california broker february 2016

VOLUME 34, NUMBER 5 SERVING CALIFORNIA’S LIFE/HEALTH PROFESSIONALS & FINANCIAL PLANNERS FEBRUARY 2016

WellnessWorkout for

BrokersShaping upYour Sales

Also Inside:Large Group Health • Disability • Sales & Marketing • Wellness • 401(k)

GA View from the Top • Private Exchanges • Life Settlements • Life Insurance

© 2016 Landmark Healthplan Inc., All Rights Reserved www.LHP-CA.com

Group Voluntary ChiropraCtiC Benefits

from landmark healthplan

introduCing

Find out more today!

(800) 298-4875, Option 5

[email protected]

Employers enjoy measurable value and cost savings with chiropractic benefits:

Lower overall medical care costs. Landmark replaces high cost procedures with lower cost, natural alternatives.

Lower the cost of Workers Compensation insurance. As an alternative to more medically aggressive treatments, Landmark will enhance a company’s underwriting profile.

Speedy return to work. With less aggressive natural treatment alternatives, employees can return to work sooner while continuing treatment.

Consider theses additional advantages that Landmark offers your employers:

No premium cost to offer our plan, benefits are 100% employee paid.

Premiums are P.o.P. Plan compatible, which reduces the employers total taxable payroll and share of FiCA contributions.

increased employee satisfaction.

Landmark also offers fully-insured group sponsored plans, ASO self-funded services and Individual and Family chiropractic plans.

Alternative care benefit plans tailored to the needs of your clients. Contact Landmark today for rates and plan details.

$20 Office visit co-payment 20 annual visits

$20 Emergency co-payment $65 x-ray co-payment

NO prior authorization NO medical management

participating employees can save over $1,000, or more than 60% off retail, when using a landmark chiropractic plan versus paying typical retail charges for the same services.

Plan Benefits:

© 2016 Landmark Healthplan Inc., All Rights Reserved www.LHP-CA.com

Group Voluntary ChiropraCtiC Benefits

from landmark healthplan

introduCing

Find out more today!

(800) 298-4875, Option 5

[email protected]

Employers enjoy measurable value and cost savings with chiropractic benefits:

Lower overall medical care costs. Landmark replaces high cost procedures with lower cost, natural alternatives.

Lower the cost of Workers Compensation insurance. As an alternative to more medically aggressive treatments, Landmark will enhance a company’s underwriting profile.

Speedy return to work. With less aggressive natural treatment alternatives, employees can return to work sooner while continuing treatment.

Consider theses additional advantages that Landmark offers your employers:

No premium cost to offer our plan, benefits are 100% employee paid.

Premiums are P.o.P. Plan compatible, which reduces the employers total taxable payroll and share of FiCA contributions.

increased employee satisfaction.

Landmark also offers fully-insured group sponsored plans, ASO self-funded services and Individual and Family chiropractic plans.

Alternative care benefit plans tailored to the needs of your clients. Contact Landmark today for rates and plan details.

$20 Office visit co-payment 20 annual visits

$20 Emergency co-payment $65 x-ray co-payment

NO prior authorization NO medical management

participating employees can save over $1,000, or more than 60% off retail, when using a landmark chiropractic plan versus paying typical retail charges for the same services.

Plan Benefits:

800.542.4218 calchoice.com

A health care partner for California brokers and businesses for two decades.

Celebrating 20 years of Choice.

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- CalBrokerMag.com -4 | CALIFORNIA BROKER FEBRUARY 2016

ALSO IN THIS ISSUE:

LARGE GROUP HEALTH

Navigating the 101 and Beyondby Michael Wolff

Brokers who are not selling in the large-group space may want to think again. Agents are finding many large groups with no prior coverage.

Opportunities Abound for Agents in the New Large Group Market

by Neil CrosbyThe year 2016 will truly

be a year of growth for agents and

brokers with limitless opportunity.

SALES & MARKETING

Win Today or Relevance Tomorrow How the Power of Consultative Sell-ing Can Help You Grow Your Business

by Jim McCabeHelpful tips for weaving consultative selling into your daily conversations to become more valued among clients.

GA VIEW FROM THE TOP

by Leila MorrisGeneral agen-cy executives give their take on challenges and opportuni-ties in today’s market.

DISABILITY

Why Millennials Make Attractive Disability Insurance Prospects

by Jim FardenDon’t miss out on the opportu-nity to target Millennials for income protection solutions.

WELLNESS

Finding a Work-place Wellness Program Fit for Every Client

by Heidi BowmanMore employers un-derstand the benefits of moving to a holistic wellness strategy.

Helping Employers Maximize the Return on Investment in Wellness

by Dinesh ShethHow employers can increase the ROI from their wellness investments.

PRIVATE EXCHANGES

An Option for the Futureby Dorothy Miraglia King

Is a private exchange part of your client’s benefit strategy? If not, you may want to consider it.

The Next Health ExchangesHave Already Been Built

by Joel WhiteCongress has an op-portunity to modify the exchange system to engage consumers.

LIFE SETTLEMENTS

A Primer for Healthy Insuredsby Robert Stark

Why a life settlement (traditional or no LE) can be a great option in certain circumstances.

LIFE INSURANCE

Trends That Are Shaping Today’s Wealth Transfer Policies

by Palmer WilliamsClients who’ve been hesitant to use life insur-ance for wealth transfer can now enjoy the benefits and maintain control of the policy.

401(K)

New Regulations for Employersby Ellen Bartholemy

Brokers need to understand the latest regu-lations and guidelines when selling 401(k)s and other qualified retirement plans.

Guest Editorial .........................6Annuity Sampler .....................8New Products ...................... 35

News ....................................... 42Classified Advertising ....... 46Ad Index ................................. 46

PUBLISHERRic Madden

email: [email protected]

EDITOR-IN-CHIEFKate Kinkade, CLU, ChFC


SENIOR EDITORLeila Morris


ART DIRECTOR/PRODUCTION MANAGERSteve Zdroik

ADVERTISINGScott Halversen, V.P. Mktg.


CIRCULATIONemail: [email protected]

BUSINESS MANAGERLexena Kool


LEGAL EDITORPaul Glad

EDITORIAL AND PRODUCTION:McGee Publishers

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Phone No.: 818-848-2957email: [email protected].

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California Broker (ISSN #0883-6159) is published monthly. Periodicals Postage Rates Paid at Burbank, CA and additional entry offices (USPS #744-450). POSTMASTER: Send address changes to California Broker, 217 E. Alameda Ave. #207, Burbank, CA 91502.

©2016 by McGee Publishers, Inc. All rights reserved. No part of this publication should be reproduced without consent of the publisher.

No responsibility will be assumed for unsolicited editorial contributions. Manuscripts or other material to be returned should be accompanied by a self-addressed stamped envelope adequate to return the material.

The publishers of this magazine do not assume responsibility for statements made by their advertisers or contributors. Printed and mailed by Southwest Offset Printing, Gardena, CA.

FEBRUARY 2016

TABLE OF CONTENTS

• Electronic Enrollment and Benefits Administration• ACA Tracking • Optional 1094/1095 Reporting for a Nominal PEPM Fee• Employer/Employee Interface• Renewal Marketing and Commission Tracking

Call Today for More Information

(800) [email protected]

Protect and Grow Your Book at No Cost to You or Your Clients

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www.thebrokersga.com


GUEST EDITORIAL

SIGN NEW BUSINESSGET FREE MARKETING

Covered California for Small Business helps you sell health insurance plans to small businesses in California. And we’re not just talking ideas. It’s materials and resources.

For every group you sign with 10 employees or more, you get a mailing of 1000 FREE POSTCARDS — including customization, printing, postage and a prospect list. You choose one of our professionally designed postcards and we take care of the rest!

Call today to learn how to order your free [email protected](844) 332-8384

SPECIAL OFFER!

Looking for more choices for your health plan?

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4/30/15 11:09 AM

Health care has emerged as one of the flash points in the Democratic presidential race.

Vermont Sen. Bernie Sanders has been a longtime supporter of a concept he calls “Medicare for All,” a health system that falls under the heading of “single-payer.”

Sanders released more details about his proposal shortly be fore the Democratic debate in South Carolina. “What a Medicare-for-All program does is finally provide in this country health care for every man, woman and child as a right,” he said in Charleston.

Sanders’ main rival for the nomination, former Secretary of State Hillary Clinton, has criticized the plan for raising taxes on the middle class and said it is politically unattainable. “I don’t want to see us start over again with a contentious debate” about health care, she said.

Some of the details of Sanders’ plan are still to be released. But his proposal has renewed questions about what a single-payer health care system is and how it works. Here are some quick answers.

WHAT IS SINGLE-PAYER?Single-payer is not the same thing as socialized medicine. In a truly socialized medicine system, the government not only pays the bills, but also owns the health care facilities and em-ploys the professionals who work there.

The Veterans Health Administration (VA) is an example of a socialized health system run by the government. It owns the hospitals and clinics and pays the doctors, nurses and other health providers.

Medicare, on the other hand, is a single-payer system in which the federal government pays the bills for those who qualify, but hospitals and other providers remain private.

WHICH COUNTRIES HAVESINGLE-PAYER HEALTH SYSTEMS?Fewer than many people think. Most European countries never had or no longer have single-payer systems. “Most are basically what we call social insurance systems,” said Gerard Anderson, a professor at Johns Hopkins Bloomberg School of Public Health, who has studied international health systems. Social insurance programs ensure that almost everyone is covered. They are tax-payer-funded but are not necessarily run by the government.

Germany, for example, has 135 “sickness funds,” which are essentially private, nonprofit insurance plans that negoti-ate prices with health care providers. “So you have 135 funds to choose from,” Anderson said.

Nearby, Switzerland and the Netherlands require their resi-dents to have private insurance (just like the Affordable Care Act does), with subsidies to help those who cannot other-wise afford coverage.

And while conservatives in the United States often use Great Britain’s National Health Service as the poster child for a socialized system, there are many private insurance options available to residents there, too.

Among the countries that have true single-payer systems, Anderson lists only two — Canada and Taiwan.

ARE SINGLE-PAYER PLANS LESS EXPENSIVE THAN OTHER HEALTH COVERAGE SYSTEMS?Not necessarily. True, eliminating the profits and duplicative administrative costs associated with hundreds of different private insurance plans would reduce spending, perhaps as much as 10% of the nation’s $3 trillion annual health care bill, Anderson said. But, he noted, once that savings is achieved, there won’t be further reductions in following years.

More important, as many analysts have noted, is how much health services cost and how those prices are determined. In most other developed countries, even those with private insur-ance, writes Princeton Health Economist Uwe Reinhardt, prices “either are set by government or negotiated between associa-tions of insurers and providers of care on a regional, state or na-tional basis.” By contrast, in the U.S., “The payment side of the health care market in the private sector is fragmented, weaken-ing the bargaining power of individual insurers.”

WOULD MEDICARE FOR ALL BE JUST LIKE THE EXIST-ING MEDICARE PROGRAM?No, at least not as Sanders envisions it. Medicare is not nearly as generous as many people think. Between premiums (for doctor and drug coverage), cost-sharing (deductibles and coinsurance) and items Medicare does not cover at all (most dental, hearing and eye care), the average Medicare beneficiary still devotes an estimated 14% of all household spending to health care.

Sanders’ plan would be far more generous, including dental, vision, hearing, mental health and long-term care, all without copays or deductibles (which has given rise to a lively debate about how to pay for it and whether middle-class families will save money or pay more).

WOULD PRIVATE INSURANCE COMPANIES REALLY DISAPPEAR UNDER SANDERS’ PLAN?Probably not. Private insurers are fully integrated into Medicare, handling most of the claims processing and providing supple-mental coverage through “Medigap” plans. In addition, nearly a third of Medicare beneficiaries are enrolled in private managed care plans as part of the Medicare Advantage program.

Creating an entirely new federal claims processing structure would in all likelihood be more expensive than continuing to contract with private insurance companies. However, Sanders makes it clear insurers in the future would no longer be the risk-bearing entities they are today, but more like regulated utilities. H

Julie Rovner, the Robin Toner Distinguished Fellow, joined Kaiser Health Network after 16 years as health policy correspondent for NPR, where she helped lead the network’s coverage of the passage and implementation of the Affordable Care Act. A noted expert on health policy issues, Rovner is the author of a critically-praised reference book Health Care Politics and Policy A-Z, now in its third edition.

DEMOCRATIC CANDIDATES DEBATE “SINGLE-PAYER,” BUT WHAT DOES THAT MEAN? By JULIE ROVNER for KHN.ORG

SIGN NEW BUSINESSGET FREE MARKETING

Covered California for Small Business helps you sell health insurance plans to small businesses in California. And we’re not just talking ideas. It’s materials and resources.

For every group you sign with 10 employees or more, you get a mailing of 1000 FREE POSTCARDS — including customization, printing, postage and a prospect list. You choose one of our professionally designed postcards and we take care of the rest!

Call today to learn how to order your free [email protected](844) 332-8384

SPECIAL OFFER!

Looking for more choices for your health plan?

SHOP.postcards.2015.newlogo.indd 9

4/30/15 11:09 AM


ANNUITY SAMPLER

Type Mkt. Comm. Ratings Product SPDA Initial Guar. Bailout Val. Min. StreetCompany Name Bests Fitch S&P (Qual./Non-Qual.) FPDA Interest Period Rate Surrender Charges (y/N) Contrib. (May Vary)

American Equity A- BBB+ A- ICC13 MYGA (Guarantee 5) (Q/NQ) S 2.70%* 5 yr. None 9%, 8, 7, 6, 5, 0 Yes $10,000 (Q) & 3.00%, age 0-75 & $10,000 (NQ) 2.10%, age 76-80** ICC13 MYGA (Guarantee 6) (Q/NQ) S 2.90%* 6 yr. None 9%, 8, 7, 6, 5, 4, 0 Yes $10,000 (Q) & 3.00%, age 0-75 & $10,000 (NQ) 2.10% age 76-80** ICC13 MYGA (Guarantee 7) (Q/NQ) S 3.15*% 7 yr. None 9%, 8, 7, 6, 5, 4, 3, 0 Yes $10,000 (Q) & 3.00%, age 0-75 & $10,000 (NQ) 2.10%, age 76-80** *Effective 1/4/16. Current interest rates are subject to change on new issues. **Commission may vary by issue age and state. See Commission Schedule for details

.American General Life A A+ A+ American Pathway S 2.50%*a 5 yr. None 8%, 8, 8, 7, 6, 5, 4, 3, 2, 1, 0 Yes $10,000 (Q &NQ) 1.5% age 0-75Insurance Companies Solutions MYG 2.65%*b .75% age 76-85 *CA Rates Effective 11/2/15. First year rate includes 1.50% interest bonus. a (less than $100K ; b (100K or more)

American General Life A A+ A+ American Pathway S 1.60%*a 5 yr. None 9%, 8%, 7%, 6%, 5%, 0% No $5,000 (NQ) 2.00% age 0-85Insurance Companies Fixed 5 Annuity 1.80%*b $2,000 (Q) 1.00% age 86-90 *CA Rates Effective 11/2/15. Includes 2.00% 1st year bonus, 1.00% base rate subsequent years. a (less than $100K) b(100K or more)

American General Life A A+ A+ American Pathway S 2.00%*a 5 yrs. None 9%, 8%, 7%, 6%, 5%, 4%, 2%, 0% No $5,000 (NQ) 3.00% age 0-85Insurance Companies Fixed 7 Annuity 2.20%*b 1.50% age 86-90 *CA Rates Effective 11/2/15. First year rate includes 4.0% bonus 1st year. a (less than $100K) b(100K or more)

American General Life A A+ A+ American Pathway F 4.15%* 1 yr. None 8%, 8%, 8%, 7%, 6%, 5%, 3%, 1% 0% No $5,000 (NQ) 2.20% age 0-75 Insurance Companies Flex Fixed 8 Annuity (Q/NQ) $2,000 (Q) 1.70% age 76-80 1.20% age 81-85 *CA Rates Effective 11/2/15

Genworth Life & A A- A- SecureLiving Rate Saver S 2.80%* 7 yrs. None 9%, 8, 7, 6, 5, 4, 3 Yes $25,000 (NQ) Varies 0-85Annuity Insurance Co. 2.65% 5 yrs. None 9%, 8, 7, 6, 5, ,0 *Effective 8/19/15. Based on $250K or more.

Great American Life A A+ A+ SecureGain 5 (Q/NQ) S 2.40% 5 yrs. N/A 9%, 8, 7, 6, 5 Yes $10,000 2.50% 18-80 (Q), 0-80 (NQ) Effective 6/8/15. Includes .25% first-year bonus and is for purchase payments over $100,000. Escalating five-year yield is 2.40%. For under $100,000 first-year rate is 2.25%. Escalating rate five-year yield 2.25%. 1.50% 81-89 (Q&NQ)

Great American Life A A+ A+ SecureGain 7 (Q/NQ) S 2.65% 7 yrs. N/A 9%, 8, 7, 6, 5, 4, 3 Yes $10,000 3.50% 18-80 (Q), 0-80 (NQ) Effective 6/8/15.. Includes 1.00% first-year bonus and is for purchase payments over $100,000. Escalating seven-year yield is 2.54%. For under $100,000 first-year rate is 2.55%. Escalating rate seven-year yield 2.44%. 1.50% 81-85 (Q&NQ) Great American Life A A+ A+ Secure American (Q/NQ) S 1.75%* 1 yr. N/A 9%, 8, 7, 6, 5, 4, 3 No $10,000 5.75% 0-70 4.65% 71-80 *Effective 6/8/15.. Eff. yield is 2.77% based on 1.75% first year rate, 1.00% available portion of 10% annuitization bonus (available starting in contract year two) and 0.02% interest on available portion of bonus at the rate of 1.75%. 4.40% 81-89 Surrender value interest rate 1.75%. Accepts additional purchase payments in first three contract years. COM12255

The Lincoln A+ AA AA MYGuarantee Plus 5 S 1.55%* 5 yr. None 7%, 7, 6, 5, 4, 0 Yes $10,000 (Q/NQ)Insurance Company **Rates Effective 2/1/16 for premium less than $100,000 and are subject to change

The Lincoln A+ AA AA MYGuarantee Plus 7 S 2.00%* 7 yr. None 7%, 7, 6, 5, 4, 3, 2, 0 Yes $10,000 (Q/NQ)Insurance Company **Rates Effective 2/1/16 for premium less than $100,000 and are subject to change.

North American Co. A+ AA- A+ Gaurantee Choice (Q/NQ) S 2.60%*a 5 yr. None 10, 10, 9, 9, 8 Yes $2,000 (Q) 2.50% (0-80)for Life and Health 2.85*b $10,000 (NQ) 1.875% (81-85) *CA rates effective 1/5/16 – a (less than $200K) b(200K or more) 1.25 (86-90)

Reliance Standard A+ A Eleos-MVA S 3.50%* 1 yr. None 8%, 7, 6, 5, 4 Yes $10,000 3.25%***Effective 7/28/15. Includes 1.50% 1st yr. bonus. Min. guarantee is 1.00%. **Reduced 20% ages 76-80, and 40% ages 81-85

Reliance Standard A+ A Apollo MVA (Q/NQ) S 4.45%* 1 yr. None 9%, 8, 7, 6, 5, 4, 2 Yes $5,000 4.00% to age 75**Includes 2.00% 1st yr. bonus. Min. guarantee 1.00% **Reduced 20%, ages 76-80, and 40% ages 81-85. Effective 7/28/15

Symetra Life, Inc. A A A Custom 7 (Q/NQ) S 3.05%* 7 yrs. N/A 8%, 8, 7, 7, 6, 5, 4, 0 No $10,000 Varies*Effective 11/17/15. 2.55% base rate with no guaranteed return of purchase payments. Plus 0.50% bonus for $250,000 and above.

JANUARY 1, 2016

(*Guarantee Return of Premium) (Q/NQ)

*(includes a 2% interest rate bonus for first year)

(*Guarantee Return of Premium) (Q/NQ)

Orange County Association of Health Underwriters

Business Development Summit 2016

When: 16 Feb, 2016 • 7:00 AM - 3:30 PMLocation: Hilton Costa Mesa • Investment $30

OCAHU Vision 20/16: Looking Ahead(20/16 is like seeing 20/20)

How clear is the health care industry picture in 2016?You need to see what’s coming in advance so you can present a

clear vision and strategy for your clients. Get your C.E credits.

Keynote Speakers:

Breakout “Group” SessionsHIPPA Privacy & Security: Business Associates Responsibilities & Liabilities Part II

Dorothy Cociu (1-Hour CE | Course: 331833)HITECH & Cybersecurity: What to Look For & How to Protect Your Agency

Frans Trisnadi (1-Hour CE | Course pending approval w/CDI)“Senior” Sessions (1-Hour CE | Course pending approval w/CDI)

Technology “Shark Tank”Marketing Sessions

World Class Selling - Centrac

OCAHU is proud to host its annual trade show and education day. The 2015 OCAHU event drew morethan 475 industry professionals. Currently OCAHU’s membership, attendance at monthly meetings, and overall

chapter activity continues to grow thanks to all of your collective efforts. We look forward to\seeing you again for aday that will bring into focus successes from the past and a truly positive vision for the future!

Great C.E. Topics! Great Information! Great Prizes! Great Opportunities!Register online at www.ocahu.org

Morning SpeakerDiane Laird, MPH

Chief Strategy OfficerMemorialCare

“Impact of Insurer & HospitalConsolidation on Pricing”

Afternoon SpeakerJohn NelsonChief Executive OfficerWarner Pacific“Vision 20/16:Looking Ahead”


HEALTHCARE

No, this is not a travel log recant-ing my last vacation along the beautiful California coast. In-

stead, it’s a basic guide to selling in the large group (101 and over) market along with some reflections on recent trends.

Brokers who are not selling in this space may want to think again. Agents are finding that there are more large groups with no prior coverage than they may have thought. The Employer Shared Responsibility rules within the ACA have brought these groups out of hiding as they face penalties for not of-fering coverage that is affordable and of minimum value.

Although the small group market continues to experience many chang-

es that require a broker’s guidance, there is more opportunity than ever to help large employers make sound decisions for their companies and em-ployees. There are several differences between marketing a small and a large group. Brokers should keep these in mind as they equip themselves to bring the right solutions to the table.

DO YOUR HOMEWORKA broker who is developing a large group request for proposal (RFP) for a prospect is a bit like an attorney who is preparing for a trial. The research, attention to detail, and time spent de-veloping your case have a direct effect on the outcome. So, not only do your homework, but also you need to start

early – not days or weeks, but months ahead of the requested effective date. Depending on the size of the group, 90 to 100 days is a good benchmark.

The process of formulating a large-group quote is quite different from that in the small-group market. Most nota-bly, the underwriting of a large group is done up front before a quote is re-leased by a carrier. This means that the time spent gathering an accurate census and the required information/documentation happens before you even see a rate. (Yes, health condi-tions play a large part in determining rates as do current and anticipated par-ticipation, age, gender, home zip code, and industry). In general, the more information that is gathered, includ-ing claims and rate history, the greater the chance there is of getting the best possible rates.

Successful brokers know that the key to a large-group strategy that meets budgetary and coverage needs is asking the right questions of their prospects and listening carefully to the answers before they develop a proposal. The ACA has created a whole new set of questions that need to be answered to determine who is eligible for coverage and whether an employer is part of a larger population by virtue of common ownership and/or tax law. Many times, the composi-tion of a group may not be what you or even the owner thinks. At this stage, a large group qualifying questionnaire or checklist can be your greatest asset.

CHECK YOUR FACTSOnce you have a complete census for your prospect and have gathered information about current coverage

Navigating the101 and Beyond

BY MICHAEL WOLFF

A BASIC GUIDE TO SELLING IN THE LARGE GROUP (101 & OVER) MARKET

2016–25th ANNUAL IEAHU SALES SYMPOSIUMMarch 10, 2016–Ontario Convention CenterFantastic Speaker Line-up!!!!

The Highway Has Changed, What Road Are You On?

Date: Thursday, March 10, 2016Time: 7:00am to 3:30pm

Where: Ontario Convention Center 2000 Convention Center Way, Ontario, CA

Cost: If Purchased by 03/03/16:Member–$45, Non-Member–$75Purchased day of Symposium:Member–$75, Non-Member–$100

PriceIncludes:

Continental Breakfast& Lunch and earn

CE Credits for attending

Register On-Line Today: http://guestli.st/400125

Phone: 866-922-8387 Email: [email protected]


HEALTHCARE

for groups who have a plan in place (renewal, benefit summaries, etc.), put on your underwriter hat and look for details that don’t add up or simply don’t make sense. These include dis-crepancies between the renewal and the census, invalid dates of birth and/or home zip codes, and the absence of any large claims data. It is best that you find them before you submit your RFP to the carrier rather than waiting until later in the game when they are requested of you. This also may help your chances of getting a quote when more than one broker presents the group to the carrier – a.k.a. “duplicate activity.” Carriers will be more willing to release a quote when the facts are clear and complete.

PREPARE YOUR STRATEGY A very successful large group agent in the Inland Empire once told me that an RFP without a sound strategy is tan-tamount to throwing spaghetti against the wall to see whether it will stick. And any of the best large group car-rier reps will always ask for the story of why the group is shopping (better ben-efits, lower rates, ACA compliance) and what you believe to be the best combination of products to meet their needs. Be prepared to answer these all-important questions by using what you learned during your initial pros-pect meetings, including any special circumstances surrounding the group (e.g. controlled group status, large vari-ances in employee wages).

There are a lot of good options out there for large groups. Your prospect may want to consider a fully insured program, partial or full self-insurance and/or a minimum essential coverage (MEC) plan combined with critical ill-ness and hospital indemnity plans.

Self-insurance is on the rise, as Employer Shared Responsibility rules leave companies in search of an afford-able option to increase participation in the plan. With this option, remember to always do your due diligence before you select a claims payer or third-party administrator (TPA).

Groups looking for a bundling of em-ployee benefits and additional servic-es such as HR, compliance, workers’ compensation or payroll alongside em-ployee benefits may want to consider

PEOs or private exchanges. Many of these services can also be added to core medical offerings through a bun-dled technology solution.

The service and account manage-ment strategy is of equal importance when marketing large groups. Who is the point person? Who is the service person? Where does the buck stop? These important staffing decisions cannot be overlooked when managing the expectations of a large employer.

Finally, be prepared with a plan of how you are going to generate revenue. Will you adopt a fee-based model or ask that commissions be built into the rates?

You are ready to submit your RFP to the carriers of your choosing when you have examined all of the angles and anticipated most of the questions you may be asked during the underwriting process.

BE READY WITH PLAN BWhat if, despite your best efforts as outlined above, the quote comes back and you find that your prospect is not a good fit for your proposed strategy? If your prospect has not had prior cov-erage and, like many, is striving for ACA compliance, perhaps a two-year strategy is in order. Employers that have never paid a portion of their em-ployees’ benefit premium are suffering from sticker shock even when present-ed with very competitive rates. Simi-larly, employees who are contemplat-ing the purchase of medical insurance for the first time have a very different understanding of affordability than that which is derived from the calculators.

As agents try to balance all of the moving pieces to keep their prospects away from penalties, provide employ-ees with meaningful benefits and not break the budget, many find them-selves putting one solution in place for year one, with an end goal of achieving a different solution in year two.

Remember, too, that in addition to having a second strategy, coverage op-tion, or funding mechanism in mind, there may be room for negotiation with carriers when it comes to holding rates for the next effective date, reducing commission in order to lower rates, or writing a short or long contract to achieve the group’s ideal effective date during year two.

EXPLAIN THE OPTIONSTHOROUGHLYBusiness owners and their staffs know their industries, for certain, but often they neither speak the language of employee benefits nor have a realis-tic idea of what benefits cost. Because carriers can and do re-rate groups if as-sumptions regarding the census, par-ticipation or the health of the group are different than the actual enrollment, your thorough review with the pros-pect must include the what-ifs.

You know your prospect better than anyone does. If you know that the decision-maker may take a while mull-ing over the options, don’t expect to be able to close the deal in a couple of weeks. Avoid putting the group through a rushed enrollment only to find out that you cannot meet partici-pation or have missed the cutoff date to submit your case.

READY, SET, GONew to selling in the large group mar-ket? General agencies employ spe-cialists who are skilled at guiding you through each of the steps above in order to help you complete the sale and provide your clients with the best products and services for their particu-lar needs and budgets.

When you have done an outstanding job for your prospects, remember to be actively involved throughout the year with any and all that turn into clients and revisit next year those you were not able to convert. Remember, too, that business owners know other busi-ness owners and decision-makers, so don’t forget to ask for referrals to keep your large group pipeline full. H

Michael Wolff is president of Dickerson Employee Benefits, a general agency serving brokers and their clients for the past 50 years. A graduate of Germany’s Albert Ludwig University of Freiburg, Wolff holds a law degree with qualification as a superior court judge in Stuttgart. Before joining Dickerson in 2005, he was recruited into the German Diplomatic Service where he headed the legal, press and cultural divisions in several countries, ending with a post that brought him to California with the Los Angeles German Consulate. Dickerson Employee Benefits is headquartered near Dodger Stadium in Los Angeles and offers employee benefits and worker’s compensation products, con-cierge service and technology tools. Wolff can be reached at [email protected].

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HEALTHCARE

and publications, and providing links to valuable resources. Agents and bro-kers also offer professional relation-ships that come from their experience and connections.

All of the ACA provisions suggest that agents and brokers have new opportunities to retain and grow their large-group business, including the IRS requirements as well as the new size guidelines for large employers.

The fact that large groups can no longer be declined for pre-existing health conditions is a huge plus, which opens many doors. Another opportu-nity is that carriers are allowing lower participation, so employers who have not been able to meet normal partici-pation requirements may now be able

to qualify for a large-group plan.As you are aware, the ACA’s Cadil-

lac Tax has been delayed another two years, which will push it away another four years from now. There is a good chance that it will be repealed com-pletely. Employers who were worried about having more expensive plan designs needn’t worry about that for the time being. That’s great news for

agents and brokers. They no longer have to help clients select reduced benefit plans for employees and their dependents in order to stay under the allowed premium maximums and avoid the 40% excise tax on premium amounts over the allowed thresholds.

There is another provision that af-fects large-group verses small-group premiums. Large group claims ex-perience is subject to an 85% MLR, verses the 80% MLR for small group and individual. Of course, all of this is borne by the carriers, not the employ-ers, but it leaves carriers a lower mar-gin for error with many large-group employers. It will give carriers more flexibility with rates in the expanding small-group market.

Overall, it’s increasingly clear to all employers, whether small group or large group, that they need help. They

need their professional agent/bro-ker. They are keenly aware that

they need assistance from a professional – someone who deals with the ACA on a daily

basis, can guide them without crossing the line of providing legal

advice, and help them go back to running their busi-ness when they have the confidence that their benefit needs are in order. Many employers have told

me that their confidence rises tremendously if their advi-

sor is a member of a professional association, such as the Califor-nia Association of Health Under-writers (CAHU) or the National Association of Insurance and

Financial Advisors (NAIFA). Em-ployers have found that agents and

brokers who are members of these great organizations are more prepared, receive more information, and can of-fer more pertinent advice than can most of those who are not members.

The year 2016 will truly be a year of growth for agents and brokers with lim-itless opportunity. Keep reading, learn-ing, and investing in yourself for your future; it will pay off big time for you in this ever-changing marketplace. H

Neil Crosby is director of Sales for Warner Pacific General Agency.

The year 2016 is a year of change for California’s smaller large-group employers. As you know,

the ACA has changed every-thing in the minds of many employers that fall into the 51+ size margins. Employ-ers with 51 to 100 employ-ees had been in the mid-market, large-group segment. But they are preparing for the fact that they are now small-group employers. Or they kicked the can down the road one last time and will have to deal with the new provisions at the end of 2016.

Meanwhile, large-group employers are still trying to determine what the ACA provisions mean to them. They are looking at having to comply with the pay-or-play employer mandate that requires them to provide minimum-essential coverage to employees, comply with new IRS tax reporting documents, and comply with many other ACA provisions. What is certain is that large employers, throughout California, are searching for meaning-ful, relevant information to determine what they need to do moving forward.

They need their agent/broker to pro-vide information and direct them down the path of health care reform, such as giving verbal advice, providing articles

OPPORTUNITIES ABOUND FOR

AGENTS IN THE NEW LARGE

GROUP MARKETBY NEIL CROSBY

- CalBrokerMag.com -FEBRUARY 2016 CALIFORNIA BROKER | 15

SALES & MARKETING

Win Today or Relevance TomorrowHOW THE POWER OF CONSULTATIVE SELLING CAN HELP YOU GROW YOUR BUSINESS

Many brokers and agents in California are meeting with their sales managers to kick

off a whole new year of big, intimidat-ing goals. We all have different goals, whether it’s achieving a giant sales number, learning a new product, or adding a new territory. This article will give you tips for weaving consul-tative selling into your daily conversa-tions to become more valued among clients and prospects to meet your 2016 goals.

WHAT CLIENTS WANTIt’s pretty simple why our clients chose us as their agent or broker. They want our expert help. They are too busy to do the research, compare pricing, and stay on top of legislation; they expect their agent or broker to do it for them.

Our clients also expect us to un-derstand their business. We need to know their operations, their competi-tors, their pain points, and their suc-cesses. As their agent or broker, it’s up to us to know their financial and busi-ness structure, their challenges, their competitors, and their goals.

Consider helping your clients from a holistic business perspective. For ex-ample, are they trying to fill a specific position? Help them network. Are they running into a contractual challenge? Recommend legal counsel. A little ef-fort will create trust, and enhance the business relationship, which will pay off for everyone in the long run.

ASK QUESTIONS How do you become more consulta-tive? Ask questions beyond what you need to get your job done. Find out what problems your client is trying to solve today and in the next three to five years. What pain points are the cli-ent’s problems creating? Do the prob-lems span multiple departments or lo-cations? Are the problems increasing? Are there competing issues?

HOW DOES YOUR CLIENT OR PROSPECT MAKE DECISIONSWho is the decision-maker? Your con-tact may be in human resources or fi-nance, but are there other stakeholders in the mix? Since every company is dif-ferent, make sure that your sales pre-sentations speak to the full audience ahead of time. It is 100% acceptable to ask who will be reviewing your propos-als. It is 100% acceptable to ask if there are questions or areas you should cover in order to satisfy all parties, even those who won’t be present at your meeting.

Know your client or prospect’s cul-ture. When you present a solution, il-lustrate how it ties into their culture. Doing so will strengthen your offering, and show that you not only understand their culture, but also that you care about why it is critical to their success. That’s the sign of a true business part-ner, not just a transactional vendor.

COST VERSUS VALUEIn any industry, most buyers fall into two categories: those who value cost and those who value quality and ser-vice. The problem with buyers who val-ue cost is that there is always a lower cost option. Always. Clients who only value cost will leave you at renewal if a cheaper option comes along.

Be respectful of your own time, and seek clients who are looking for a long-term business partner. How? When you present your solution, show that you’ve done your research. Show them the math, not only for the sale, but also to show how it could save money in the long run or for employ-ees. Show the additional benefits of your solution. Maybe it’s a tax benefit, increased employee communication and engagement, or something that could help human resources improve morale. If possible, offer evidence in favor of your solution. If you are of-fering something that will save em-ployees money, demonstrate it with a graph or calculator.

RESEARCH IS CRITICALTO UNDERSTANDINGAdjust your message to your client’s needs. Ask what is possible before engaging. For example, if they say the budget is $30,000, don’t present something that is $60,000. If your cli-ent needs bilingual service, deliver that option. Show that you are listening.

Secondly, use language that’s con-sistent with your client’s style. If they refer to employees at teammates, you should too. If they refer to locations as storefronts, you should too. Make it easy for them to translate your propos-al into their terminology to share within their organization.

VALIDATE BEFORE OFFERING YOUR SOLUTIONDo your fact-checking. Ten minutes of your time could make a huge differ-ence in your presentation. Also, inves-tigate any internal politics. Is the issue the same in everyone’s eyes? Since your proposal may be shared across departments, make sure that you are sensitive to the whole organization.

KNOW YOUR STRENGTHSDon’t try to be all things to all people. When you need help, find partners who provide that expertise. Don’t try to fake it; it will just backfire. Maybe that partner will remember you next time and give you an opportunity.

GROW WITH YOUR CLIENTSKeep up on industry trends and forward meaningful information to your clients, whether it’s a news article about them or a competitor or about legislation. Join LinkedIn groups to get relevant news that helps you and your clients. Once you create value, you will be valued, and your clients will be more likely to stay with you and refer you to their peers. H

Jim McCabe is a vice president of Sales Strategy for Sterling Administration. For more information, visit [email protected].

BY JIM MCCABE


GENERAL AGENCY

General Agency View From the Top

HOW HAVE GAs CHANGED OVER THE PAST FEW YEARS? David L. Fear, Sr., president and CEO of Shepler & Fear General Agency: The GA market in California is different. In California, GAs have had a strong role in delivering competing health care products for many years. However, like other industries, there have been acquisitions and mergers, which will continue as you see fewer GAs in the California marketplace. Some larger GAs have expanded with a multi-state presence while others remain as strictly regional. The big-gest changes I see are that GAs are not just product wholesalers anymore, but have taken on more of a consulta-tive role with their clients being agents and brokers who no longer get the support from the carriers that was pro-vided in the past. GAs have expanded their services into areas where carriers have retreated due to cost constraints. California is fortunate to have multiple, competing GAs in this market, which bodes well for their agent clients.

Dennis Fallon, senior vice president, Insurance Field Sales and Services for BenefitMall: To meet the changing needs of their brokers, general agen-cies have broadened their capabilities

through diversified product and ser-vice offerings. These additional offer-ings are designed to increase agent revenue streams, compete in the marketplace, and address employee and employer benefit needs to pro-tect health benefit books of business. Many general agencies are building proprietary tools and services for their brokers and employer groups while others are partnering to create best-in-class offerings to meet the needs of brokers and employers. As today’s business environment continues to evolve, general agencies are expand-ing their geographic footprint. The ability to provide not only a diversified product and service offering, but also multi-state support, is now a base re-quirement to provide the support that brokers and their clients expect.

Jessica Word, president of the Word & Brown General Agency: The Af-fordable Care Act (ACA) has undeniably shaped our service model, putting an in-creased emphasis on ACA compliance. The transition of 51- to 100-employee groups to the small-group market has increased demands for products and services that have been tradition-ally reserved for the mid-sized market: composite (tier) rating, rich coverage options, customized benefit solutions, integrated billing, and list enrollments. That has led to these becoming require-ments across our customer base and, like our brokers, GAs have become part insurance sales and support and part technology developer.

Jim McCabe, vice president of Sales Strategy for Sterling Administra-tion (McCabe is providing answers as they relate to a TPA, not a GA): Over the past few years, consumers across all types of businesses are doing busi-ness via mobile. We’ve seen a big in-crease in our mobile customers. We’ve seen an uptick in our Spanish-speaking

customers. We are also increasingly being asked to provide more back-shop support in compliance, technol-ogy, and client communication to the brokerage community.

Ken Doyle, executive director Sales for LISI: Despite minor idiosyncrasies here and there, the value proposition of a GA basically remains the same. The bigger question is how will they be changing in the upcoming years, and what will they choose to implement?

Colleen M. Gimbel, vice president of Marketing/Recruitment/Compli-ance for Berwick Insurance Group: One of the biggest changes, over the past few years, is the amount of com-pliance information that agents are re-quired to understand. Agents want to know what they can and cannot do, which increases the need for compli-ance staff and training programs.

Jennifer Lisanti, director of Sales with beere&purves: While general agents continue to be actively involved in marketing and sales of employee benefits, their role in providing ongo-ing, day-to-day service for existing business has increased considerably. Compliance has become more com-plex and burdensome for employers as a result of the ACA, along with the constant introduction of state and fed-eral regulations. General agents are providing agents and agencies with the resources and contacts to ensure that they are informed on these mat-ters. Employers are also looking for ways to simplify benefits and HR ad-ministration through technology. With the proliferation of online HRIS op-tions, general agents have respond-ed by researching these systems so agents can recommend viable solu-tions to their clients. General agents have introduced their own technology solutions on behalf of agents for on-

In this article, executives from California’s leading general agencies givetheir take on critical trends in the health and employee benefit marketplace.

GENERAL AGENCY

By LEILA MORRIS

ben•e•fit bro•ker \ ben- -fit bro-k r\nounA person who advises businesses on employee benefit solutions.

Including, but not limited to: medical, ancillary, benefits administration, payroll, HR, tax/ACA compliance.

The definition has changed. How will you respond?

Concord (800) 354-6926 | Orange (800) 966-3791 | Woodland Hills (800) 877-0101 | www.benefitmall.com


GENERAL AGENCY

line enrollment, census collection, and more, which improves data quality and expedites group enrollments.

Michael Wolff, president of Dicker-son Employee Ben-efits: During the past few years, and particularly since the signing into law of the ACA, GAs have become centers of education for agents who pass the infor-

mation along to their clients. This is particularly true with compliance and legislation. GAs, like their agent cus-tomers, are taking a more consultative approach to working with employers and individual clients. This often takes the form of a total-solution proposal that includes traditional and expanded product and service offerings.

Jeff Papenfus, senior vice presi-dent, Sales of Warner Pacific Insur-ance Services: Over the past several years, GAs have been doing more ad-ministrative tasks for carrier partners. With the implementation of healthcare reform, broker education has become critical. Vetting and partnering with outside vendors for online enrollment, HRIS, ACA, and ERISA compliance, COBRA, travel insurance, and so on, has taken that burden off the brokers and their clients.

WHAT ARE THE MOST IMPORTANT MARKET TRENDS THAT AGENTS NEED TO BE AWARE OF THIS YEAR? Dennis Fallon of BenefitMall: We see three primary trends that are af-fecting agents most heavily in 2016. The benefit arena now reaches well beyond the traditional broker market with employee workforce services and technology companies vying for a piece of market. These competitors are luring clients away through the promise of free technology and other value-added services. ACA compli-ance is confusing consumers who are often not savvy enough to be aware when a broker-of-record is occurring. Many employers will seek various on-line workforce solutions and end up with a new broker-of-record without even being fully aware it. When this

happens, employers lose the valuable expertise of their local broker. The con-solidation of health benefit carriers has expanded and can be seen in banking, payroll services, and human-resource management. With these consolida-tions, we see diversification in product portfolios, larger marketing spending, and more growth in retail sales, which often competes directly with the bro-ker channel. Finally, for group agents, there is a change in the small-group definition in California to two to 100. The continued creativity around multi-carrier and multi-product offerings will be a battle on the small-group front as brokers strive to provide a compre-hensive solution at an affordable price with the service that clients are accus-tomed to receiving.

Jennifer Lisanti of beere&purves: Transitioning 51 to 100 groups into small group products will be an important focus in 2016. The small-group market presents en-tirely new rates, rules, and product offerings to agents who have

not focused in the under-50 market. Working with a knowledgeable gen-eral agent will provide a considerable advantage in getting up to speed quickly. Employers want to minimize their management systems and points of contact through an online HR system. To remain competitive, agents are offer-ing their own value-added services or at least, they are becoming knowledge-able enough to direct clients to the most viable options. Employers are turning to their insurance agents for help with HR-related issues that are outside their tradi-tional scope of business. General agents provide much needed help with these client demands, but agents also need to stay up to date on their clients’ issues and challenges, including vendors and secondary resources to provide further guidance.

David L. Fear, Sr., of Shepler & Fear: The number one issue, this year, is the full implementation of the ACA’s Employer Shared Responsibility man-date. The government has not done a very good job of communicating

things to employers, which will show up as large employers struggle to file their 1094/1095-C reports this spring. They’ll soon face the IRS and have to provide proof that they have been offer-ing affordable coverage to their eligible employees that meets a minimum-val-ue standard. Agents need to be at the front of this new and confusing process. The second issue is how agents will provide solutions to reduce the cost of their clients’ health insurance benefits. Obviously, the cost of insurance cov-erage has not come down. Many em-ployers are getting closer to throwing in the towel and dropping their group health plan. It’s become unaffordable. Employees are not happy about their high out-of-pocket costs under the new ACA pricing and benefit requirements. Agents need to provide solutions now.

Jeff Papenfus of Warner Pacific: Since we just got through moving the one to 50 groups into ACA-compliant plans, the next focus should be on the 51 to 100 groups. Many of these groups took renewals in December to delay moving to ACA-compliant plans. Does that sound familiar? The biggest chal-lenge is that most of these groups will have to go to an age-rated plan from a composite-rated plan. However, a fair percentage will actually save premium dollars by moving into the new plan de-signs and rating structure. While premi-ums may be significantly higher or low-er under the new ACA rating, there will be employees in each group who are winners and losers in regards to their personal premiums. The other trend we are likely to see, this year, is that car-riers and brokers are working together to move groups from the 12/1 renewal date. I think all of us would agree that renewing 80% of all business in a two-month period is not good for GAs, carri-ers, brokers, or their clients.

Jessica Word of Word & Brown: Brokers would do well to get very cre-ative this year. The old standard of sell-ing an out-of-the-box solution is gone, or will be soon. Multi-carrier packages with unique funding options are win-ning the marketplace as they offer the most diverse coverage, providers, and prescription benefits for a large organization to meet the needs of its


GENERAL AGENCY

many constituents. Offering combined solutions will keep insurance rates low for customers while quality and satisfaction remain high. Brokers can deliver customized solutions to meet each employee’s medical and finan-cial needs by allowing them to choose their own options within a set of car-riers, plans, and coverage. The de-mand for technology is growing, too. If brokers don’t have a solution and are speaking to clients about it, they need to find one (or more) to meet their cli-ents’ needs. Or, they can partner with a GA that is offering support in imple-menting and running cases through an online solution.

Jim McCabe, Sterling: The changing legislative landscape is one of the most im portant things to watch this year. The Cadillac tax was de-layed, and more changes are on the way. A majority of employees may have

less disposable income to handle larger deductibles and out-of-pocket costs with narrow networks and less choice, and high deductible plans.

Ken Doyle of LISI: It will be another interesting year with the second half of the small-group market (51 to 100) hav-ing to move. Being a highly politicized year, more legislation will be introduced in hopes of easing some of the ACA pain. I also think that we will see a move-ment to get viable software technolo-gies in place before the fourth quarter. With this shift in technology, it would be-hoove you to assess whether you have the aptitude, the resources, and the agil-ity to keep up with all the trends. If you can’t respond with a vehement “yes” to these concerns, consider hiring some-one or partnering with a resource to help you take it to the next level. Re-evaluate your workforce. Agents need a service team that can keep up with today’s pace with tomorrow’s forward thinking men-tality. Agents should be looking at the concept of all-in-one-place platforms, such as concierge services.

Michael Wolff of Dickerson: Agents continue to look for ways to differenti-

ate themselves. In 2016, it will be key to access integrated technology and compliance tools while keeping an eye on products and services beyond the traditional. For example, don’t overlook including voluntary benefits for small and large employers. Agents don’t have to know all the answers. They just need to know where to go for information and creative alternatives.

DO YOU SEE ANY SPECIFIC TRENDS RELATED TO THE SMALL GROUP VERSUS THE BIG GROUP MARKET?Michael Wolff of Dickerson: It will be important to be sensitive to the chang-es affecting mid-size groups that are becoming small groups. These chang-es include the move to small group rating and underwriting guidelines, as well as the employer shared respon-sibility requirements that are new to groups of 50 to 99. These groups will look to agents to educate them on the differences between large and small group plan designs. They will seek the account management-level service to which they have become accustomed.

Jessica Word of Word & Brown: With mid-sized employers (with 51 to 100 employees) moving into the small-group marketplace, we are wit-nessing a blending of requirements in our small group product portfolio. Benefit-administration systems have typically been reserved for larger cli-ents who could afford higher-priced, integrated functionality involving pay-roll, benefits, and billing. But cost-effective solutions are emerging to simplify the administrative burden of tiny groups. We saw significant diver-sification of our broker-customers in 2015 into new products and additional marketplaces to make up for the re-cent cuts in carrier commissions. Brokers who have been the servicing agent on a single in-force policy are looking to increase their reach into a client’s coverage portfolio to enhance and further bind the relationship. We’ve seen brokers exit the market-place – some leaving the industry and some selling their books of business to rivals and larger agencies. That consolidation has reduced our active broker population by roughly 5%, a trend we anticipate will continue.

Jim McCabe, Sterling: The need for education in all things benefit-related has to be more focused. All of the voluntary products, retirement, and tax efficient savings accounts require more information about individual risk tolerance as well as short- and long-term goals. Companies have to pro-vide more insight, and address em-ployees’ financial goals based on their life events.

David L. Fear, Sr. of Shepler & Fear: Smaller employers are looking into alterna-tive funding, such as HRAs, HSAs, and FSAs to help curb the cost of health care and health insurance. Many large employers have done it success-

fully. Now it’s time for small employ-ers to implement some of these ideas. Even though small employers are not subject to the ACA employer mandate, they still have to deal with other things out of their control. Small employers are struggling to deal with health insur-ance, which is one of the most regu-lated products in the United State. They are going to look to their trusted advisor for solutions on how to comply with the law and how to reduce costs while still attracting and retaining good workers. If the employer-based system remains, it’s up to agents to help clients work through these challenges.

Jennifer Lisanti of beere&purves: The biggest trend we see is the move-ment to private exchanges in the small-group market. The private ex-change model allows small groups to implement cost controls through de-fined contribution and offer multiple carriers, which provides access to a significantly larger pool of providers. This simply does not exist in the mid-market segment (100+). Another trend is the onslaught of fourth-quarter re-newals. This year, it will affect an even larger number of renewals due to the 51 to 100 groups taking advantage of early renewal opportunities in 2015. This trend will continue to create quot-ing, enrollment, and approval challeng-es for agents and agencies servicing these groups.


GENERAL AGENCY

Dennis Fallon of BenefitMall: Small groups are weighing the value of con-tinuing to offer benefits versus the cost and compliance burden. Large groups face the heavy costs of having to offer benefits to everyone when they may have only covered a portion of their population. The compliance burden may be heavier on the small group sector since they don’t often have HR departments to take on the burden. It falls on owners and managers who can become overwhelmed by the task.

WHAT THINGS HAVE YOU NOTICED THAT SET APART SUCCESSFUL AGENTS?Jeff Papenfus of Warner Pacific: Our

broker partners have a passion for what they do. They are adapting to a new marketplace and be-coming more knowl-edgeable. They are evaluating what they offer and looking to

technology tools with personalized service to grow their business.

Michael Wolff of Dickerson: Agents who have truly embraced consulta-tive selling and the latest technolo-gies are standing out among their contemporaries. These agents are educators as much as they are bril-liant salespeople. They use all avail-able communications vehicles to stay in front of their clients – face-to-face, telephone, webcasts, social media, print and email – to deliver meaning-ful information to their multi-genera-tional client bases.

Dennis Fallon of BenefitMall: Agents who are evolving with the trends are the most successful. To com-pete in our chang-ing industry, agents must be confident, committed, and passionate about

providing the best benefit cover-age possible, and stay relevant to employers and the management of health benefits. Agents also need to provide a complete human capital

management offering that ensures that competitors do not compromise their health benefit book of business. No matter how valuable the benefit consultation may be, an employer group can be easily stolen in 80% of scenarios when another provider offers a comprehensive workforce solution. Successful agents are con-stantly bringing new solutions to their clients, educating themselves on market trends and new products, embracing technology solutions, and maintaining a level of service to be responsive to the needs of new and existing clients.

Jennifer Lisanti of beere&purves: Agents who are open to change in our increasingly complex industry will have an advantage over those who do business as usual. Agents who avoid technology trends and compliance is-sues expose themselves to competi-tion and their clients to unnecessary risk. Successful agents stay informed of carrier product offerings and rules, as well as state and federal legislative issues. They are prepared to inform their clients of any positive or negative issues. Successful agents continu-ally prospect for sales opportunities, add new lines of coverage to existing clients, introduce product lines, and demonstrate the value they bring to the agent-client relationship to ensure client retention.

Jessica Word, Word & Brown: The best brokers – like the best and most suc-cessful businesses in any maturing indus-try – are adaptable and flexible. They meet new strains on their resources, client requirements,

and government regulation without resistance, always looking for and vet-ting solutions that deliver meaningful results. They are innovative, looking for gaps in the solutions their competi-tors provide, and delivering meaning-ful ways that attract customers and generate referrals. Finally, successful brokers form deep partnerships with organizations that fulfill these needs, adapt to changes, and are responsive

to requests for support. They pass the labor onto service partnerships while maintaining their focus on their own business and on the growth of their sales opportunities.

Ken Doyle of LISI: How do you become scalable? Utilize partners through this transformation and build your sales/service model to meet the new consumers’ needs through tech-nology, and create an experience that provides value. Cutting-edge agencies understand analytics and how the in-formation can help provide financial solutions. These agencies are moving from descriptive (what happened) to diagnostic analysis (why it happened), to predictive (what is likely to happen), and to prescriptive (determining the right outcome). This is where you will see movement in the types of prod-ucts offered in the market. A sharper customer targeting approach and a variety of wellness strategies will shift the discussion for the agent in becom-ing a preventative risk advisor.

Jim McCabe, Sterling: Successful agents have a personal touch and at-tention to detail. They also understand where our client brokers are in their life-cycle. Not every firm wants the same things.

Colleen M. Gimbel of Berwick In-surance Group: It’s knowledge, train-ing and confidence. An agent who is confident with the material they rep-resent will be much more successful. It goes without saying that an agent needs to know the material in order to sell a plan. Many agents have the knowledge, but they don’t feel confi-dent with the information. Every agent needs a different amount or type of training to feel comfortable enough to sell a Medicare plan.

David L. Fear, Sr., of Shepler & Fear: We see a group of younger agents who approach this business in a very smart way – using tools that make them more efficient with their time. We see a lot of younger agents going out and sharing ideas that employers have not heard before. They are demanding that our industry respond better to the needs of their clients through online

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GENERAL AGENCY

capability, simplification of processes, and ease of communication. Success-ful agents think out-of-the-box and communicate more effectively with their clients. Many GAs can assist in providing these value-added services.

WHAT KINDS OF GA SERVICES ARE MOST VITAL TO TODAY’S AGENTS?Jessica Word, Word & Brown: Two key areas affect our brokers today: compliance and technology. ACA compliance is a maze. Each scenario creates a different compliance require-ment. Mandates are repeatedly re-vised, shuffled, and updated. Brokers have to align themselves, very quickly, with emerging technology, find the so-lutions that meet their clients’ diverse needs, and learn to operate and imple-ment these solutions for their groups.

Ken Doyle of LISI: To understand what is vital to the agent, you need to look at the end-user (con-sumer). What are they demanding in the way of customer experience and me-dium of information? You are now hearing

that we are experiencing disruption in our industry. This is true, but most peo-ple think that disruption is in the soft-ware being introduced that provides benefit administration or HRIS linked to payroll, time and attendance, and/or compliance, etc. Well, it’s much more than that. Think about customer experi-ence. How do they interact with tech-nology and the information they can get at their fingertips? You will see the adoption of the “Internet of things” and other new technologies. But this follow-the-leader paradigm of the industry will mean that any edge that a GA has will disappear quickly. Sure these technolo-gies are impressive, even evolutionary, and long over-due in our industry. Still, they are not disruptive, nor are they rev-olutionary. Revolution comes from prod-ucts and services that do something with technology to create a better expe-rience through personalization. We have a whole new generation of consumers moving into the workforce who will not accept how we have always done things. This generation was immersed

in technology, and embraced it — seem-ingly before they were even wheeled out of the maternity ward. So it will be vital to help the agent comprehend and deliver to this new and rising population of consumers while keeping in touch and relevant to existing clientele.

Jim McCabe, Sterling: Agents want personal customer service for their clients, as well as easy online access to check balances and plan renewals. Knowledge-based support, original con-tent to share, sales education, and chan-nel support are among the top requests.

Colleen M. Gimbel, Berwick Insur-ance Group: Agents want compliance information that is digestible and imple-mentable in their day-to-day activities. They also need ac-cess to sales support staff. It is vital for an

agent to be able to contact the FMO whenever they have questions.

Jeff Papenfus, Warner Pacific: The most common need is probably quick access to information. Because of fre-quent changes to carriers’ products, plan designs, networks, and compliance requirements, agents need to find the most up-to-date information quickly and preferably in one place to be efficient. With new technology-centered brokers, agencies and brokers are asking us how they can compete. When it comes to online enrollment and HR systems, one size definitely does not fit all.

Michael Wolff of Dickerson: Next to product and price consultation, ACA-related education and resourc-es top the list of GA services most often requested by our agents. And in a blending of areas, agents are looking for the most cost-effective employee benefit solutions to help ensure ACA compliance for their cli-ents. In addition to core medical and ancillary plans, products that were once considered to be voluntary are increasingly offered as employer-sponsored coverages. Technology tools are critical to the extent that they can integrate enrollment, pay-

roll, benefit, and HR data. A GA that can provide these tools and the tech-nical support to use them will help the agent enhance retention as well as create employer efficiencies and mandated reporting capabilities.

Dennis Fallon of BenefitMall: Bro-kers need solid general agency, back-office support more than ever. The basics of being accessible, providing a timely response, providing insight and guidance are still important. But offer-ing access to tools being requested by employer groups is probably the most significant area of GA services. Gen-eral agencies should provide a wide ar-ray of services beyond health and an-cillary including benefit administration tools, ACA compliance, payroll servic-es, tax compliance, and supplemental products, such as workers’ comp and 401K. A combined product offering is where the marketplace has moved. A strong GA partner will provide safe access to these tools and services through a channel that will not com-pete with or steal your business. If a general agency is not helping agents compete with product and technology companies that are calling on their em-ployer groups, the agent should move to a general agency that is committed to their success.

Jennifer Lisanti of beere&purves: One would not necessarily consider knowledge a service, but ensuring that your general agent trains and ed-ucates their staff so they know their products and resources inside and out is critical to an agent’s success. General agents offer a wide variety of services and technology tools, but they are only as good as the expertise of the people filling the service roles. As employers face extensive com-pliance requirements, they are ask-ing their agent to help simplify these daunting obligations with the aid of educational resources, access to on-line HR and compliance systems, and/or vendor relationships with preferred pricing. Working with a general agent that understands an employer’s com-pliance and technology needs not only provides tremendous relief to an em-ployer, but it also helps to strengthen the agent/client relationship.


GENERAL AGENCY

WHAT IS THE MOST IMPORTANT THING TO KEEP IN MIND WHEN CHOOSING A GA?Jessica Word, Word & Brown: It is definitely the people; I encourage bro-kers to vet a general agency by engag-ing its people because service depends a great deal on those who deliver it.

Each GA offers what appears to be the same or similar services, at least on paper. They all have products for their marketplaces. They all have a solution for quoting, whether it’s pro-prietary or purchased. They all have a sales team. Longevity of service is im-portant. Is the general agency staffed by experts who have worked in our industry for a long time? That can be a differentiator. And offering guaran-teed accuracy of quotes is critical for brokers and clients. Being adaptive to what’s happened in our industry in the past five years is also important.

Jim McCabe of Sterling: When you are choosing GA or administrator, know what is most important to your employer population. Do they need bilingual access, mobile access, or educational materials? Can the general agency or administrator enhance your client relationships? Can this relation-ship assist in growing and retaining profitable revenue? Can the GA re-duce your cost of business by supply-ing support so that you don’t have to invest in it on your own?

David L. Fear, Sr., of Shepler & Fear: Who owns and operates the GA? Are they aligned with agents and their role in delivering insurance benefits? Does the GA have a track record of support-ing agents and brokers? Are they fo-cused on meeting the needs of agents or are they focused on profits? What do they do differently than their com-petitors and why are they different? Are they a supporter of the industry? Will the GA provide personal service and attention to the agent and their cli-ents? Will they go out with the agent and meet with their clients personally and act in a consultative role or are they just trying to push products?

Colleen M. Gimbel of Berwick Insur-ance Group: Work with people you like and who are easily accessible. Many

times we hear about agents who are contracted with an FMO/GA that never returns their calls. That’s a huge prob-lem because the whole purpose of the FMO/GA is to support its down line. Too many times agents just look for an FMO/GA who will give them leads; they don’t think about any of the other services they might need. In my experi-ence, agents who choose an FMO/GA based solely on the amount of leads the FMO/GA said they would provide is often disappointed and disgruntled. This is a crazy industry, and no com-pany is perfect. But if you have a good working relationship with your FMO/GA it makes everything go much more smoothly, and it’s more enjoyable.

Ken Doyle of LISI: Work with a thought leader who understands in-surance 2020. The central message or strategy needs to be looking at how they will keep pace with social media, technology, economic, and political de-velopments. Digitization will be key for the GA, carrier, agent, and group cli-ent. Previously everyone talked about big data. Well, we have more data in our industry than we know what to do with, and therein lies the issue. As we move toward digitization of informa-tion, it will depend on algorithms and analytical techniques that will reshape customer targeting, financial advice, and individual customization. With that said, choose a GA whose approach to the new market will complement you, your agency, and your business phi-losophies through transformation. Not everyone is created equal, so it cannot be a one-size-fits-all approach.

Jennifer Lisanti of beere&purves: Agents should consider the total value the general agent will deliver through the entire sales cycle. General agents provide value beyond quoting and en-rollment form collection. Don’t just fall for the sales pitch. Make sure that you work with a general agent who actu-ally services your business so you have more time to focus on sales. Ask to see samples of their agent commu-nications. Find out if they provide de-ductible credit services or if they get in-volved in claim and billing issues. Find out if they offer online enrollment and who does the setup. Ask to see their

average group approval turnaround times. Ask enough questions to make sure they will deliver value to your agency and your clients. Also make sure the general agent is knowledge-able and exhibits expertise about the products they sell and the rules that must be followed in order to sell those products. When a general agent has educated and informed employees, miscommunications and oversights are minimized, allowing everyone to work more effectively and efficiently.

Jeff Papenfus of Warner Pacific: When evaluating a GA relationship, brokers and agencies should ask what are the most important aspects of that relationship, the technology, the ac-cessibility, the responsiveness, and the personal touch. The answers will point them to the right GA for their needs.

Dennis Fallon of BenefitMall: When selecting a general agency, you want to select a partner whom you can see yourself working with on a daily basis. You need a partner who is not only able to meet your needs today, but also an-ticipate your needs. Most importantly, you need a long-term partner who is invested in your business and is a mu-tually beneficial partner. As you build a successful brokerage, you need a partner who can provide a local view of what is occurring in the employee benefit industry. More importantly, this partner needs to be able to help identify the carriers, partners, trends, and services on a national scope, when your business needs demand it.

Michael Wolff of Dickerson: Be-cause one solution does not fit all em-ployers, it is important to work with a GA that offers in-depth consultative services and provides access to unique employee benefit solutions. Whether you have a 10-life group of high wage earners or a 125-life group with a wide range of budgets and family needs, a GA needs to respond with a strategy that includes a few well-thought-out options from which agents and their clients can choose. H

Leila Morris is senior editor of California Broker Magazine.


DISABILITY

There three reasons why Mil-lennials (born in 1980 to 2000) make up an attractive group to

target for income protection solutions:1. They know how to track expenses

and stick to a budget better than doformer generations.

2. They have witnessed the effect of afinancial crisis on retirement plans.

3. They are concerned about their fi-nancial future, but they need educa-tion to make investment decisions.

MILLENNIALS CANMANAGE A BUDGETA recent study from T. Rowe Price proves that Millennials, now in their 20s and 30s, are better at managing a budget, tracking expenses, and pre-paring for their financial future than are former generations. Additionally online budgeting tools and mobile apps make it easier than ever for Millennials to keep track of their expenses.

You can help them understand how income protection solutions can fit into their budget. Because this generation relies on their smartphone to help man-age finances, consider offering digital tools, like income-protection calcula-tors to help them understand the cost and value of income protection on their budget and financial future.

MILLENNIALS HAVE BEEN JADED BY THE FINANCIAL CRISISMany Millennials were just beginning their careers during the financial crisis of 2008. Jobs were hard to come by; promotions were few and far between; and pay raises were not a guarantee from year to year. Millennials faced unparalleled college debt while strug-gling to find and hold jobs to pay back student loans and pay rent and car pay-ments. They witnessed their parents’ and grandparents’ retirement dreams get shattered.

Millennials are realistic about their financial future. They know that they need to be prepared. While studies show that they are ready to save, your job is to help them understand how to create a comprehensive plan to help protect their financial future, including solutions to help protect them from unexpected illnesses and injuries. Mil-lennials are still a bit jaded from the financial crisis, so present them with a strategy that considers all aspects their financial future.

MILLENNIALS LACK EDUCATION TO INVEST IN FINANCIAL FUTURESixty-four percent of Millennials would rather save than spend, which is a promising statistic for this target audi-

ence, according to a study by North-western Mutual. But, while they are concerned about saving for their fu-ture, they often lack knowledge and confidence in investing strategies. That’s where you can offer your value to this audience.

Fifty-three percent of Millennials have set financial goals, compared to only 38% of Americans age 35 and older, according to Northwestern Mu-tual. That’s a promising trend among this group. Capitalize on their desire to set financial strategies by helping them see the bigger picture. Many may believe that they are prepared for their future because they invest in a 401(k) plan. But retirement savings is only a piece of the financial secu-rity puzzle. Help them understand that other options, like income protection, can help prepare them for unexpected roadblocks in their financial planning. You can help them fill the gaps in their financial strategy. Don’t miss out on the opportunity to target Millennials for income protection solutions. You can offer a lot of value to a target audi-ence that is ready to start preparing for their financial future today. H

Jim Garden is disability income regional vice presi-dent at Principal Financial.

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WELLNESS WELLNESS

WellnessWorkout

for BrokersShaping upYour Sales

More employers understand the benefits of moving from a frag-mented wellness strategy to a

more holistic one. So there’s a fresh responsibility for brokers to guide cli-ents toward the most efficient and effective course. By deftly navigating the evolving terrain, the best brokers

are able to choose from the burgeon-ing wellness options and incentives to build upon the trust they have estab-lished with their clients.

Over the past two years, we have seen a shift among employers from simply policing employee health to re-ally focusing on employee quality of

FINDING A WORKPLACE WELLNESS PROGRAM FIT

FOR EVERY CLIENT

by Heidi Bowman

FEBRUARY 2016


WELLNESS

life. It’s a response to a greater under-standing of the association between weight loss and disease. For example, diseases such as depression and obe-sity can be treated before they be-come expensive.

A closer look also unearths some significant factors in the success of a wellness plan. First, incentives are in-tegral to getting employees on board and keeping them engaged. Second, the trend toward holistic employee wellness encompasses not only physi-cal health, but also mental and emo-tional well-being. Brokers who have the most success in this area build upon a client’s comprehensive well-ness program strategy.

Leading wellness plan brokers know that escalating health care costs mean that companies need to implement holistic programs that target problem areas. Pinpointing the financial drains and building a strategy to minimize them is the calling card of an advisor who provides solutions instead of just reacting to the client’s fire of the day.

It’s also important to remember that companies are rolling out wellness programs with their employees, rather than the more passive strategies of de-cades past. Ten years ago, a company might have tackled a type-2 diabetes issue strictly by encouraging the em-ployee to take their medication. Today, that same company understands that it makes a bigger difference to go be-yond simply managing insulin shots to helping an employee lose 50 pounds, for example. As a result, we are seeing an increasing number of companies implement personalized wellness pro-grams backed by leadership support.

PROVEN INCENTIVESOffering incentives paves a proven path to wellness success by keeping employees engaged. Social programs, such as health competitions, are ef-fective in engaging employees in a group. The latest health technologies can also delight participants and keep them involved. Encouraging wellness programs that entail such incentives can lay the groundwork for strong em-ployee involvement, solidifying client trust in your abilities as their solution advisor and not just another vendor.

In the age of information, access,

and technology, it is important for bro-kers to provide trusted wellness pro-gram recommendations or risk losing client trust. With wellness tools tied to new technologies, companies can

offer a myriad of options that would have been too expensive in the past. Brokers who are leveraging these new technologies tell us that they are see-ing an increase in utilization in wellness programs as well as a longer engage-ment time line for employees who use the tools. Great brokers have their fin-gers on the pulse of new wellness pro-grams, technology, and incentives. At the same time, they remain cautious before jumping on a bandwagon so they are not just promoting the flavor

of the day. It is difficult for companies to sort through the myriad options so it’s up to brokers to cut through the clutter.

One proven incentive involves com-panies covering half the cost of a well-ness program, such as a weight man-agement meeting. Even better, there is a correlation between higher employ-ee engagement and a greater subsidy. Some companies cover up to 100% of the cost. Companies have seen higher engagement with these incentives be-cause wellness programs are available

year-round, and employees can sign up for a fixed-price program. Often, success is seen when employers inte-grate programs with incentives, such as providing company incentive points for attending a wellness program.

MIND, BODY, SPIRITThe wellness focus of many compa-nies is evolving from strictly physical improvements to mental and emotion-al enhancement as well. Companies are beginning to realize that employ-ees want new ways to nurture and nourish themselves that go beyond food and fitness. Behavioral science has shown that people have a better chance at successful weight-manage-ment when they find ways to take care of themselves and put themselves first. In other words, they are finding and fueling their inner strength. Bro-kers need to take note of this shift to well-being when proposing programs, making sure to advocate for programs that make the necessary adjustments to keep up with this trend. This in-volves moving away from just losing pounds to adopting a multi-faceted fo-cus on weight loss and healthy living that encompasses the evolving needs, attitudes, and science around weight management.

The quickly evolving wellness realm poses fresh challenges for bro-kers who want to keep their clients ahead of the curve. With the proper knowledge, brokers can offer their cli-ents new opportunities for a happier, healthier company. H

Heidi Bowman is senior vice president and general manager of Weight Watchers Health Solutions. Weight Watchers Health Solutions is a sub-divi-sion of Weight Watchers International, Inc. Driven by experience in the consumer and corporate markets, Weight Watchers connects its platform to organizations with a range of services includ-ing: promotion and engagement, benefit offerings, member data and reporting, and account manage-ment and implementation. Weight Watchers also offers a variety of packages that are adaptable to various organizations, such as convenient meet-ings; online and digital tools; and weight watch-ers for diabetes, tailored to type 2 diabetes needs, featuring all the benefits of weight watchers plus unlimited access to a certified diabetes educa-tor. For more information, contact [email protected] or 212-817-4442.

The wellness focus of many companies is evolving from strictly physical improvements to mental and emotional enhancement as well.

Companies are beginning to realize that employees want new ways to nurture and nourish themselves that go beyond food and fitness.


WELLNESS

WellnessWorkout

for BrokersShaping upYour Sales

HOW TO HELP EMPLOYERS

MAXIMIZE THEIR

WELLNESS PLAN ROI

BY DINESH SHETH

Workplace wellness programs exist for two key reasons: to save employers money

while keeping employees and their families healthy. Employers are always seeking to realize the return-on-invest-ment of their wellness programs – from human resources directors up to C-lev-el leadership. Yet it continues to be a challenge. This is because employers

often implement a program without a strategy to drive engagement. Also, spending happens now while benefits come later. By shifting how companies implement their wellness programs, employers could multiply the ROI, which hovers from $1 to $3 for every dollar invested in wellness.

The wellness model must be trans-formed from an open-ended system

with occasional contact with a well-ness coordinator and enrollment in some fitness programs or life-style coaching. It must become a closed-loop feedback system that hinges on consistent, collaborative feedback and ongoing monitoring and coaching among employees, their families, and wellness coaches.

For starters, employers should

WELLNESS

- CalBrokerMag.com -


WELLNESS

stop focusing on just the number of employees participating in wellness programs and begin examining the needs of various sub-groups. Throw-ing a generalized wellness program at all employees is not very effective. A non-tailored program usually attracts the healthiest people who are already highly motivated and are not driven by incentives from their employers and insurers. While this group enjoys the benefits, the rewards are not the reason for their healthy lifestyle. This is the caveat behind most wellness programs; the healthy people continue their healthy habits while those who need the support usually abandon the wellness programs in a few weeks or months. Employers must be aware of health trends that affect their work-force. Soon, 50% of the population will have at least one chronic condi-tion, according to the American Nurs-ing Assn. Chronic diseases are respon-sible for seven of 10 deaths each year, and treatment for chronic diseases ac-counts for 86% of the nation’s health care costs, according to the Centers for Disease Control and Prevention.

Employers can observe data in their

employee pool on epidemics like high blood pressure, diabetes, and obesity. They can offer programs for the em-ployees with the most critical needs, and help them change unhealthy hab-its. To achieve behavioral changes in targeted employees, the wellness pro-gram should function as a closed-loop system that generates constant feed-back. With this model, the program collects physiological data from em-ployees and their families like weight, blood sugar, and blood pressure as well as behavioral data like activity lev-els and caloric or fluid intake. After pro-cessing this information, participating employees get practical guidance on how to tackle their health conditions. Consistent communication and moni-toring are fundamental features of a successful wellness program. Studies suggest that having readily available guidance helps people achieve behav-ioral changes much faster. It also pro-vides the ROI that is noticeably absent from most wellness programs.

An engaging guided wellness pro-gram is an effective model. But, for

employers, this approach raises con-cerns over the expenses of providing a dietician and a day-to-day coach for each worker. However, newer technol-ogy like remote monitoring, wearable devices, and self-service care plans are the answers to that issue. These systems enable cost-effective moni-toring and coaching of employees on a large scale, allowing employers to easily help workers who have the high-est need for active participation with

healthcare providers. Through this method, each employee can get as-sistance from a coach on a daily basis, along with referrals for physicians as needed, maximizing the wellness and care coordination programs and result-ing in a quantifiable ROI with reduced medical costs.

More than 70% of employers offer some type of wellness program, but without the correct approach. Their ef-forts are often wasted because they lack accountability through collaboration and communication, according to a re-port by the Society for Human Resource Management. Without engagement, guidance, and feedback, employees and their families are left unsupported in their quest for a healthy lifestyle.

Even though employees and their families have good intentions to man-age their health, many fail to keep up with their care plans. Even if they see their doctor several times a year, they don’t always heed suggestions that could have a significant effect on their health. Also, the time between appointments leaves time for minor health issues to exacerbate and re-quire more extensive and costly treat-ment. The chances of staying on track with a care and wellness plan increas-es greatly when someone is there to coach people daily along the way. Therefore, employers must leverage the tools and technology that leading advocates of healthy life style changes have begun to accept for ongoing col-laboration and monitoring.

Employers can increase their com-pliance and commitment to health-care protocols, and reduce healthcare costs by leveraging tools that support engagement, guidance, and feedback throughout wellness and chronic con-ditions care programs. As the well-ness program evolution continues, the return-on-investment from such engagement will be a higher quality of physical, mental, and financial health of the workforce. H

Dinesh Sheth is founder and CEO of Green Circle Health, a medical services technology platform provider that leverages advances in information, communication, and sensor technologies to en-hance the quality of healthcare services and im-prove population health. For more information, visit www.greencirclehealth.com.

“Employers can increase their compliance and commitment to healthcare protocols, and reduce healthcare costs by leveraging tools that support engagement, guidance, and feedback throughout wellness and chronic conditions care programs.”

“More than 70% of employers offer some type of wellness program, but without the correct approach.”


PRIVATE EXCHANGES

Is a private exchange part of your client’s benefit strategy? If not, you may want to consider it. Having the

right benefit strategy is critical to your client’s business success. Depending on their company size, culture, and business needs, a private exchange may be able to help control health care costs, offer employees more con-sumer-driven options, and reduce the administrative burden of providing an employee benefit program.

Private exchanges are online mar-ketplaces for health insurance and related products. In addition to com-prehensive medical plans, private ex-changes also commonly include vol-untary benefits, such as dental, vision, life, disability, accident, and critical ill-ness. Private exchanges should not be confused with the public exchange or Marketplace for individuals with poten-tial subsidies, or the SHOP exchange for small groups offered through the Affordable Care Act (ACA).

Private exchanges are completely separate, and can be established by employers, insurance companies, benefit consulting/brokerage firms, and technology platforms. A private exchange can be a more consumer oriented delivery alternative for em-ployees.

Private exchanges can be flexible to address the needs of the employer group unlike public exchanges, which are targeted to individuals and small groups. Private exchanges can focus on communication strategies and decision-support tools to address the needs of the employee population. Secondly, private exchanges facilitate moving to a defined contribution mod-el for health care costs while allowing

Private Exchanges-An Option for the Future

by Dorothy Miraglia King


PRIVATE EXCHANGES

employers to retain some involvement in their employees’ healthcare offer-ing. And finally, moving to an exchange reduces the employer’s administrative burden.

Private exchanges offer the following through a technology based platform:• Access to a portfolio of benefits: The

exchange contracts with or creates its own set of health plans. Exchang-es have varying levels of involve-ment in health plan standardization and design.

• An ACA-compliant environment: The exchange provides tools for the em-ployer to meet its employer shared responsibility requirements for em-ployer-sponsored coverage.

• The ability for employers to convert to a defined-contribution arrangement: The exchange allows a fixed-dollar amount to be spent on health ben-efits.

• Decision-support tools and guidance: Communication strategies and re-sources to educate plan participants about the choices available for them-selves and their families.

• Simplified benefit administration: Single-source administration for eligi-bility, enrollment, billing, and reconcili-ation.

For the past 20 years or more, com-panies that offered health care ben-efits to employees have done so on a defined-benefit basis by offering a standard set of health benefits and taking on most of the financial burden and risk of healthcare costs. This mod-el has become unsustainable over the past decade as healthcare costs have more than doubled, creating an afford-ability crisis for employers. Health care reform is also affecting the employer-sponsored insurance landscape, par-ticularly the individual mandate, em-ployer-shared responsibility, and public health insurance exchanges. The goal of healthcare reform was to make health insurance more affordable for individuals and employers. The indi-vidual mandate and employer shared responsibility provisions have changed the way health benefits are offered to employees, now offering multiple channels to access benefits.

So what do we expect to see in terms of the growth of private ex-

changes? About 6 million employees selected health plans through private exchanges for 2015, which is double the amount from 2014, according to a recent survey from Accenture. But it is still a very small amount of the em-ployer market. Accenture predicts that 40 million of the 150 million people with employer based health insurance will choose plans through private ex-changes by 2018.

Options do vary for employers adopting a private exchange depend-ing on the size of their workforce, ac-cording to a 2014 survey by the Kaiser Family Foundation.

Employers with fewer than 50 em-ployees are served primarily by single carrier and broker-supported exchang-es with a technology platform. These groups are not subject to the employer shared responsibility requirement un-der that ACA. Their interest in private exchanges is significantly less than it is with their larger counterparts since they have an alternative in the pub-lic health insurance exchange. Some small employers have even dropped group health coverage, but use a pri-vate exchange to supplement access to the individual public marketplaces.

Employers with 50 to 2,000 em-ployees are mid-size employer groups. They have been targeted by single car-rier and broker supported exchanges as well as some direct-to-employer models. Much of this enrollment is driven by brokers and insurance com-panies attempting to move their exist-ing book of business to this new ap-proach.

Employers with more than 2,000 employees are large employers. They are served primarily by the exchanges created by the large broker consulting firms. Many large employers already use benefit consultants in the design, execution, and evaluation of their ben-efit plans so there is a synergy in tran-sitioning to a private exchange. Given these dynamics, there is a strong po-tential for private exchanges to grow in the medium to long term.

Here are a few considerations when evaluating whether a private exchange solution may be viable for your client:• The private exchange has to be a

full-service solution to be success-ful. This includes educating employ-

ees to make the best choices, and offering them options to purchase products that fit that choice — from understanding how cost sharing works through the value of wellness programs. Medical bills are the lead-ing cause of bankruptcy in the Unit-ed States, so getting their benefit planning right is critical. Purchasing health care is a challenge for most employees; that’s why decision-sup-port tools and resources are vital to making this solution work.

• Employers need to learn about the value that defined-contribution ar-rangements bring, and how they dif-fer from a defined-benefit plan. This is part of a compelling business case for employers to switch to defined-contribution plans. Employers need to be aware of tax and reform im-plications of switching to a defined contribution plan.

• Exchanges need to be on a flexible platform. This allows them to con-tract with several insurance carriers, and offer a wide range of products. These products need to be simple and clear for employees to navigate. The platform needs to deliver a robust online enrollment portal, and deliver unbiased decision support through a variety of channels including a call center, the Web, live-enrollment ses-sions, and health advocates.

• Private exchanges need to be man-aged efficiently. Administrative ca-pabilities must include all aspects of benefit administration, reporting and account management. They must also include seamless interac-tion and exchange of information among carriers and plans offered, consolidated billing of all products purchased through the exchanges, and integration and facilitation of em-ployee payroll deductions. H

Dorothy Miraglia King is executive vice president of Engage, a HR outsourcing organization that pro-vides HR and benefits to businesses nationwide. The Engage PEO exchange allows employees to choose from a suite of health plans from a single insurer, as well as a variety of voluntary benefits, including dental, vision, life, and disability insur-ance as well as several non-insurance benefits. Most of the benefits are offered with no minimum participation requirements. For more information, visit www.engagepeo.com.


PRIVATE EXCHANGES

The Next Health Exchanges Have Already Been BuiltPublic health insurance exchang-

es have cost American taxpay-ers more than $5 billion in estab-

lishment grants to the 17 states that received funding. Four of these state exchanges have failed, so 38 states or territories use the federal exchange, HealthCare.gov.

Although Obamacare required state exchanges to be self-sus-taining by January 1, 2015, states have been allowed to continue spending federal grants under “no-cost exten-sions” for funding that was already awarded. Far from being self-sustaining, there appears to be a growing need for additional lines of credit for operational expenses. What’s even more concerning is that it appears that lack of oversight and serious operating deficiencies in the four failed states have meant that consum-ers and taxpayers paid for poor m a n a g e -ment, and will continue to pay in higher premiums and cost sharing as a result.

To address this issue, Congress included a provision in the report language of the Om-nibus funding bill that requires states to notify the feds of any illegal use of grants for the operation of state ex-changes. This notice must also include a detailed report on how states intend to recoup those funds.

At the end of 2015, Rep. Rick Al-len (R-GA) introduced legislation that would require states who shutter

their exchanges, such as the ones in Nevada and Hawaii, to report on how their funds were used, and return any

unspent funds to the federal govern-ment, which would be applied to defi-cit reduction. The bill also places en-forcement in the hands of the feds. This means that states that have mis-managed funds cannot also enforce the laws they may have skirted.

Instead of becoming more efficient and lowering costs, most state ex-

changes have simply raised fees on insurers. According to the Commonwealth Fund, assessments on

insurance plans sold through state exchanges ranged from 1% to 3.5% of monthly premiums in 2015. The federal ex-change, Healthcare.gov, charges its plan issuers a user fee to fund its op-erations equal to 3.5% of premium revenue. So

what’s the problem? These fees are

then passed on to hard-w o r k i n g c o n s u m -

ers in the form of higher

insurance premiums. Simply put, when costs go

up, coverage goes down. Moreover, taxpayers have footed

the bill for exchange websites and still-evolving functionalities that have been available in the private sector for decades. Consumers have experi-

enced difficulties getting accurate esti-mates of total out-of-pocket costs and confirming whether their preferred providers and prescribed medications

by Joel White


PRIVATE EXCHANGES

are covered across plan options. It is clear that public exchanges have

few incentives to control costs or pro-vide user-friendly interfaces or the lat-est technology that has already been deployed in the private sector.

In contrast, private exchanges have to be efficient and keep costs low, or they will go out of business. Also, pri-vate exchanges cannot keep increas-ing prices or they will lose customers, so they tend to offer health insurance plans in a consumer-friendly manner and often at a lower price. These pri-vate companies are key to fixing the public health insurance exchanges.

Private exchanges with effective consumer-facing features exist today. For example, online health insurance exchanges allow individuals, families, and small businesses to compare health insurance products from lead-ing insurers side-by-side and purchase and enroll in coverage online.

Although private exchanges can sell insurance to individuals and employer groups, subsidies are only available on public exchanges. You may wonder why this is so. Private exchanges are not part of Obamacare. Accordingly, the federal government essentially has a monopoly on exchanges.

It doesn’t have to be this way. The private sector should be able to com-pete with government-based exchang-es on a level playing field. This would encourage the private and public sec-tors to make needed improvements and other enhancements in order to keep current consumers and garner new ones.

NEXT GENERATIONEXCHANGE PROPOSAL Congress has an incredible opportu-nity to modify the current construct of the exchange system to engage con-sumers, increase enrollment growth, and ensure financial sustainability by creating the next generation of health insurance exchanges. This would ease the sustainability challenge faced by states and the federal government while lowering premium costs to con-sumers.

Under the Next Generation Ex-change proposal, the private sector would take on more responsibility for exchange functions that are exclusive-

ly provided by federal and state gov-ernments. The model would consist of four parts:

PRIVATE SHOPPING WEBSITESWe should allow private websites to compete directly with public web-sites, and reserve the functions of government, such as verifying sub-sidy eligibility and making payments to health plans, to the states and the feds. Since private shopping websites

are likely to list the same health insur-ance products, they should compete for consumers based on these user experience and key-decision support tools:• Out-of-pocket cost calculators• Smart plan finder tools that allow

consumers to prioritize and highlight best-fit options.

• Integrated and searchable provider networks and drug directories.

• Easy-to-understand cost information for common services and proce-dures.

A MODERN ELIGIBILITY PROCESS Shopping for health insurance should be akin to shopping via innovative web-based companies, like Kayak.com and Amazon.com. Many of these consumer-friendly websites offer mul-tiple payment options, including credit cards, gift cards, and PayPal. To fa-cilitate competition and allow for next generation private shopping websites, the federal government should con-tract with vendors to create a mod-ern eligibility system that resembles the PayPal system. This would allow

subsidies to become portable so that low-income consumers could pur-chase coverage from any insurance or exchange website, public or private.

SIMPLIFIED SMALL EMPLOYER SHOPPINGPrivate shopping websites should also provide a simplified health insurance shopping experience for small employ-ers. These websites should allow small employers to use their tax credits to purchase traditional small group cover-age. There should also be time-saving features, such as the ability to upload demographic files so employers can input data once and get health insur-ance pricing across multiple insurers.

A REVAMPED STATECERTIFICATION PROCESSEach state should certify that there is at least one website that allows for the purchase of health insurance, shows the pricing of all insurers that offer individual market and small group coverage in the state, and offers a Pay-Pal-like system for subsidies. States should also document and certify exchange expenditures and be held accountable for unauthorized uses of funds. Unused funds should be re-turned to taxpayers. This is essentially the Allen bill.

American consumers would ben-efit from a simplified health insurance shopping experience that is more re-sponsive to their wants and needs. The public sector’s strength is in regu-lation and enforcement of the rules of the road. Undoubtedly, that role should continue.

However, the private sector’s strength is in enhancing the consumer shopping experience. We should le-verage the decades of expertise.

Faced with the potential financial collapse of some state exchanges, Congress should consider this com-monsense Next Generation Exchange proposal to help consumers purchase health insurance that best fits their medical needs. We don’t need to re-build the wheel that’s already been built in the private sector. H

Joel White is president of the Council for Afford-able Health Coverage. For more information, visit http://cahc.net.

“Private exchanges with effective consumer-facing features exist today…online health insurance exchanges allow individuals, families, and small businesses to compare health insurance products…”


NEW PRODUCTS

Recruiting Software. Hrsoft releases ver-sion 9.2 of its applicant-tracking software. The cloud-based recruiting software is designed to improve the recruiter and hir-ing manager experience. In addition, the software continues to be refined to be completely responsive (mobile friendly) on a wide range of internet browsers used by clients. For more information, visit https://hrsoft.com

PBA. RxBenefits has received a significant investment from Great Hill Partners. RxBen-efits provides pharmacy benefits administra-tion to small to mid-sized, self-insured em-ployers. The recapitalization, will allow the company to expand its sales and marketing, and product development. The company will also continue to evaluate partnership and ac-quisition opportunities, with additional equity capital available from Great Hill Partners. For more information, visit www.rxbenefits.com.

Aflac Contact Service Center Operations Achieves J.D. Power Certification. Aflac’s contact center operations has achieved J.D. Power certification for providing outstanding customer service for its live phone channel. For more information, visit www.jdpower.com/about/index.htm.

Exchange-Traded Funds. Charles Schwab is offering John Hancock Investments’ suite of six strategic beta exchange-traded funds (ETFs). It offers investors and financial advisors access to commission-free ETFs. For more information, visit schwab.com/SchwabETFs.

Marketing Book. Expressing gratitude and appreciation to clients makes a huge differ-ence for your business, according to Michael F. Sciortino, Sr., author of the book “Grati-tude Marketing.” Gratitude Marketing is a movement away from pushy sales tactics and toward engaging and connecting with people in a personal, authentic, human-to-human manner,” he said. The goal of the ap-proach is to increase client retention, refer-rals, and revenue. For more information, visit GratitudeMarketingBook.com.

Annuity. Vantis Life Insurance Company re-launched its multi-year guarantee annuity, Freedom I, with special features for retirees. A version of the product was a best seller for the company in 2010. Freedom I features a return-of-deposit guarantee during the ini-tial five years of the annuity. The minimum investment for the annuity is $5,000 and

the maximum is $500,000. Other features include the following:• A surrender-charge period that matches

the guarantee period – five years.• A terminal illness surrender-charge waiver.• A nursing care facility surrender charge

waiver.• After the initial five-year 2% guarantee, the

rate can never be lower than 1%.• 10% free withdrawals after first contract

year.• A.M. Best Rating: A- Excellent.For more information, visit http://www.van-tislife.com/able.

Book on ObamaCare: Promises vs. Re-ality. Copernicus Healthcare released the book, “The Human Face of Obamacare: Promises vs. Reality and What Comes Next.” The book takes a comprehensive, non-partisan look at the ACA almost six years after its passage. Stories of patients illustrate continuing problems of the health care system. Underinsurance is the new norm. Narrowed networks, high deductibles, and increasing cost-sharing are forcing many people to forgo necessary care, according to the book. The book assesses three major al-ternatives for further health care reform. For more information, visit www.copernicus-healthcare.org.

Online Medicare Drug Dashboard. CMS is releasing an online dashboard of Medicare prescription drugs for Part B and Part D.

The tool displays spending, utilization, and trend data. It also includes descriptions of drugs, manufacturers, and uses. CMS is prohibited from publicly disclosing informa-tion on manufacturer rebates so the data used to select Part D drugs does not reflect manufacturers’ rebates or other price con-cessions. For more information, visit https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Re-ports/Dashboard/Medicare-Drug-Spending/Drug_Spending_Dashboard.html.

Great American Launches Accident and Health Insurance Programs. Great Ameri-can Insurance Group launched its special risk accident and health insurance programs. The company is offering an array of cover-ages designed to meet the needs of a va-riety of organizations, such as schools, day care centers, churches, civic groups, boys and girls clubs, camps, recreational organi-zations, and volunteer groups, among oth-ers. The coverage helps offset the cost of

accidental injuries that occur during an or-ganization’s sponsored activities and events and supplements general liability coverage. For more information, visit GAIG.com/Acci-dentandHealth.com.

Private Exchange. WebInsure Benefits marketplace has added several health and ancillary insurance carriers and benefit ad-ministrators. WebInsure Benefits is a single cloud-based platform for brokers to manage their employer group and individual business and simplify administration. New insurance carriers and benefit administrators include the following:• Assurant: Individual dental plans.• Chard Snyder: FSA, HSA, HRA, transpor-

tation & parking reimbursement, COBRA, billing, and FMLA.

• Guardian: Dental, vision, STD, LTD, Life, and AD&D.

• HIC Group: Short-term medical; dental and vision; prescription discount plan; ac-cident, sickness and hospital plans; critical illness; telemedicine; and life insurance.

• HSA Bank: HSA, FSA, HRA, premium reimbursement account, defined contri-bution plans, and transit and commuter benefits.

• The IHC Group: Health, life, disability, dental, vision, limited benefit, hospital in-demnity and medical stop-loss insurance solutions to individuals and groups.

• Renaissance Dental. For more information, visit www.hcentive.com

ACA Management Software. Passport is offering ACA management software with simple employee data entry screens for easy setup. Users can anticipate ACA-related ob-ligations to avoid penalties. Employers can track offers of insurance, calculate safe-har-bor options, and monitor employee hours. It includes 1094-C and 1095-C reporting with electronic filing as required. For more infor-mation, visit http://www.pass-port.com/aca-management-software.

ACA Compliance Navigator. Businesses that are required to deliver the new Afford-able Care Act (ACA) 1094 and 1095 forms may be worried if they don’t have a plan for filing. PrimePay’s new ACA Compliance Navigator is open for enrollment until Dec. 31. Primepay says that it is the only platform that gives businesses time to meet the 2016 deadlines for 2015 calendar-year returns. For more information, visit http://primepay.com/aca-compliance-reporting. H


LIFE SETTLEMENTS

A Primer on Life SettlementsFor Healthy InsuredsA life settlement is the sale of a life

insurance policy for more than its cash-surrender value. For a

policy owner, a life settlement is not an investment to buy existing life insurance policies, not a loan to finance existing life insurance policies, not a strategy to get new life insurance coverage for any means, and not a trick to take policies from senior citizens. It is one of several options for a policy owner to consider in the final disposition of a life insurance policy including lapsing the policy, sur-render it, or allow it to run its course.

Over the years, we have heard a lot of rhetoric that life settlements are evil. They are going to be the next sub-prime crises or perhaps the life settle-ment business will take down one of the major carriers. None of that is true. Not only is a life settlement transac-tion legal and heavily regulated, but it’s

also quite consumer friendly.We know life insurance companies

are opposed to them for obvious rea-sons. Employees of certain compa-nies are actually forbidden to disclose to their clients the existence of the life settlement market.

A California policy owner is suing Lincoln National because an agent failed to disclose the existence of the life settlement market. It will be inter-esting to see how the court rules in the case of Larry Grill, et al. v. Lincoln National Life Ins. Co., 5:14-cv-00051-JGB-SP, C.D. Cal. But the point is clear; if you have clients who fit the life settlement profile (65 or older and $500,000 in a death benefit), at the very least, they should be made aware of the existence of the option, regard-less of whether an advisor or firm can participate or profit in the transaction.

A MARKET OPPORTUNITYApproximately $57 billion is surren-dered or lapsed annually in universal and variable universal policies insuring the life of a senior, according to the Life Insurance Settlement Assn. This number balloons to over $110 billion when you consider term and whole life policies. Nine policies are surren-dered or lapsed for each life insurance policy traded through a life settlement. Our collective clients lapse a saleable policy every two minutes.

Ninety percent of seniors who surrendered or allowed a policy to lapse would have considered a life settlement if they were aware of the option, according to the Insurance Studies Institute. Clients are unknow-ingly abandoning billions of dollars in value when you look at the growing demographic and the general lack of

by Robert Stark


LIFE SETTLEMENTS

awareness of the life settlement op-tion. They are likely missing out while assuming that their trusted advisors have informed them of all options. If these abandoned polices got an offer of just 5% of the face amount, policy owners left about $3 billion in settle-ment value on the table last year, mostly unknowingly.

Without a doubt, the life settlement market has experienced a significant rebound. The competition for policies is at a post-2009 high and with con-tinued institutional interest, there is no reason to think this will slow. That said, volume for the life settlement market is still somewhat limited, due partly, to a lack of awareness, and in some cases, concealment.

EVOLUTION: NO MEDICALUNDERWRITING In today’s market, buyers are getting more creative in order to deploy more capital. One example is the no life expectancy (no LE) program. Here, a buyer forgoes medically underwriting the insured. The life settlement value is determined by coupling the policy purchase with a single premium annu-ity (SPIA). Income from the annuity is used to pay future premiums.

CASE EXAMPLE: Insured Male 75 Policy Size $4 million Policy Type Survivorship universal life with the female deceased Cash Value $200,000Life Expectancies AVS 176 months (110%) /21st 189 months (1.24)

This trust-owned policy was set up to benefit the insured’s children, but the trust minimally funded the policy. As a result, significant catch-up premi-ums are due, which no one involved wants to pay.

Based on the insured’s good health, there was little opportunity to sell this policy in the traditional life settlement market. However, a no LE buyer made this case work when it would have oth-erwise been a decline and disappoint-ment for the insured, trustee, and the referring life insurance agent. Gross Life Settlement Offer $425,000

WHAT’S IN IT FOR THE BUYER: SYNTHETIC BOND CREATION?It makes sense to view this from a buyer’s perspective to understand why an opportunity exists when medi-cal underwriting is irrelevant. First, let us look at this strategy as if it were a bond. A bond investor lends money to earn a rate-of-return for a period of time, called a “coupon.” At the end of the investment period, the investor experiences a return of their principal investment.

In our scenario, while the annuitant is living, the buyer collects the annu-ity payments. These payments are used to pay premiums on the policy that was purchased as a life settle-ment with the overage cash flow be-ing the buyer’s return-on-investment, or in bond terms, their coupon. Upon maturity of the annuity (death of the annuitant/ insured), annuity cash flow ceases, and the buyer gets a lump-sum payout from the life settlement policy, which is equal to their initial investment. While the buyer’s invest-ment is in place, their principal is pro-tected by the insurance hedge. The annuity cash flow is backed by a highly rated insurance carrier.

Let’s look at the Case Example again. [Estimates are used here be-cause we do have final information re-lating to the SPIA (final investment and final yield)].

Buyer’sInvestment Life Settlement $425,000 Annuity (SPIA) $3,575,000 Total Investment $4 million

Annual Cash flow Annuity $327,316 Life Insurance ($39,708) Premium Overage $287,608 Rate of return 7.2% Upon Maturity Cash flow $0 Death Benefit $4 million

The buyer has created a fixed and hedged return that is uncorrelated to the markets and backed by highly rat-

ed insurers. In the future, when you think of buyers purchasing policies without medical underwriting you might no longer think of these buyers as crazy or reckless. These buyers are seeking healthy insureds because their continued returns depend on life and not death.

WHO QUALIFIESThe no LE sale is a perfect life settle-ment when the insured is generally healthy. Buyers seek insureds who are male 75 or older or female 77 or older and when universal life policies were issued at preferred rates. This program does not work well with term conver-sions or survivorship policies when both insureds are living.

EASE OF PRICING INDICATIONPricing cases for the no LE market is relatively simple. An offer is generally available within 24 hours with an ap-propriate illustration and relevant appli-cation and state disclosures for com-pliance reasons. This is much different and considerably faster than the sev-eral week long process of a traditional life settlement.

A life settlement (traditional or no LE) is a great option in certain circum-stances. Its availability must be part of all life insurance policy final disposi-tion discussions. When an insured is thought to be relatively healthy, a no LE evaluation is a fantastic non-invasive way to test the market to establish or reaffirm expectations. Regardless of the option chosen, it is important to educate policy owners of the alterna-tives to lapsing and surrendering their valuable life insurance assets. H

Robert Stark is the president of Melville Capital, LLC when he oversees the implementation of operational strategies including asset valuation, transaction marketing and closing and compli-ance. Robert has worked in finance, lending, structured assets or life insurance for over 22 years. He has directly been involved in over $3.5 billion of life-contingent structured finance trans-actions. Robert holds his series 7 and 63 licenses as well as is a licensed life insurance agent and life settlement broker in numerous states. Robert earned a B.S. in Finance from the University of Maryland at College Park, and his Master of Busi-ness Administration from New York University’s Stern School of Business.


LIFE INSURANCE

The Trends That Are Shaping

Today’s WealthTransfer PoliciesA variety of economic, demo-

graphic, and market factors bring an unprecedented op-

portunity for wealth-transfer planning. First and foremost, we are arguably in the friendliest federal estate tax envi-ronment ever. Under current law, indi-viduals can pass on up to $5.43 million estate tax free to their heirs. Married couples can leave double that amount – nearly $11 million. Some clients have been hesitant to use life insurance for wealth transfer because it has involved creating trusts and relinquishing ac-cess to their money. They can now en-joy all the benefits of life insurance and maintain control of the policy.

Favorable market returns are also creating new wealth-transfer opportu-nities. With the stock market achiev-ing strong growth since the 2008 mar-ket crash, many clients have restored their retirement nest eggs and are bet-ter positioned to leave a legacy to their family or favorite cause. But they are understandably concerned that their gains could be erased by the next in-evitable market correction, and leave a diminished estate for their heirs. Life insurance is an appealing solution. A client can reposition earnings and gain leverage with a non-correlated asset that is earmarked for their heirs. This way, the increased life insurance ben-efit can be a hedge against market vol-atility and secure the legacy the client wants to pass on.

With the Baby Boomers aging, more clients than ever are in their retire-ment years. Most often, the client’s primary goal, after providing a secure and comfortable retirement, is wealth

transfer. Clients recognize that many of the financial opportunities available to them, such as an affordable edu-cation, employer-provided pensions, and Social Security, may not be avail-able for younger generations. They want to provide enough assistance for their loved ones to live full and com-fortable lives. At the same time, many families’ inheritance disappears once it is transferred to the second and the third generations. Seventy percent of wealthy families lose their wealth by the second generation, and a stagger-ing 90% lose it by the third generation, according to a recent study by the Wil-liams Group Wealth Consultancy. Only one in five of high-net worth parents agrees strongly that their children will be well prepared to handle fam-ily wealth they are likely to inherit, ac-cording a study by US Trust. The good news is that life insurance and a prop-erly designed trust can be powerful wealth-transfer tools to help clients’ ensure their legacy while controlling the amount and time frame in which beneficiaries receive their inheritance.

1. HOW ARE CONSUMERS USING WEALTH TRANSFER POLICIES IN LIGHT OF THESE TRENDS?First and foremost, appropriate candi-dates for wealth transfer policies are 65 to 80, and are comfortably secure in their retirement. These consumers want to leave a legacy. We often rec-ommend using life insurance because it offers a liquid, predictable, and defined death benefit. Also, the internal rate-of-return on the death benefit at life ex-pectancy is generally 6% to 7.5%, and

the proceeds from life insurance gener-ally pass to heirs income tax-free. Life insurance offers a competitive rate-of-return on their premiums, especially for Baby Boomers and older retirees whose risk tolerance is lower.

Clients are also utilizing many fea-tures of life insurance that are useful during one’s lifetime. Life insurance cash values grow on a tax-deferred ba-sis, and can be accessed through loans and withdrawals, allowing clients to put wealth-transfer plans in place while maintaining financial flexibility. If the client’s needs change, the cash value can be a source of funds to reduce pre-miums, adjust coverage, or simply help pay for college tuition, a wedding, or emergencies. Living-benefit riders are frequently included or purchased with policies to help prepare for potential long-term care needs.

by Palmer Williams


LIFE INSURANCE

2. WHAT SHOULD CONSUM-ERS CONSIDER WHEN THEY ARE THINKING OF USING LIFE INSUR-ANCE FOR WEALTH TRANSFER?Clients must have a desire to leave a legacy to loved ones, a charitable or-ganization, or educational institution. They should have liquid assets that are not earmarked or needed for their retirement income or potential risks, such as a major health crisis. To put it into numbers, a good guideline for this strategy is to consider it for clients with $500,000 or more in investable assets.

The other key consideration is that clients need to be healthy enough to qualify for the life insurance at pre-mium rates that make sense. If they are reasonably healthy with no serious chronic health conditions or risk fac-

tors, the policy should offer affordable premiums and leverage to help make life insurance an attractive wealth trans fer strategy.

Lastly, it is crucial to plan 10 to 15 years down the road and design a flexible plan since a client’s financial situation and goals will surely change. Advisors should make sure that clients have options if they need to modify or exit a policy.

3. HOW SHOULD AN ADVISOR RECOMMEND WEALTH TRANSFER AS PART OF THE RETIREMENT PLANNING PROCESS?Advisors should take the time to learn about a client’s life, family, and inter-ests. A client’s legacy is very personal, so the advisor should make sure that the proposed strategy reflects their

values and goals. Second, advisors should consider

which policy options their client will need. For example, suppose a married couple doesn’t need the life insurance individually, but purely as a vehicle to transfer wealth to heirs. A survivorship policy that pays the benefit upon the second death of the couple would be an appropriate choice. Purchasing a survi-vorship policy rather than two individual policies will increase leverage versus premium paid. Other policy features to consider are important riders, such as chronic illness or long-term care, which is often critical as clients age.

Finally, advisors should make sure that the policy offers the flexibility of a cash-value design, so the policyholder can access the premiums accrued if a financial or health crisis arises later in life. With this type of policy, clients may have the flexibility to unwind premiums they paid into the policy, use the cash value to pay premiums rather than pay out-of-pocket, or reduce the death ben-efit so they have lower premiums.

4.WHAT ARE THE BIGGEST WEALTH TRANSFER TRENDS FOR 2016?With the upcoming election, we’re keeping an eye out for what could hap-pen to estate-tax laws since it will di-rectly affect wealth transfer. Estate-tax laws seem to ebb and flow in terms of thresholds and rates, and are likely to continue to change. This will be espe-cially important to pay attention to for clients with assets totaling $1 million and above.

On the product front, we expect to see continued innovations with more survivorship policy options and more cash-value products. Living benefits are becoming much more prevalent, increasing competition among carri-ers. We expect to see an expansion in the qualifying events that trigger the claims process as well as entirely new features associated with these LTC and chronic-illness riders. Life insur-ance policies have been a great value proposition for the beneficiaries; these enhancements bring significant value for the insured as well. H

Palmer Williams is national sales director of Say-brus Partners.


401(k)

New 401(k)Regulations

for EmployersWhen selling 401(k)s and

other qualified retirement plans, it’s important for in-

surance and financial brokers to be educated in the latest regulations and guidelines. Especially when it comes to fees, employers are looking to their brokers to outline their fiduciary re-sponsibilities and help them choose the plan that is appropriate for their business structure and is in their em-ployees’ best interest.

The recent Supreme Court ruling (Tibble v. Edison International) makes this responsibility even more appar-ent. The lawsuit focused on whether financial professionals on Edison’s investment committee violated their fiduciary duty by making a selection that led to higher fees. They selected retail-share classes instead of individu-al mutual fund shares. The court ruled against Edison and decided that em-ployers are responsible for continually monitoring the 401(k) fees charged to plan participants and ensuring that the plan continues to be in the best inter-est of employees.

Under the Employee Retirement In-come Security Act (ERISA), employers have been responsible for initial plan and investment selections. ERISA sets minimum standards for the administra-tion of employee benefit plans and

provides regulations for fiduciary duty as well as plan funding, participation, vesting, and accrual.

The new Supreme Court ruling protects employees even further; it’s prompting many employers to re-eval-uate their 401(k) investment options and potentially change providers. For those who are offering a 401(k) plan for the first time, it will be even more important to evaluate each plan with a critical eye. This is where insurance and investment brokers are more valu-able than ever. Employers need extra help selecting an appropriate plan as well as continual support to ensure that they don’t breach fiduciary duty each year their plan is in place.

According to the Dept. of Labor (DOL), fiduciary responsibilities in-clude the following:

• Acting in the sole interest of plan participants and their beneficia-ries.

• Carrying out their duties prudently.• Following the plan documents (un-

less inconsistent with ERISA).• Diversifying plan investments.• Paying only reasonable expenses.Insurance brokers, financial advi-

sors, attorneys, and CPAs are not fi-duciaries; they have no legal responsi-bility for a plan’s administration. They serve as advisors and are there to pro-

by Ellen Bartholemy

tect the business itself. For example, a broker who sold a plan that became subject of a lawsuit would not typically be held responsible for reimbursing employers or employees for any penal-ties, fees, or other resulting damages.

However, in April 2015 the DOL pro-posed redefining a fiduciary as anyone who provides fee-based investment advice to the following entities:

• ERISA–covered employee benefit plans


401(k)

• Plan fiduciaries• Plan participants• Plan beneficiaries• IRA plans or IRA owners If approved, the proposed rule would

hold financial advisers, planners, bro-kers, investment managers, and oth-ers to ERISA’s fiduciary standards as well as prohibited transaction require-ments and required disclosures. Exist-ing rules only hold non-fiduciary advis-ers to a suitability standard, meaning

that they can sell products that gen-erally fit an investor’s needs and risk tolerance without disclosing conflicts of interest.

Of course, clients can take legal ac-tion for negligence and other issues, so brokers still need to to communi-cate regulations to clients and, when appropriate, refer them to a CPA or attorney for further counsel. Choosing a CPA firm that specializes in ERISA audits will help protect the assets of

the employee benefit plan and ensure that the funds are available to pay the promised benefits to employees. An incomplete or late filed report can re-sult in significant penalties for the plan administrator, so choosing an experi-enced auditor is very important.

ERISA audits are generally required for companies with more than 100 employees, and include the following areas:

• Valuation of plan assets and plan obligations.

• Timeliness of contributions.• Evaluation of whether benefit pay-

ments were made in accordance with plan terms.

• Determination if participant ac-counts are fairly stated.

• Determination if any transactions prohibited by ERISA.

• Review of annual 5500 form. In addition to audits, CPA firms that

specialize in employee-benefit plans will also report on any significant prob-lems encountered, and can suggest how the employer can improve their internal control and plan operations. A CPA firm with experience in audit-ing ERISA plans can help employers document their thought processes be-hind benefit plan decisions, providing a rationale that could protect them in a lawsuit.

In the end, retirement plan benefits are wonderful recruiting and retention tools for employers. They can have significant tax benefits, but they also open businesses up to potential liti-gation. To reduce the risk, make sure that your clients are informed of their responsibilities from the start, and that you are in touch after you make the initial sale so they can continue to offer the best plan possible. With the new proposed fiduciary regulations, this could become more important than ever. H

Ellen Bartholemy is the director of Accounting Services at Hall & Company CPAs, an indepen-dently owned accounting firm in Irvine, Calif. She has more than 25 years of experience in public accounting. Bartholemy has extensive experience with financial audits, reviews and compilations of closely held companies. For more information about Hall & Company, visit www.hallcpas.com or call 949-910-4255. Ellen can be contacted at [email protected].


NEWS

HEALTHCAREIRS Extends ACA Reporting DeadlinesThe IRS issued a two-month extension for employers and issuers to report on offers of health coverage and coverage provided. The deadlines for reporting to the IRS by paper have been extended to May 31 or June 30 for electronic submissions. Greatland Corp. advises employers to con-tinue with preparations as if the deadlines had not been pushed back. Bob Nault, Greatland’s CEO said that waiting until the last minute can lead to failure to file 1095 forms for the 2015 tax year, which could bring penalties of up to $1 million on small businesses. Maximum penalties to pay-ers for failure to file correct information returns, including furnishing an incorrect name/TIN to IRS are $3 million/year ($1 million for small businesses).

Janice Kreuger, ACA subject matter expert for Greatland said, “We are hearing from a lot of businesses that think the IRS will not enforce fines for the 2015 reporting year. This is simply not the case. The IRS will not fine employers and insurers for mistakes. However, they still need to file and file on time, even with the extended deadlines.”

The IRS imposes the following fines for returns filed be-ginning January 1, 2016:• $50 per information return if you file correctly within 30

days of the due date.• $100 per information return if you file correctly more

than 30 days after the due date, but by August 1.• $250 per information return if you file after August 1 or

you do not file required information returns.• $500 for a return for intentional disregard with no maxi-

mum penalty.For more information, visit www.greatland.com.

A Snapshot of Consumer-Driven Health PlansA recent survey by EBRI and Greenwald & Associates finds the following about consumer driven health plans (CDHPs):• 13% of the privately insured population are enrolled in a

CDHP; 11% are enrolled in a high-deductible health plan (HDHP); and 76% are enrolled in more traditional coverage.

• 26 million people with private insurance are enrolled in a CDHP—a health plan associated with a health savings account (HSA) or health reimbursement arrangement (HRA), or an HSA-eligible health plan.

• 63% of people in CDHPs have opened an HSA, 13% are in an HRA, and 24% are in an HSA-eligible health plan, but have not opened an HSA.

• People in a CDHP or an HDHP are more likely to have cost-conscious behaviors compared to those in traditional plans. They are more likely to have checked whether the plan would cover care; asked for a generic drug; talked to their doctors about prescription options and costs; asked a doctor to recommend a less costly drug; talked to their doctors about other treatment options and costs; devel-oped a budget to manage health care expenses; and used an online cost-tracking tool provided by the health plan.

• People in a CDHP are more likely to have talked to friends, family, or colleagues about the plans; attended a meeting where health plan choices were explained; and consulted with their employer’s HR staff about health plan choices.

• People in an HDHP are more likely to have visited the health plan’s website to learn about their plans; talked to friends, family, or colleagues about the plans; used other websites to learn about their choices; and consulted with an insurance broker to understand their plan choices.

• CDHP enrollees are more likely to take advantage of well-ness programs, such as health-risk assessments, and health-promotion programs, and biometric screenings.

• Financial incentives mattered more to CDHP enrollees than to traditional-plan enrollees.

For more information, visit ebri.org.

Many Insured Patients Still Face Crushing Medical DebtA recent Kaiser Family Foundation/New York Times study reveals that one-in-five working-age Americans have run into serious financial difficulties trying to pay medical bills despite being insured. In the survey, 62% of those with

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medical bill problems say the bills were incurred by some-one who was insured, with 75% saying that the amount they had to pay for their insurance copays, deductibles, or coinsurance was more than they could afford. They re-ported skipping or putting off other health care in the past year because of the cost, such as postponing dental care, skipping doctor-recommended tests or treatments, or not filling a prescription. For out-of-network charges, 69% said they were unaware that the provider was not in their plan’s network when they received the care.

Consumer Watchdog says that PPO health insurance policies with very narrow provider networks and extremely limited out-of-network coverage are a new form of “junk insurance.” The group says that many patients cannot find competent in-network doctors, and then face huge medi-cal bills due to extraordinarily limited coverage for out-of-network services.

Jamie Court, president of Consumer Watchdog said, “New PPO policies with very limited providers in-network and extraordinarily low benefits out-of-network are creating new express lanes to bankruptcy for families. Until insur-ance companies are forced to justify that their premiums, co-pays, and policy benefits are reasonable, too many families will be forced to choose between medical bills and other necessities of life, like paying their mortgage. These findings should shake up the statehouse and revive the regulation debate.”

In 2014, Consumer Watchdog sponsored Proposition 45, which would have allowed the insurance commissioner to make health insurance companies justify their rate hikes under penalty of perjury, and to reject excessive rate in-creases.

Other findings in the Kaiser/New York Times survey include the following:• 26% of insureds with problems paying medical bills say

they received unexpected claim denials; and 32% say they received care from an out-of-network provider that their insurance wouldn’t cover.

• Those in higher deductible private plans are more likely to report medical bill problems than those in private plans with lower deductibles (26% versus 15%).

• Sixty-one percent of those with medical bill problems say they’ve had difficulty paying other bills as a result of their medical debt, and 35% say they were unable to pay for basic necessities like food, heat, or housing.Read the Kaiser Family Foundation/New York Times

survey here: http://kff.org/health-costs/press-release/new-kaisernew-york-times-survey-finds-one-in-five-working-age-americans-with-health-insurance-report-problems-paying-medical-bills/.

EMPLOYEE BENEFITS2015 Study Reveals Gaps in Wellness ProgramsFifty-three percent of about 6,000 consumers who were enrolled in health plans in 2015 say it’s not easy to under-stand their health information or how to maintain or improve their health, according to HealthMine’s research. Forty-six percent of consumers with a chronic condition discovered their illness through a wellness program. The study also re-vealed the following about consumers:• Less than one third know their key health metrics including

their blood pressure, cholesterol, BMI, and blood sugar.• 53% can’t access all of their clinical health data from a

computer. Another 39% can’t access all of their clinical and behavioral (collected by apps/trackers) health data from a single source.

• 53% say it’s not easy to understand their health informa-tion or how to maintain or improve their health.

• 55% want help from their healthcare plan in setting per-sonal health goals. Another 65% want reminders about critical health actions, such as prescription refills and an-nual health exams.

• 44% stay engaged in their wellness program throughout the year while 27% say that lack of time keeps them from engaging.

• 55% say that wellness incentives have not been not meaningful, and little more than half actually earn all of their available incentives each year.

• 38% say their wellness program helps them manage their costs.

• 81% of wellness programs do not include a price com-parison tool.For more information, visit www.healthmine.com.

IN CALIFORNIAMajor Health Insurance Changes For The New YearCovered California is reminding consumers and small busi-nesses about important changes in 2016. Starting January 1, Covered California increased access to plans and provid-ers and offered more health plans, and increased the num-ber of benefits that are not subject to a deductible. Here is a run-down of the changes:

Most California Consumers GetNew Forms for the 2015 Tax YearThis year, consumers who are insured through their em-ployer or a government program, like Medi-Cal, will get Form


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1095-B or Form 1095-C. The forms show who maintained minimum essential coverage and is not liable for the tax pen-alty. Consumers under Covered California will continue to get a Form 1095-A. For more information, visit https://www.irs.gov/Affordable-Care-Act/Questions-and-Answers-about-Health-Care-Information-Forms-for-Individuals.

The Penalty for Not Buying AffordableInsurance Is Going Up — A LotThe IRS penalty applies to people who go without insur-ance when they can afford to buy it. It will increase for 2016 to at least $695 per adult and $347.50 per child under 18 or 2.5% of household income, whichever is greater. A recent study by the Henry J. Kaiser Family Foundation estimates that the average household penalty in 2016 will be $969, which is a 47% increase from 2015. For more information, visit www.taxpayeradvocate.irs.gov/estimator/isrp.

New Requirements and New Optionsfor Many of California’s Small BusinessesEmployers with more than 50 full-time-equivalent (FTE) employees must offer health insurance to employees or pay a penalty. Through 2015, this requirement applied only to businesses with more than 100 employees. Any of these employers with an employee who does not take their of-fer of coverage will have to pay a penalty if the employee goes on to get financial assistance to purchase coverage through Covered California. For more information, visit https://www.irs.gov/Affordable-Care-Act/Employers/ACA-Information-Center-for-Applicable-Large-Employers-ALEs.

Covered California for Small Business will expand beyond the ceiling of 50 employees to serve companies employing 100 or fewer FTE employees. For more information, visit www.CoveredCA.com/ForSmallBusiness.

Major Improvements in Choice, Access and BenefitsCovered California used its power as an active purchaser to hold down rate changes for a second year. Before the Affordable Care Act, consumers regularly experienced double-digit premium increases. For 2016, Covered Califor-nia negotiated a weighted average change of 4%, which is lower than last year’s change of 4.2%. In addition, nearly 90% of Covered California enrollees get some financial as-sistance to help pay premiums. On average, those subsi-dies resulted in more than $5,200 for each household in 2014. Benefit Changes for the 2016 coverage year:• The majority of Bronze plan consumers now get three

office visits a year to a primary care provider or specialist with no deductible. Other needed services, such as lab tests and rehabilitation, will not be subject to a deductible.

• Covered California’s Silver plan will combine copay and coinsurance into a single product. Every doctor visit, lab test, and prescription will not be subject to a deductible in this single product. Consumers with chronic conditions will be protected by a cap on specialty drugs. The vast ma-jority of consumers will see their specialty drugs capped at $250 per month, per prescription. Plus, because of Cov-ered California’s standard benefit design, the caps must be offered by every health insurance plan in the individual

market and by all plans offered by the exchange. For more information, visit http://news.CoveredCA.

com/2015/05/covered-california-board-protects.html.

Adult dental coverage is now offered as an add-on.6% of Covered California consumers will be able to choose from at least three health insurance companies thanks to the addition of two new health insurance companies — UnitedHealthcare Benefits Plan of California and Oscar Health Plan of California as well as the expansion of Blue Shield of California and Health Net.

More than 90% of hospitals (general acute centers as designated by the California Office of Statewide Health Planning and Development) in California will be available through at least one health insurance company, and 74% will be available through three or more companies.

Medi-Cal Coverage for Undocumented ChildrenMedi-Cal will be expanded to all children regardless of their immigration status. The new law goes into effect in May 2016.

Health Care Improvements for All CaliforniansStarting July 1, health plans must publish and maintain printed and online provider directories. Health plans must maintain accurate provider directories, including routine up-dates. For more information, visit http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201520160SB137.

A new state law will require health plans and insurers to implement formula-tier requirements and cost-sharing caps similar to products offered through Covered Califor-nia. Assembly Bill 339 requires plans and insurers to have formularies that do not discourage the enrollment of people with certain health conditions. It also sets requirements re-garding access to in-network retail pharmacies, standard-ized formularies, and coverage for certain single-tablet HIV and AIDS treatments. For more information, visit http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201520160AB339.

The Fight to Slash Drug PricesHeaded for 2016 California BallotThe AIDs Healthcare Foundation has collected enough Cali-fornia voter signatures to qualify for the November 2016 ballot. If the ballot initiative passes, state programs cannot pay more for prescription medications than the prices nego-tiated by the Dept. of Veterans Affairs. The Foundation has a similar ballot drive in Ohio.

“VA pricing is, by far, the lowest pricing available to any government agency for the purchase of prescription drugs for use in state programs…If California and Ohio are able to pay the same prices for prescription drugs as the amounts paid by the Dept. of Veterans Affairs, it would result in sig-nificant savings to taxpayers. These ballot initiatives are necessary and appropriate to address public concern about runaway drug pricing,” said Michael Weinstein, president of AIDS Healthcare Foundation.

“Nationally, prescription drug spending increased more than 800% between 1990 and 2013, making this one of the fastest-growing segments of health care. Spending


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on specialty medications, such as those used to treat HIV/AIDS, Hepatitis C, and cancers, are rising faster than other types of medications. Total spending on specialty medica-tions increased more than 23% in 2014 alone,” said Tracy Jones, executive director of the AIDS Taskforce of Greater Cleveland.

Pharmaceutical Research and Manufacturers of America (PhRMA) has established a fund of more than $10 million to fight the California Drug Price Relief Act. Johnson & John-son is the largest contributor, with $5.86 million donated to date. These drug makers also contributed millions of dollars to oppose the measure: Amgen ($4.265 million), AstraZen-eca Pharmaceuticals LP ($4.15 million), AbbVie Inc. ($4.15 million), (Novartis ($2.88 million), Eli Lily ($2.88 million), Bristol-Myers Squibb Co. ($2.88 million), Otsuka America ($1.075 million), and Purdue Pharma LP ($1.105 million)

The Foundation is fighting back at the Johnson & John-son’s headquarters starting his week in New Brunswick, N..J. by driving trucks near the headquarters with mobile billboards that say, “No More Tears for Greed.” The Foun-dation resorted to using trucks when an outdoor advertising company refused to run paid billboards from the Founda-tion. The ads will also appear in nearby transit stations. In addition, street teams have begun distributing palm cards near the Johnson & Johnson campus. For more informa-tion, visit www.aidshealth.org.

RISING INTEREST RATES AREGOOD FOR THE LTC INDUSTRY

The decision by the Federal Reserve to raise short-term interest rates will spell good news for the long-term care insurance industry, states Jesse Slome, executive director of the American Association for Long Term Care Insurance (AALTCI). Higher interest rates will enable insurers to avoid increasing premium rates with new policy offerings. Ac-cording to AALTCI data, a 1% increase in long-term interest rates can translate into a 10% to 15% decline in policy pre-miums. Companies offering LTC insurance policies will earn

more money on the reserves they set aside to pay future claims. Slome says that the rise in interest rates may also encourage insurers to re-enter the marketplace. Slome said that higher interest rates will benefit safe investments and insurance products like long-term care insurance.

One-year CD rates were roughly 5% in 2000 and in the 4% range before the Great Recession in 2007. Interest rates have been at historic lows since then, which has af-fected savings accounts, CDs, annuities, life insurance, and long-term care insurance products, he explained. For more information, visit Walpurgisnacht.

LIFE INSURERS TO BENEFIT FROM RATE HIKESGradually rising interest rates provide significant benefits for all major life insurance and annuity products, improving reinvestment rates, interest margins and reserve adequacy, says Fitch Ratings. Life insurers would benefit if a rise in short-term rates leads to a rise in long-term rates over the coming year. But they must manage certain risk factors. Rising interest rates could increase liquidity stresses. There could also be an uncertain statutory capital effect associ-ated with variable annuities. (Statutory capital is the amount of capital and/or surplus that an insurance company must have to be licensed to do business).

Also, if interest rates rise too fast, policyholders may sur-render policies faster than expected, which could lead to cash flow obligations that exceed investment returns. Fitch expects the life insurance industry outlook to shift to nega-tive if longer term rates decline to levels seen in late 2012 (i.e. 10-year Treasury below 1.75%) and stay low beyond 2016.

LIFE INSURANCE & LONG-TERM CAREInterest Rates, Economy Are Still Concerns in 2016Insurance executives surveyed by LOMA expect modest growth due to interest rates and the economy. Neil Sprack-ling, president of Swiss Re Life & Health America said, “The life industry is in transitional recovery mode. We’re still suf-fering from the hangover of the financial crisis and what now looks like long-term low interest rates. So, do I predict rocketing sales and significantly higher profits in 2016? No, however, my optimistic nature tells me that we’ve turned a corner.” Most executives agree with the following:• Technology will continue to have a profound effect; digiti-

zation may change how products are developed. Predic-tive analytics, automated underwriting, and smart phones are all mentioned as important. But the industry is also looking at emerging technologies, such as wearables and gamification, which may bring even more dramatic changes.

• Quality service will be a key to retaining customers. Pow-er has shifted from companies to consumers. Consumer expectations are increasingly based on experiences with other companies that use leading-edge technology.

• Human capital is a big concern. Millennials coming into the industry are looking for the opportunity to work for the greater good and to make a difference. Some say that companies that have a strong digital strategy stand the best chance of recruiting the best talent.For more information, visit www.loma.org. H


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