The Field Is Wide Open For ‘Ancillary’ Group Product Sales
The future wellness of sales of ancillary group medical insurance products – dental, vision, long-term care, for example – could fluctuate depending on the final health care reform package bestowed on U.S. citizens.
It is too early to predict what this package will be and how everything that comprises the group market will mesh. Regardless, savvy life and health insurance professionals won’t be waiting to see what may or may not happen; they’ll be out making sales in the ancillary group products market.
Agents and brokers have the opportunity to fill in coverage gaps by marketing group products for dental, vision, and long-term care. These markets are relatively untapped, according to our sources. Success will come to the agents and brokers willing to learn about the group products and teach the employers and employees who populate the market.
Group Vision Insurance
The vision care market is broad and reasonably untouched.
“There’s a lot of interest right now, with all the uncertainty in the marketplace,” says Paul Disser, president and CEO of Spectrum Vision Systems, Overland Park, Kansas.
“Surprisingly enough, a lot of the brokers especially are looking at different products, and vision historically has been pretty much of a stepchild product, so they’re coming around, asking a lot of questions,” Mr. Disser continues. “We’re able to show them some concrete examples of where people have been able to really do customer service and make some decent income by simply selling benefits that haven’t been talked about a whole lot.”
Mr. Disser says that the addition of vision care benefits as an option in the group health insurance market is growing.
“However, according to recent surveys by organizations such as Hewitt Associates and A. Foster Higgins. the penetration of vision care benefits in the labor force still is less than 35% overall,” Mr. Disser explains.
“Among the general population, fewer than 25% have access to a formal vision care program. This lack of penetration leaves a wide-open field for sales among a market of 150 million eyeglass wearers in the United States.”
Mr. Disser says that the established agent has a natural prospecting base in his or her existing group clients. Referrals, targeted mailings, telemarketing, and radio/television/magazine advertisements also have proven effective.
“For the new agent, vision care benefits offer one of the most effective ‘door-openers’ in recent times.” Mr. Disser says.
He believes that because so few employers have vision care plans, the new agent can take advantage of the fact he or she doesn’t have to overcome any existing relationship barriers.
“In fact, the new agent can use vision care to establish a beachhead and move into other product areas from there,” Mr. Disser says. “Traditional methods such as mail, advertising, telemarketing, etc., also will work for the new agent, presuming the new agent has the budget to accommodate these methods.”
Because vision care plans come in all shapes, sizes, and price ranges. Mr. Disser believes it’s important for the professional agent first to determine the needs, wants, and budgetary requirements of his or her client/prospect to determine which plan is most appropriate.
For the past several years, cost containment has been the emphasis in medical care. Mr. Disser says. Because many decision makers in the labor force wear corrective vision eyewear (either glasses or contact lenses), a good place for the agent to open his or her presentation is with the prospect’s vision care needs, such as:
“Mr. Prospect. I couldn’t help but notice as I opened my proposal that the first thing you did was to put on your glasses for a better look. Did you realize that every day, more than 150 million people in the United States, including probably 70% of your employees, perform the same function to do their jobs? If I could show you a plan that would help your employees and save them money in the process, would you be interested?”
These opening questions usually, will work on any size group, Mr. Disser believes. He adds that in the small group category, because many carriers automatically have incorporated vision care benefits into the plan corpus, the presentation takes the form of explaining what benefits are included and how they work as opposed to a sales presentation.
Mr. Disser says that employers and insurers are adding vision benefits in one form or another, e.g., self-insured custom designed plans, administrative services only (ASO) arrangements, fully insured managed vision care plans, and so on.
Group Dental Insurance
“We see things changing with health reform,” says Karen M. Darrah. director of managed care, Ameritas Life Insurance Corp., Lincoln, Nebraska. “If they pick apart the dental coverage that would be available under the health reform. we’re going to have to come up with packages that compliment the national health care plan.”
The future may be unknown, but the agent who currently sells voluntary dental programs through Section 125 plans should do well.
“The introduction of Section 125 continues to open new voluntary markets for dental,” Ms. Darrah says. “Employers who were unable to introduce dental to their employees before because it wasn’t affordable—they couldn’t get the budget in place—now can. Section 125 is an avenue for totally voluntary benefits to be introduced to employees.”
Ms. Darrah says that the market has seen a huge shift in the last 10 years from dental being almost totally paid for by the employer to being paid for by the employee.
“The employees are becoming very aware of where their dollars are going and the utilization is going up at the same time, because they want something for the money they’re paying,” Ms. Darrah says, “They want to get every cent that they’re paying into that premium out for dental care.”
Ms. Darrah believes that agents need to look for new avenues when prospecting for dental cases. She suggests that agents contact a third-party organization, because these companies usually don’t have a dental plan in place.
She says that a broker could contact a carrier and say that he or she would like to align the carrier’s dental product with the third-party organization. The carrier would go in with the broker, and the broker would get a piece of the commission on every dental plan that is written tied to the third-party organization. Ms. Darrah points out that the broker would want to avoid a carrier that ties medical with dental. Because the third-party organization typically already would have its own medical plan, it wouldn’t want to compete with the dental part of the plan for any medical benefits tied to the dental.
There are other ways of prospecting, because of the Section 125 involvement, Ms. Darrah says. She suggests that an established agent could contact a previous large case that didn’t have the funding to offer dental before.
“By going into those larger companies and establishing a Section 125, it allows a whole new market that was not there before,” Ms. Darrah says. “The totally voluntary market is relatively open.”
Ms. Darrah adds that agents need to realize that dental is getting more complicated.
“The brokers need lo understand that they are going to have to educate the employers about what is covered inside a dental plan to get the sale.” she says. “If they don’t do that, they won’t succeed in the voluntary benefits market.”
Ms. Darrah points out that with Section 125, the agent is making two sales: one to the employer and one to each employee.
“The one to the employer has to show that the benefits are going to be attractive to the employees, that they’re going to sign up, that the rates are reasonable, and that the employer is not going to get screamed at by employees if the plan does not deliver high levels of service or offer value to the employees,” Ms. Darrah explains.
In the presentation to employees. she suggests that agents show the tax benefits of adding a dental plan in a Section 125 environment.
“The agent should show how the pre-tax dollars affect the premium to lessen what employees and employers really are paying for the dental,” Ms. Darrah says.
Dental care, and consequently dental insurance, is getting more expensive, Ms. Darrah says. Some of this has to do with Occupational Safety and Health Administration (OSHA)) requirements for infection control techniques, she explains. Liability coverage adds expense, as well. These things, coupled with the proposed health care reform, continue to complicate the dental market.
She also sees managed care coming into prominence in the dental arena.
“If people aren’t in managed care with PPOs and pre-paids in dental, they might as well get out of the business.” Ms. Darrah says. “The biggest problem we have with managed care in the dental business is that it’s not as readily accepted in some areas of the country. The dentists don’t believe they need to do any kind of fee negotiating, like the medical world was a couple years ago. So in some areas it’s hard to get the managed care concept in place, but it’s going to happen.”
Group Long-Term Care Insurance
There is an awareness issue and many of the employers nationally are unaware that they can sponsor group long-term care offerings, according to Karen Smith, FLMI, director of the long-term care department for Blue Cross & Blue Shield of Connecticut, Inc.. North Haven. Connecticut.
“I’m very excited,” Ms. Smith says. “Employers want to know what group long-term care is and what their responsibility is. They’re happy right now that it is employer-sponsored and employee-paid, because of budgetary reasons. And of course we’re happy that President Clinton is going to offer tax incentives for employers to offer these things and employees to purchase these things.”
Ms. Smith says that the market is wide open, but that the big drawback is lack of education.
“What I find is that the agents and brokers are not educated enough on long-term care insurance,” she explains. “They have not taken the time to find out the differences in the products and the differences between individual and group.”
After educating themselves, agents and brokers need to educate the employer, Ms. Smith says.
“Established agents need to let their employer accounts know that they are competent and that they understand the products in the market,” she says.
The agent’s presentation would differ by size. Ms. Smith believes that small employers definitely do not have manpower to help employees understand long-term care, so the agent’s involvement is greater. Large employers—more than 1,000 employees—have the human resource departments where the agent can train the trainer, and the trainer can get involved actually in helping the employee understand what long-term care is and how much to buy.
“[The agent has] misconceptions to overcome,” Ms. Smith explains, “so employees need to be educated, and this includes an awareness campaign.”
“What I’m Finding is that agents and brokers simply can’t dedicate that kind of time to this market at this point.” she says. “It’s a niche market. It’s the 20/80 rule: 20% of them are going to really understand what they’re doing, and they’re going to end up with 80% of the business.”
Ms. Smith foresees evolution for the group long-term care market. Because of this evolution, employees will have several choices when enrolling. Ms. Smith says that in general, the employee, his or her spouse, and the parents are eligible, but she has worked cases where the benefits were open to employee and spouse, the parent, the parent-in-law, the grandparent, the grandparent-in-law, the retiree, the retiree’s family, as well as the adult children of the employee. The drawback is that parents and in-laws, for example, are unused to being able to purchase insurance in this manner, so education is key. She also has created a product where a husband and wife can buy one long-term care insurance policy together, somewhat like a joint-life policy.
Ms. Smith believes that premiums will hold steady or possibly increase with product evolution. Among new benefits are lifetime inflation coverage. lapse protection, and third-party notification of lapse.
Age also affects the cost of group long-term care insurance, she says.
“In the group market, the age is declining,” Ms. Smith says. “Our average age of sale on our individual product is 67, and our average age in the group market is 44. If I take the group employees and add their family members, the average age goes up to about 52.”
Because these 44-year-old insureds will not be in claim for 30 or 40 years, the benefits must escalate over time and administration barriers have to be overcome.
She is finding that very large employers are starting to think about self-funding the product, and she says some companies are in a position to offer the administrative services.
“I believe that long-term care group insurance is here to stay, and it’s going to grow and expand,” Ms. Smith says. “The amount of interest is enormous, and the interest at the employee level is growing. The products are getting better and will continue to because of health care reform. President Clinton’s health care reform package proposes standards that guarantee consumer benefits that might not necessarily have been there in a certain state before. That is going to create quality products only underwritten by carriers that are in this for the benefit of the consumer. Reduced commissions are going to be part of this.”