little sense and do not benefit Seniors. They only add into the cost of MA plans. MA plans’ gross overspending and inability to meet the 85 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 looking for a conventional Medicare Supplement.

If they spend money on a Plan F and have 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 three percent interest, which exceeds the return on most bank accounts and CDs. When you sell an HDF plan (instead of 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 3 percent interest on their deposits. The RFA allows the Company to pay for 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 had purchased a plan F by itself. That frees up money for them to buy additional coverage they may need. And that can result in additional commission for you, not to mention a well-cared-for customer!

What is in the future for Worksite sales?
The U.S. economy still may be struggling, but employers’ interest in voluntary benefits isn’t. Based on Eastbridge Consulting Group, leading consultants in 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 have 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 five hundred benefit managers in businesses ranging from ten employees to thousands of employees, Eastbridge found the number of employers offering at least 1 voluntary benefit increased during the last three years. Today, 66 percent of all employers offer at least one voluntary benefit, and employers with ten to one hundred employees have seen by far the most growth in recent years. The Eastbridge survey showed the typical quantity of products offered by an employer is three to four, but some employers surveyed offered as many as 12.

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 remains 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?

Most of the federal government health care reform regulations for primary health plans affect firms that have 50 employees or more. Still, worry is great among all employers regarding employer-sponsored benefits. Because of this, due to tax savings, more employers than ever are drawn to voluntary benefits’ a number of programs that enhance employees’ coverage at no cost to your employer. A voluntary benefit offering can provide their employees some extent of benefit stability, regardless of what happens in the future. In the Eastbridge year-end 2009 Confidence Index Survey, 84 percent of people who responded thought voluntary benefit sales would increase in 2010.