Writing Employee Benefit Plans in the New Normal

The only thing certain about the future of the employee benefits market today is uncertainty. The marketplace is a work in progress due to the Patient Protection and Affordable Care Act recently enacted by Congress.

In 2014, most of the major elements of the new health-care law will be in place. These include the guarantee issue of insurance, coverage for pre-existing medical conditions, government regulated health plan purchasing exchanges, and mandated coverage. How these changes will affect the role of the agent in writing group and individual major medical and the rest of the employee benefit package — which includes primarily life, dental, vision, and disability insurance — remains unknown.

With significant changes on the horizon, now is the time for all agents to begin educating themselves, whether they work primarily on the Property & Casualty side or in the Life & Health arena. Anyone serious about thriving in this revised marketplace should be proactive in seeking out new technology such as social networking and new product offerings to learn how the carriers envision their future roles. Industry and agent associations can also provide valuable insight to their members.

Opportunities Abound, if You Know Where to Look

For several years now, the biggest growth area in benefits has been with ancillary products such as life, dental and disability coverage. The two major markets here are group and voluntary plans. Group plans are generally those where the benefit sponsor is the named insured. Voluntary plans are those that are written at the worksite; employees pay the full cost of coverage and have the premiums deducted from their pay checks.

While group ancillary is expected to remain a viable market, growth will be stagnant because employers are contributing less due to economic pressure. Bonnie Brazzell and Gil Lowerre, vice president and president respectively of Eastbridge Consulting in Avon, Conn., said in Benefits Selling magazine that voluntary benefits remain the biggest growth area. They noted that employer groups of 100 and under are least likely to offer these benefits; up to 35 percent of the market in some areas offer no voluntary benefits.

Mike Schlossberg, incoming president of the Broward Association of Health Underwriters and a 30-year veteran of life, health, and securities, looks at change optimistically and advises agents to seek out opportunities from the evolving market. "Included in the new health-care law is a government worksite sponsored long-term care provision," Schlossberg said. "This presents an opportunity for agents to write group and voluntary long-term care because, while the government plan is limited, it provides publicity for this benefit. As the population ages, long-term care is an undersold and important coverage item."

Commissions Take a Hit

The marketing of Medicare supplement plans, often referred to as Medigap plans, was more profitable before government standardization in 1991. The group and individual health marketplace now will follow suit due to the new health-care law. There will be less innovation in plan design. Commissions will plummet because the new law requires an accounting of a health plans percentage of claims versus administration costs and sets up an 80/20 rule, with claims on the 80 percent side. Commissions are administrative costs, and carriers are already reducing them in preparation.

Agents will now more than ever have to become advisors, explaining government rules and regulations, and identifying which carriers will best serve their prospects and clients. The current market in Medicare supplements will continue to grow as the Baby Boomers become a part of the equation on Jan 1, 2011.

Agents who would like to continue — or begin — writing health insurance need to view their new roles more as advisors than as field underwriters. They need to understand the importance of voluntary benefits and the huge potential of the senior marketplace, and remember that Boomers do not like being referred to as "seniors."

Rick Stark is a past president of the Broward Association of Life Underwriters and its current legislative chairman. He is president of Stark & Associates in Pembroke Pines, specializing in group and individual health insurance, and partner with the Senior Insurance Center in Coral Springs, a general agency specializing in Medicare and long-term care insurance. www.starkinsurance.net.