With economic uncertainty continuing deep into 2009, many employers are scaling back health benefits and shifting more costs to employees. But the news isn’t all bleak for insurance producers as voluntary plans become the darlings of the downturn.
Multiple industry sources report double-digit declines for new health policies while the demand for voluntary coverage is growing by 15% or more each year. In fact, in one recent survey, 82% of voluntary insurance carriers, brokers and third-party administrators said sales in 2008 exceeded expectations.
Traditionally, producers specializing in group health have not aggressively pursued voluntary plans because of a misplaced belief that they are too complex and offer minimal return for time invested. However, with proper planning and the right partner, the most common myths around voluntary plans are easily busted, eliminating any excuse employee benefits agents have for not selling voluntary products.
Myth 1: Tightening budgets make for difficult sales.
While it’s true employers are scaling back on benefits in an effort to contain costs, this actually creates an opportunity for selling voluntary benefits. Employers still want to offer comprehensive benefits packages. Voluntary lets them do that. It fills coverage gaps, is affordable and lets employers offer options that employees may not otherwise have access to.
Voluntary plans create cross-selling opportunities that are more about employer-employee morale and less about contract specifics. These plans offset core benefit changes by providing quality options that deliver value to employees at low or no cost to employers.
Offering voluntary options can also strengthen the producer-client relationship, keep competitors at bay and, of course, increase revenues.
Myth 2: Too much work, not enough revenue.
A common belief is that selling voluntary benefits is an extensive, high-touch process that involves finding new clients and meeting with every employee to discuss plan options and manage enrollment. That translates into many hours of work to sell products for commissions that don’t offset the expense of enrollment.
In reality, the greatest opportunities with voluntary sales are with existing clients. As a true cross-sell product, voluntary plans can increase earnings exponentially, as illustrated in the table on this page. (Note: the second-year commission schedule assumes a 95% retention rate.)
Further, by leveraging a full-service partner such as a third-party administrator, enrollment firm or carrier, producers can increase revenues without taking too much time away from core sales. Once initial needs have been identified with the employer, producers can simply share that information with their partner, who will then create a comprehensive proposal consisting of the right mix of voluntary products to meet the client’s needs.
Top-tier partners will also provide enrollment support and work with producers throughout the life of the plan, even identifying opportunities for adjustments at renewal that could increase retention. They also work with producers to present new voluntary plans to meet changing client needs.
Myth 3: Too many products, way too confusing.
Voluntary plans in and of themselves are not tricky. Dental plans cover dental care. Critical care plans cover critical care. Confusion occurs when producers try to know all plan specifics and try to determine whether individual, group or hybrid plans are the best option for a given employer.
Benefits brokers simply cannot be experts on every voluntary plan, nor do they need to be. They need only to be familiar with a plan’s basic moving parts, such as pricing, participation requirements and portability, and have a basic understanding of the types of contracts (individual, group or hybrid).
They should focus instead on educating the employer about plan benefits and how they address needs. Does the employer want to reduce costs? Attract and retain employees? Address demographic changes? Supplement decreased core medical benefits?
All other details can fall to the partner to sort through. Armed with the information on the employer’s needs, the partner organization can generate detailed proposals for a best-of-breed portfolio of voluntary products–with minimal time and effort from the agent.
By allowing a partner to help craft the voluntary product suite, producers can present plans that meet employer needs, extend employee benefits and confirm their position as an advisor and advocate.
Myth 4: Too much maintenance.
We’ve all heard horror stories from producers who sold voluntary products with disastrous results. In almost every case, fault lies with short-cuts taken on the front end resulting in missed expectations, poor enrollment, etc., on the back end.
The key is to develop an implementation plan and timeline. Start with the effective date and work backwards to ensure no deadlines are missed. These include the date the carrier needs enrollment information and when premium and other information needs to be back to the employer to set up payroll deductions. Also important to address in the pre-implementation plan is “administrative housekeeping” for the employer, such as how and when premiums are billed.
It is also important to gain agreement from the employer to communicate the benefits of voluntary plans to employees in advance of enrollment meetings. As for the meetings themselves, offer a variety of formats including group forums and even web-based meetings. These activities will help achieve the ideal of an 80%-90% enrollment rate.
Again, partnering with a trusted full-service organization can ensure the process is done right the first time. In addition to providing enrollment support, including providing customized marketing materials and hosting meetings, the partner organization will handle the “heavy lifting” involved with underwriting, billing and customer service.
Myths busted-find a partner and go sell.
Voluntary plans offer tremendous upsides, especially when producers join forces with a full-service organization with the domain depth to make voluntary benefits a profitable venture.
When evaluating a potential partner, producers should look for one with a proven track record, broad “best-of-breed” portfolio, and customer support for the life of the sale. The organization should also provide representatives who take a consultative approach as well as:
–Deliver proposals within 24 hours.
–Offer flexible billing options, including electronic and consolidating billing.
–Offer the same compensation levels as carriers.
–Provide services beyond quoting and sales support.
–Focus as much on helping retain business as on writing new business.
Armed with a trusted partner, producers can stop worrying about reduced health insurance policies and start focusing on new business wins with voluntary plans.
Juliette Crowley is vice president, sales and implementation, and Todd Cowan, REBC, RHU, is senior vice president, sales & distribution, with HealthPlan Services, an independent provider of service and technology solutions to the insurance and managed care industry. They can be reached by email, respectively, at [email protected] and [email protected]