Supplemental benefits ease the move to consumer-driven health plans: the first step

 Supplemental benefits ease the move to consumer-driven health plans: the first step

As a business consultant specializing in change management, I was initially driven to get my insurance license in part because I was approached by practically every company owner, CFO, and HR director who wanted my advice on how to combat the skyrocketing cost of healthcare coverage. Regarding their major medical plan expenses, which have been increasing at double-digit rates annually, I had no choice but to suggest that they just swallow the pain and undergo a painful process of micro-re-examination of plan prices almost year until recently. A lot of decision-makers are having to cut perks or pass the cost on to their employees. Thanks to a new, reasonable approach, we can cut expenses (and taxes, by the way), provide workers greater agency and safety, and, surprisingly, prevent them from launching a rake-and-torch revolt in response to demands that they chip in more of their own money. The policyholder has just as much say as the employer does about the health benefit programs offered by these plans, hence the name "Consumer Driven Health Plans" (CDHPs).

A lot of attention has been focused on two important aspects of CDHPs. A High Deductible Health Plan (HDHP) and a Health Savings Account (HSA) are the two required pieces of insurance. The basic premise is that the employer (or employee) can drastically lower the premium cost by enrolling in a major medical health insurance plan with a substantially larger deductible ($1000 or more). The constraints are not going to be discussed in great length, but the notion is there. Another way to ensure that tax-free dollars cover the deductible is to switch from Flexible Spending Accounts (FSAs), which force participants to spend their tax-free contributions within the plan year or lose them, to Health Savings Accounts (HSAs).

The one drawback of this plan is that, unlike HSAs, which only allow the amount that has been funded so far to be made available, FSAs make the elected amount available from day one of the plan. That is to say, the majority of people face the possibility of significant out-of-pocket costs associated with the deductible in the first year of having such a plan.

Implementing Supplemental Benefits, the third critical component of the strategy, is the means to avoid this danger. Through the Cafeteria (Section 125) plan, whether it's brand new or already in place.

Any HDHP/HSA plan should begin with additional benefits for multiple reasons. First, they help workers feel comfortable with the idea of contributing to their own financial security by introducing them to employee-funded, entirely voluntary plans. Second, employees understand that they can lower their out-of-pocket costs in the event of an unexpected event by participating in supplemental plans, which cover deductibles and co-pays. The need of pre-tax funds is taught to them thirdly. Finally, improved knowledge on the nature of those options is a natural byproduct of increased choice. What this means is that workers are more invested in finding out how everything comes together and how to make the greatest decisions for their families.

First, supplemental plans give workers a sense of agency since they allow them to better protect their families without affecting other aspects of their work lives. So when the HDHP/HSA switch is finally made, much fewer workers will feel like they're losing out.

A solid Supplemental strategy must address these questions.

The plans are very comparable in terms of structure and features, but the providers' approaches and the quality of customer support offered differ greatly. When they require financial security and control, your employees know they can rely on you to choose reputable benefit providers. With the increasing number of participants, it's inevitable that every insurance company will boast about their own achievements. Be wary, though, because many unknown, unproven businesses masquerade as established names in the industry. Insurance behemoths aren't always the result of mergers and acquisitions; in this instance, the goal was to go into the voluntary benefits industry. The marketing and financial data of a parent firm can, like the Emerald City in the Wizard of Oz, paint an inaccurate picture of the size and competence of the division responsible for product development, underwriting, and servicing.

Astonishments are never welcome. Specifically, as it pertains to the safety of finances. Who wants to hear from an employee who has claims issues and thought they were signing up for a policy with BIG Insurance Company? Then they find out that the policy was actually underwritten by National United Smoke and Mirrors Insurance Company of Hoboken, NJ., which only did property and casualty insurance until last year. Big Insurance Company's slick marketing reps boasted about their gazillions in financial backing and years of experience. Whoever is hiding behind the curtain deserves your concentration.

In order to choose the finest supplier for your company's and employees' needs, it is important to ask the correct questions of possible providers.

Here are a few recommendations:


Tell me who has been underwriting the policy for how long.
Being large is important in the assured renewable (supplemental) market, and experience is a strength in this regard. In what ways has the company excelled and what is its history? An organization with a history of happy customers in a variety of sectors and the resources to deal with adverse selection is what you need.

In what ways is the company's financial health illustrated?
Pick one of the best rated businesses, regardless of whether you go by A.M. Best, Moody's, Fitch, Standard & Poor's, or any other metric. A number of them exist. Superior to B is A, superior to - is +, and the list goes on.

In what ways is the firm known?
Customer happiness over the long run is more important than short-term gains in recognition or market share. Good signs include long-term partnerships with businesses similar to yours. Above all else, how would you characterize the operational unit that really offers the underwriting? A provider of life insurance? Do you mean a liability firm or a property and casualty company?
What are the ratings for each one?

How important are voluntary benefits to the insurance company?
Do supplemental and voluntary plans constitute the company's primary emphasis, or are they merely a glimmer that could lead to additional connections? How much of the parent company's total premium base does the offered insurance constitute? The decision to put all your eggs in one basket (or not) is heavily influenced by who you choose.

Do we have national representation?
Is it only an 800 number that goes to a main office, or do they have actual locations in every state? Does their network include local agents or is it more of a loose confederation of intermediaries found all over the world? This does not pose a problem for enterprises having one or two local branches. However, the degree to which your message is consistently communicated and your employees are well-served is dependent on the quality of training your firm's representatives receive regardless of their location, even if your company has multiple sites in the same state. How comprehensive and high-quality is the backup?

What is the frequency of rate increases? What exactly are the factors that lead to increases in interest rates?
There are insurance providers that promise consumers a certain rate for a set amount of time, typically two or three years. Investigate thoroughly the frequency and magnitude of those rate increases over time. Demand documentation of past events. It is possible to foretell future patterns by looking at past actions. The market leader has maintained its status as one of the best-selling insurance stocks despite never increasing rates for current policyholders. Getting a low rate that will become exorbitant in a few years is not worth it.

Just how intricate is the underwriting process?
Underwriting for critical illness insurance extends how far back in time does it begin? Outside of the application, are any other disclosure documents necessary? What is the normal number of questions answered during enrollment and what information is needed regarding pre-existing conditions? Minimal underwriting is what you should aim for. Even the greatest firms don't always offer Guaranteed Issue, and it's usually only accessible for very large groups. Get a feel for the rules around "knock-out" questions. Verify if they appear understandable.

Does the organization have a stringent policy on disabilities?
In order to qualify as disabled under certain insurance policies, the insured must meet certain criteria, one of which is that they must be totally unable to carry out any and all aspects of their employment. In order to be considered disabled and receive payments, some organizations use a more lenient definition of "total disability." In these cases, the insured need simply be unable to perform "material and substantial" duties. Learn the meaning of "disabled" through examining concrete instances since this is one of those topics where opinions differ greatly. Loner regulations are preferable.

How much money is lost by the business?
Earned premium divided by claims paid out during the typical policy's lifetime is the loss ratio. So, how much does the policyholder typically get back compared to what they pay in? A higher rating is preferable.

What is the company's claim payment policy?
Regrettably, this crucial aspect differs considerably across the landscape. Quicker is preferable. Ease of use is preferred. Give this one your full attention. In recent years, some businesses have taken heat for their internal practices that deal with the nonpayment of valid claims. Some firms have been found to routinely reject valid claims unless specific documents are provided, which just serve to drag you out for months in the hopes that you'll give up. Pay close attention to processes and get data on common and rare claims.

Before receiving payment, is it necessary to coordinate benefits with other policies?
Some businesses provide attractive plans, but if your coverage is already in place, you won't get full reimbursement. Supplemental insurance from other sources pays out in addition to the policyholder's existing insurance, independent of the kind, amount, or beneficiary of any other benefits.

We pay benefits in what ways?
Does the policyholder receive payment directly? To the clinic or the emergency room? If not, then what? Direct payment to the policyholder, who can then decide how to spend the money, is preferred because more choice is better than fewer option.

As part of its policy, does the company promote preventive care?
To cut down on claims, several insurance firms include preventative care in their basic coverage and offer discounts to policyholders who have common precautionary checkups. In most cases, better treatment and fewer time away from work are the outcomes of early detection, so it makes perfect sense. Try to choose a company that includes these perks in the plan as standard, rather than as extras or extra riders.

Can you take the policies you sell with you?
As a result of portability, the insurance becomes the property of the policyholder rather than the business. Therefore, the policyholder's coverage remains unchanged in the event that they leave the company, regardless of the reason. Similarly, real portability entails moving at the same pace. Policies are only really transferable under specific conditions because some companies conflate convertibility with portability. The policy changes from one form to another, typically with different rates or benefits, when it is convertible.

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