Change Creates Opportunity

Reform means change. The newest Medical Loss Ratio (MLR) requirement of 80 percent for the individual and small business market along with 85 percent for large business coverage established by healthcare reform may have increasingly far-flung implications for many insurers.





Around 47 million people in the Country are enrolled in Medicare, and roughly twenty five percent of those people are enrolled in Medicare Advantage plans. MA plans were hit hard by healthcare reform. The federal government severely cut funding to MA programs at the start of 2011 to try and bring expenses in step with traditional Medicare. According to a recent government survey of Medicare Advantage insurers through the Energy and Commerce Committee, two-thirds of MA policies fall short of the newly mandatory eighty five percent loss ratio, which implies above 15 percent of the company's premium dollars went to profit, advertising and marketing, as well as other corporate and administrative expenses - not to medical expenses. In contrast, 98 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 10 times the amount per beneficiary as traditional Medicare."





Problems with the 5-Star Rating System


Another problem for MA insurers is the 5-Star Rating System. A few years back, this federal government began rating Medicare Advantage programs with a range of one to 5, with five being the best. This system was created to help Seniors make more informed choices. In accordance with health care reform, this rating system will be used to award bonuses towards the best programs, and MA companies may 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 since the plans are not available in their areas, so bonuses make little sense and don’t benefit Seniors. They only add to the cost of MA policies. MA plans’ gross overspending and inability to satisfy 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 traditional Medicare Supplement.





As long as they spend money with a Plan F and possess few claims, they have, nonetheless, still paid a higher premium. With an HDF lower premium, they've an opportunity to maintain the difference in premium and contribute some part of these savings to our optional Reserve Fund Annuity at a three percent interest rate, which exceeds the return on most bank accounts and CDs. Whenever you sell an HDF plan (rather than a Plan F) with an optional Reserve Fund Annuity, it allows the customer to fund their annual deductible amount through a Company vehicle, while earning a very competitive three percent interest rate 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 from 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 the customer to acquire additional coverage they might need. This can lead to additional commission for you, not to mention a well-cared-for customer!





What’s ahead for Worksite sales?


The United States economy may still be limping; nonetheless employers’ interest in voluntary benefits isn't struggling. According to 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 more than five hundred benefit managers in businesses starting from 10 employees to thousands of employees, Eastbridge found the number of employers offering at least one voluntary benefit increased in the last three years. Today, sixty six percent of all employers offer a minimum of one voluntary benefit, and employers with ten to 100 employees have seen by far the most growth in recent years. The Eastbridge survey showed the average 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 couple of 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 when they don’t provide benefits? How much will they be fined? Do their current benefit offerings meet federal requirements? What are their obligations under the newest law?





The majority of the federal government health care reform regulations for primary health plans affect companies that have 50 employees or more. Yet, concern is great among all employers regarding employer-sponsored benefits. Consequently, due to tax savings, more employers than ever are drawn to voluntary benefits a number of plans that enhance employees’ coverage without charge to your employer. A voluntary benefit offering can provide their employees some extent of benefit stability, no matter what happens within the future. In the Eastbridge year-end 2009 Confidence Index Survey, eighty-four percent of people who responded thought voluntary benefit sales would increase in 2010.














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