Shifting Costs
by Carolyn Ellis, Features Editor
Ms Ellis is features editor for LIFE&Health Advisor. She can be reached at cellis@lifehealth.comAs president of employee benefits distribution for ING, Heather Lavallee has oversight of all their sales and customer service organizations and is accountable for the strategy of the division. We spoke with her about current trends and issues in employee benefits.
L&HA: What are the key trends you’re seeing in employee benefits distribution?
HL: Workplace coverage and benefits for employees have never been more important. A study we conducted found that about 80 percent of those with life insurance had it through their workplace and half of workers look to their employers as their only source of coverage. The fact that employees want to choose their coverage at their place of business and they trust their employers to select the right carriers creates a great opportunity. Health care reform is unprecedented within our industry. It’s creating opportunities around both public and private exchanges in voluntary benefits.
L&HA: What else have you learned?
HL: More and more employers are shifting costs and decisions to employees, so how we educate is key. Technology supports how we enroll and make decisions. Four out of five workers report that they have some level of financial stress, so ING has partnered with Emerge Financial Wellness, a non-profit organization that helps employees gain better control over finances.
L&HA: What do ING’s new Compass products bring to the marketplace?
HL: We leveraged two key themes: 1) Employers want to purchase these products on a group chassis, meaning they’re issued to the employer and then the employee makes benefit elections. We designed them to be simple with good/better/best options for employees. 2) Administration is easy. Employers just tell us lives and volumes. They don’t have to deal with cumbersome list-billing reconciliation, and they can use any technology company platform.
L&HA: Tell us more about products.
HL: We find many employees have over-purchased their medical coverage and underestimated the likelihood of a catastrophic event or accident. Voluntary products like critical illness, accident, and hospital indemnity can help cover expenses when the medical plan may not. Our Compass products were designed to be portable, and for as long as they are needed, typically ending at a certain age, like 70 or 72.
L&HA: What impact is health care reform having on employee benefits?
HL: We’re seeing more and more employers offering high deductible health plans. Employees might have lower premiums to pay out of pocket, but they have to cover greater expenses. A critical illness, accident, or hospital indemnity policy provides a fixed level of benefits to employees and their dependents to cover some of those costs. We are seeing some employers offering these products on a non-contributory basis or a core buy-up basis, so they’ll pay some portion of the cost.
L&HA: How is the role of the broker changing?
HL: The role of the broker has never been more important. Employers need brokers for understanding what the laws say, the do’s and don’ts, the tax implications. January 1, 2014 is the date that employers have to offer coverage. In today’s environment independent brokers who have been successful based on relationships and advising need greater resources. Regional brokers with a smaller book of business have been selling out to national brokerage firms and consulting houses that bring access to actuarial and legal experts and technology resources.
L&HA: Advising is a big responsibility, when penalties can result.
HL: Prior to health care reform and the financial crisis, brokers were advising on the roundness of the benefit offering and looking for the best-in-class product at the lowest possible cost. Today the health care law has passed but there are still many unknowns, so brokers have to educate themselves to make sure they are advising their clients as accurately as possible. I would say most brokers are spending 80-85 percent of their time on the health care laws, recognizing they are trying to round out the overall benefit portfolio.
L&HA: What are top concerns for people in the distribution network?
HL: People in distribution have seen their own margins eroded, so they need to work with the best carriers who have competitive and broad offerings, good service, and the right price point. Brokers get more efficient by relying on centers of excellence or having members of their firms be experts on various topics. We are working on the right alignment within our own team to support our distribution partners.
L&HA: Let’s talk about stop loss.
HL: The role of stop loss providers to focus on cost containment solutions for employers who are self-funding the medical has never been more important. Health care reform is creating an opportunity for stop loss, but it’s also a threat in some respects. From a regulatory standpoint we are watching closely. Legislation is being passed or proposed at state levels that would regulate stop loss at a certain size. It’s our largest product at ING and we benefit from a leadership position. We see a huge opportunity for Compass products to go alongside stop loss. We’re one of the few stop loss carriers who has our breadth of voluntary products, and when we’re bidding on the stop loss we see the underlying medical experience as well as the plan design. We can consult with broker and client to make the right voluntary benefit recommendation.
L&HA: Employers’ can have significant liability.
HL: With the first wave of health care reform, one of the laws provided for medical coverage with unlimited protection. Employees and dependents need the right coverage, but liability falls to the employer. Catastrophic claims for events like transplants, cancer and premature babies are infrequent, but we’re seeing more $3- or $5- or $7-million claims than we did 5-10 years ago. Health care is a business that is definitely negotiated, so having the right partner to negotiate high-value claims is very important. At ING we tend focus on 1,000-plus lives, but we see employers with 300-400 or as few as 100 lives that are self-insuring. Employers need expertise and cash flow to handle medical expenses.
L&HA: Any concluding thoughts for our readers?
HL: Insurance is a business about relationships and intangibles — services and protection. Many of us have been in the business 20+ years. Following the economic crisis, many brokerage firms and insurance companies moved away from college hiring. Now more than ever we need to bring new talent, the next generation into the industry.
