BUILDING A BETTER BENEFITS BUSINESS

BUILDING A BETTER BENEFITS BUSINESS

Strazewski, Len

New products and customer service techniques help agents succeed

After years of health insurance rate increases and tighter underwriting, agents and brokers aren’t always the most welcome visitors to human resource executive or employee benefits manager offices.

Corporations don’t “shoot the messenger,” but after learning of another annual rate increase and the need to raise employee deductibles, they aren’t always open to more pitches or easy sells for other products.

Traditional employee benefits markets aren’t getting better sooner, and health insurance rates aren’t going to drop any time soon, either. But if agents are willing to learn the ins and outs of some hot new products and some new customer service techniques, they may be able to build a bigger, better and more welcome employee benefits practice, according to Wes Aiken, president of the Benefits Marketing Association in Twinsburg, Ohio, and vice president of National Worksite Partners in Alpharetta, Georgia.

More than 700 agents, brokers and worksite enrollment specialists attended a Benefits Marketing Mania conference in Las Vegas in early August.

Although voluntary employee benefits and the worksite marketing business has been growing for 25 years, voluntary benefits paid by individual payroll deduction have always taken a back seat to the “everybody gets it” benefits, such as major medical health insurance, Aiken says. But the rising tide of employee benefit costs has created a shift in perception among corporate buyers.

Corporations are seeking low-cost benefit alternatives to supplement their offerings and are more open than ever to agents and brokers who can deliver interesting, employee-paid products and do the labor of communicating them to employees.

This new attitude is also a welcome development for agents, he says. “The property/casualty insurance and traditional employee benefits business have become particularly intense over the past few years and the opportunity to grow a business has become limited,” he explains.

But voluntary benefits have created a marketing opportunity that is insulated from the rising cost trends, he says. The range of products has also been growing.

In addition to the voluntary benefits that have been available for more than 20 years, such as term and universal life insurance, short and long-term disability, long term care insurance, homeowners and personal automobile insurance, insurers and other service vendors are building new attractive offerings, he says.

Supplementary medical insurance has been particularly popular, including plans that fill in the new high deductibles and out-of-pocket limits in employer-paid health insurance and minimeds that provide limited coverage to low-paid or part-time workers who ordinarily would not receive employer-paid benefits.

Critical illness coverage, extended to include heart attack, stroke, invasive cancer, kidney failure and major heart surgery, among other afflictions, has also been growing in popularity as insurers introduce accelerated payment options that make benefits more immediately accessible to insureds.

In the past, employee participation in these benefits has always been relatively low, with only 10% to 20% of employees signing up for extra services and insurance paid for by individual payroll deduction. Though the agents and brokers usually handle enrollment, employers are often reluctant to commit time and effort to communicating the programs.

However, that may be changing as a side effect of the Medicare Prescription Drug Improvement and Modernization Act of 2003 that powers the new Health Savings Accounts (HSAs). Tied to highdeductible (greater than $1,000 for single employees) health insurance plans, HSAs allow employees to stockpile funds on a pretax basis to pay for medical expenses under the deductible or not covered by general health insurance, such as vision care or dental treatments (but not dental or vision care insurance).

Unlike similar Flexible Spending Accounts (FSAs), employees don’t lose money they don’t use in one year and unlike Medical Savings Account (MSAs), the new accounts can be used by all sizes of employers.

In July, the Department of Labor and the Internal Revenue Service issued guidelines for the use of HSAs and the rules surprisingly turned out to be broader than expected, allowing use of the accounts for employee-paid wellness programs, preventive tests and care-including prescription drugs like blood pressure and cholesterol medications.

The accounts can also be used to pay for Employee Assistance Programs (EAPs) that provide brief personal counseling and gatekeeping to wellness programs.

But what has captured the interest of benefit marketers, was the IKS permission to use the accounts to pay for long-term care insurance policies and supplemental health insurance that cover specific diseases, such as cancer, diabetes or congestive heart failure.

The ruling is a particular boon to long-term care insurance, which has always been considered too pricey. Fewer than 10% of employees who are offered long-tern care insurance buy the coverage-but HSAs, funded with pretax dollars-may make the coverage a bargain by essentially reducing the real cost by 30% or so.

Experienced worksite marketers expect enrollment rates to jump as the tax advantages under the new law make the benefits even more attractive to both employers and the employees.

Meanwhile, other service vendors are getting into the business and may share the advantages. The new HSA rules also allow employers to offer discount plans as benefits-as long as the discount plans don’t actually pay cash benefits for medical treatment.

Non-insurance benefits are also getting interesting, including discounted home mortgage programs, payroll deduction discounted computer purchasing, identity theft insurance, veterinary pet insurance, and discounted travel programs.

Success as a voluntary benefits marketer, however, may not come easily to property/casualty agents crossing over into a new business. Most agents are used to selling directly to corporate human resource and employee benefits officers, but worksite marketers also need to communicate directly to employees and handle the administrative process of enrollments.

Part of the attraction of voluntary benefits for employers is the administrative ease, worksite marketers say. Agents and brokers handle the hands-on communication and marketing while the employers receive the value of better benefits value recognition.

Glenn Hollern, who manages general agents in the Los Angeles office of Colonial Supplementary Insurance, says agents are the key communicators of voluntary products-and that means a high level of interaction with employees.

While many employers and their agents are using Internet sites to market voluntary benefits, employees still prefer face-to-face enrollments, according to a study conducted by the Life Insurance Market Research Association (LIMRA), he notes.

Hollern recommends that agents develop a comprehensive and written enrollment plan as part of their marketing effort and schedule both group meetings and individual meetings with site managers and employees. Agents are also responsible for printed materials, though insurers and vendors should provide product information in all languages represented by employees.

If an employer doesn’t already provide benefits statements that quantify the value of employee benefits packages, agents may also want to provide those statements.

Most important, Hollern recommends that agents focus on both employer and employee needs in providing the administrative services that are key to marketing the products.

The author

Len Strazewski has been covering employee benefits issues for more than 20 years and is employee benefits editor of Human Resource Executive magazine. He has an MA. in Industrial Relations from Loyola University.

Copyright Rough Notes Co., Inc. Nov 2004

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