Senior Association Alliances Can Bring Risks As Well As Rewards

To verify the legitimacy of an association, carriers should inquire as to what it offers its members other than insurance. A red flag is raised if no other benefits are provided, as most state laws prohibit the formation of an association solely for the purpose of selling insurance. State laws also generally require that there be some commonality amongst association members, that the association is a non-profit entity, and that it has been in business for a certain amount of time. If these factors are lacking, the association may be suspect.

Once a carrier is comfortable with the association with which it intends to partner, careful attention should be given to the product the association intends to offer. Obviously, comprehensive major medical plans may not be feasible for an older insured base.

One alternative is a “mini-med” product. A mini-med is a limited benefit indemnity health insurance plan that can often be issued with very few restrictions (although it should not duplicate Medicare coverage for insureds 65 and older). It can be used with various medical providers and is not always limited to a specific PPO network. Sometimes, a mini-med is used as supplemental coverage together with a major medical policy that carries a higher deductible. Mini-meds often include coverage for emergency room visits, doctor visits, certain inpatient hospital procedures, and some surgical benefits, allowing the insured to choose his or her desired level of coverage.

Health insurers considering partnerships with senior associations should consider a mini-med as its primary product, and it should make certain that the association members understand the differences between a mini-med and a comprehensive major medical plan.

The manner in which a senior citizen association partnership will be structured also warrants consideration. One alternative is for the carrier to assume all marketing, claims adjudication and indemnity responsibilities. A complete “in-house” operation may not be feasible for all carriers, however, especially those with limited resources to adjudicate claims. Consideration should therefore be given to outsourcing claims to TPAs.

As the carrier’s association business grows, a TPA can become more efficient in ways that will cut the cost of handling claims. Likewise, reinsuring all or part of the insurer’s liability may be an alternative.

Kenan G. Loomis is managing partner of Cozen O’Connor’s Atlanta office and a member of the insurance department. He focuses his practice in the life, health, and disability arenas. He can be reached at .