Why selling ancillary health benefits is so hard (and so bad for your clients)

Jay Starkman, the chief executive officer of Engage PEO, a professional employer organization (PEO), laughed a little at the idea that the midsize employers his firm serves might start thinking any time soon about buying employer-paid dental, vision or disability benefits. “All of the attention these days is on major medical,” he says. “The employers are not concerning themselves with ancillary products, for this year or next year.”

John Haslinger, a vice president at ADP, the payroll services and benefits administration, has run into the same lack of employer interest in products such as dental insurance, vision insurance and disability insurance. “They’re letting these plans go almost into auto pilot,” he says. In some ways, that indifference may be helpful to brokers who would like to go skiing while most of the in-force plans they serve keep themselves in force. “I have seen no trend whatsoever for employers to drop benefits,” Haslinger says.

But the same forces keeping employers from taking the time to drop benefits may be keeping those same employers from adding benefits. Anita Potter, an insurance researcher at LIMRA, says her group has not yet seen signs of employers returning to the traditional non-medical benefits market. “They’re really looking to pare costs,” Potter says.

Benefits specialists disagree about whether the Patient Protection and Affordable Care Act (PPACA) is responsible for the difficulty with getting employers to think about non-medical benefits. At LIMRA, survey results suggest that the fog in the benefits market rolled in around 2000, as a result of rapid increases in medical insurance costs.

Starkman thinks the non-medical benefits fog intensified around 2009, during the Great Recession. He contends that PPACA terror is now having a bigger, longer-lasting effect on the market than the recession did. “Companies are rebounding,” he says. “The job market is stronger. But there’s so much uncertainty around the Affordable Care Act. What is this Affordable Care Act thing going to look like when it’s finally done?”

A mind game

Employers’ sense of uncertainty has a psychological impact, and the uncertainty also has a concrete effect, by disrupting business planning, Starkman says. “You can’t budget for uncertainty,” he says. “Employers just shake their heads.”

PPACA daze is brutal for companies promoting benefits products and services unrelated to PPACA – for companies hoping to convey the idea that benefits are partly about attracting good people, retaining good people, and keeping workers productive, not just about meeting regulatory requirements and avoiding lawsuits.

Take, for example, Alegeus, a benefit plan administrator. The Internal Revenue Service recently granted a popular wish of flexible spending account (FSA) sponsors and FSA holders, by agreeing to let the holders roll some assets over at the end of the year.  Alegeus says it can show its program for implementing and explaining the partial end to the FSA use-it-or-lose-it rule can increase FSA enrollment and contributions by 17 percent.

But the company has had some trouble publicizing its approach. It’s not talking about PPACA.

In theory, government agencies care deeply about non-medical health risk. The Social Security Disability Insurance (SSDI) program is supposed to cover disability risk and some critical illness risk. The PPACA exchange program is supposed to provide some help with dental risk. Shortly before members of Congress began drafting PPACA, a 12-year-old boy died in Maryland because of a gum infection that went untreated. Congress responded by putting dental and vision benefits for children in the essential health benefits (EHB) package that all PPACA-compliant plans must cover.

In practice, SSDI is nearly broke. If Congress fails to act by 2016, the program will use up the assets in its trust fund and have to get the money for making benefits payments from current payroll tax revenue. Program trustees have estimated SSDI would have to cut benefits payments about 20 percent.

Dental decisions

When the U.S. Department of Health and Human Services (HHS) was developing regulations and operating guidelines for the PPACA exchanges, it gave exchange managers flexibility in the area of dental benefits: As long as a state’s exchange offers stand-alone dental plans, the state can decide whether to make QHP issuers embed dental insurance in their benefits, require QHP issuers to exclude dental benefits, or let the QHP issuers decide whether to include dental benefits.

The public exchanges run by HHS offer stand-alone dental plans but do not require parents of young children or other exchange users to buy dental coverage. The HHS exchanges let medical QHP issuers decide whether to offer benefits.

Colin Reusch recently reported at the Children’s Dental Health Project that, at the state-based exchanges, Connecticut, Rhode Island, Vermont and the District of Columbia require QHP issuers to cover health benefits, and Kentucky, Nevada and Washington State require parents to get their children dental benefits through their medical plans or else pay for stand-alone dental plans. Only one-third of the HHS exchange QHPs include children’s dental benefits. Fewer than 1 percent provide dental coverage for adults.

In August 2013, the American Dental Association estimated 8.7 million children would get basic dental coverage through the PPACA essential health benefits mandate. More than 8 million have paid for QHP coverage through the PPACA exchanges. At press time, HHS could not say how many had embedded coverage, or how many people had either embedded or stand-alone coverage through the state-based exchanges. At press time, all that HHS could say is that just 1.1 million QHP buyers got stand-alone dental coverage through the HHS-run exchanges.