As 2013 draws to a close, employee benefit managers and business owners find themselves dealing with continued uncertainty in the health care arena. “Many employers are focusing attention on emerging changes related to health care reform and what it means for their organizations,’ explains Robert Shestack, senior vice president and national voluntary benefits practice leader at AmWINS Group Benefits. “This, of course, is understandable.’

John Stanley, chief marketing officer at Transamerica Employee Benefits, concurs. “We expect to see continued emphasis on the impact of delayed implementation of Affordable Care Act requirements,’ he notes. “Employers will need to determine how they´ll respond to the financial and risk elements of providing employee benefits.’

Issues such as self-funding, incorporating offerings, raising deductibles and co-insurance amounts, and implementing a defined contribution benefits strategy that includes private exchange technologies are important and relevant, he adds.

Agents and brokers themselves are feeling the effects, as well. “The broker marketplace is more than occupied trying to keep up with, understand, process and evolve under PPACA,’ explains Len Cavallaro, assistant vice president of voluntary products marketing at Reliance Standard Life Insurance Company. “The distribution model, particularly independent agents and brokers, is typically either paralyzed or aggressively pursuing rules, markets and models that are changing daily.’

Shestack says that for some employers, other benefit priorities—including voluntary—have been moved to the back burner. “At the same time, some view health care reform as just another federal law to manage—just like HIPAA, COBRA and FMLA,’ he adds, “and they continue to prioritize focus on all types of benefits for their employees.’

Challenges and opportunities
Opportunities and challenges exist for brokers and carriers as employers and employees address the changing face of traditional health plans, says Domenic Palmieri, senior vice president, operations, strategy and partnerships at HM Insurance Group. “The opportunity is evident in the third consecutive year of double-digit growth in the voluntary industry,’ he explains.

Another factor affecting the benefits arena is the emergence of insurance exchanges. “As public and private exchanges move forward, we´ll face new challenges in getting products positioned for employees,’ explains Kevin Seeker, GBA, vice president of benefits communication and administration services at Assurant Employee Benefits. “Brokers may not have the same opportunities to see employees during open enrollments as they have in the past.

“The question will be, ´How do you stay in front of employees and keep products positioned so they are relevant to employees?´’ he adds. “That´s a big change in the dynamic and distribution.’ He notes that many private exchanges are using a reseller model, which still involves brokers.

Stanley is seeing a significant shift taking place in the broker/employer/employee relationship. “Many brokers have told me that their customer is no longer just the employer, which has been the case for years,’ he explains. “Today, it is also the employee. This creates both a challenge and an opportunity for brokers to reinvent themselves and get a real handle on how consumerism will impact their business going forward.’

Selling voluntary
Looking ahead to 2014, retail agents and brokers can use a number of products—and approaches—to build their voluntary business by serving clients better. “The good news is, much of the market for voluntary benefits products remains untapped,’ explains Palmieri.

“Two top voluntary benefits products for agents and brokers to focus on are critical illness and accident,’ says Shestack. “These programs offer more financial protection, similar to life and disability. Disability is important because,’ he says, “studies continue to show that many employees are still under-insured or not insured to protect their paycheck.

“Finally, medical gap/hospital indemnity should be considered, as most employees have increased medical plan deductibles and co-insurance, and these coverage programs can help close that out-of-pocket gap,’ he adds.

Palmieri suggests focusing on critical illness, accident and hospital indemnity products as solutions to customer needs. “These products provide added protection that many employees need in a changing health insurance environment,’ he explains.

“P&C agents and brokers can add value to employers´ benefit portfolios by understanding current coverages and making recommendations based on corresponding gaps that need to be addressed,’ Palmieri adds. “This, of course, requires agents and brokers to better understand the intricacies of voluntary products.’

“We are seeing a trend where supplemental products, such as critical illness/accident/hospital indemnity insurance have the highest adoption rate by employers,’ explains Stanley. “Carriers that have built a simple approach for brokers to bundle these products as supplements to existing medical plan offerings seemingly have an advantage.’

According to Seeker, “Accident plans are gaining momentum, and critical illness and cancer coverages are seeing increased interest because of increased financial exposure under new health insurance plans. Employees could face network restrictions, as well as increased out-of-pocket expenses for emergency room visits and doctors´ visits. These products are designed to help people with these incidental expenses and empower them and give them freedom of choice.’

Cavallaro says agents and brokers need to represent available products and services within a context that is meaningful to the individual making the election. “Employee research has shown repeatedly a desire for common sense advice, education and communication to help them determine an appropriate benefits strategy and investment,’ he explains. “The same research also shows this is too often lacking.’

He suggests focusing on the basics. “Consider three overall ‘buckets´ of non-medical benefits,’ he advises. “They are life insurance, income protection and ‘gap´ products, which will help alleviate the burden of and bridge obvious financial exposure left by medical or other plans.’ An example of this last category would be a group accident or limited benefit medical plan that helps employees moderate out-of-pocket risk in a high-deductible health plan.

Patrick McClelland, vice president of national inside sales at VSP Vision Care, points out that, as benefit managers look to maximize their health care spending, it´s important to focus on voluntary benefits that demonstrate a return on investment. “Vision benefits enable the early detection of serious health conditions—such as diabetes, high cholesterol and high blood pressure—up to seven years before someone would typically show symptoms,’ he explains.

“This early identification and subsequent treatment can lead to healthier and more engaged employees while offsetting lost productivity and medical costs for clients,’ McClelland adds. It may make sense to offer vision plans that have a medical component. “This expanded medical coverage keeps some eye-related issues out of a medical office and typically lowers the employer—and employee—cost of care.’

Also, McClelland notes, some vision plans offer free wellness programs that he says provide “a no-cost positive impact on the client´s bottom line. Agents and brokers could include a robust wellness plan with their pitch for vision coverage.’

Cavallaro points out that, traditionally, ancillary benefits have occupied a relatively small place in the broker channel. “And voluntary benefits hold only a fraction of that,’ he adds. “That´s, in part, because carriers and employers haven´t paid enough attention to designing, implementing and communicating these programs with the employee in mind.

“The primary issue going forward will be engagement and assistance at the individual level,’ Cavallaro says, “coupled with a degree of consumerism not previously seen in this segment of the market.’ He says agents and brokers who want to succeed in this endeavor should:

• Make benefits relevant to the employee´s (and family´s) needs and not just part of a menu of offerings
• Make decision-support organic and common sense based
• Demonstrate actual and comparative value alongside product choices
• Advocate for the overall financial health and security of the person making the benefits election
• Speak clearly, plainly and without any obvious agenda besides meeting the individual´s needs.

“Brokers and carriers that do these things will be successful going forward,’ Cavallaro notes.

Partner with experts
Stanley suggests working with a carrier that has the expertise to understand your markets and brings you the tools and resources to grow your business. “Take advantage of the educational forums that carriers and MGAs will provide to your business,’ he says.

“Consider working with an expert or hiring the expertise to build your benefits practice,’ Stanley adds. “Your clients are looking for solutions. If you can´t bring them advice and guidance, they´ll get it from someone else, and that may jeopardize other lines of coverage you offer.’

Palmieri stresses the value of partnerships, as well. “We know that working closely with agents and brokers to better educate consumers about the advantages of voluntary products is key to providing the gap-fillers that many consumers need,’ he says.

According to Seeker, it´s important to be open-minded when it comes to voluntary products. “Also, become familiar with private and public exchanges, and then position yourself to offer voluntary products or exchange technology as an option to your employers,’ he adds. “As some employers steer employees to the public exchange, voluntary could be a good way to maintain relationships and generate income.

“Many people will gravitate towards so-called bronze and silver plans, which are high-deductible health plans,’ Seeker explains. “They come with high out-of-pocket exposure to employees, and voluntary can help offset that. From an employer´s standpoint, there´s no additional cost to them because these are 100% employee paid.’

Shestack´s advice is simple: “Stick with it,’ he says. “Voluntary benefits have the greatest growth potential over the next three years, with experts anticipating an increase of more than 30%. More and more insurance carriers are creating and offering voluntary benefits within their portfolio, based on a positive industry outlook for these products.

“As P&C agents and brokers try to maintain business revenue in a soft market, many are looking to expand their health and welfare offerings,’ Shestack adds. “They already have the attention of decision makers and can leverage those relationships. Agents and brokers need to know that if they aren´t bringing their clients voluntary benefits, it´s only a matter of time before somebody else will.’

McClelland points out that the greatest areas of concern for benefit managers are managing costs, keeping employees healthy, and determining which channel to use to administer benefits—whether that be directly with a vendor or through insurance exchanges created under the Affordable Care Act. “Brokers will need to take extra care to clearly understand a client´s benefit objectives to help guide them on this ever-changing path,’ he says.

“Although the economy is still recovering from the downturn, benefit managers are looking to agents and brokers for solutions,’ McClelland adds. “Having a full complement of solid and easy-to-administer offerings can distinguish them from their peers and help build long-term client
relationships.’

Seeker says, “There´s a saying, ‘Chaos creates opportunity.´ That´s certainly going to be the case over the next year or two. Voluntary allows brokers to consult around the chaos of reform, and it lets them offer products that help fill the gaps employees and employers will face going forward.’

The author
Dave Willis is a New Hampshire-based insurance freelance writer and regular Rough Notes magazine contributor.