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Ancillary benefits market: A public exchange dreams big

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The managers of the surviving state-based public health insurance exchanges continue to put one foot in front of the other, hoping the path firms up a bit in 2017.

Some of the exchange runners are moving ahead with efforts to sell products other than major medical coverage and stand-alone dental insurance.

A task force at Connect for Health Colorado (C4HCO), Colorado’s state-based exchange, is looking into setting up C4HCO Public Benefit Corp., a public benefit corporation that could sell vision insurance, life insurance, and supplemental health insurance products such as critical illness insurance and accident insurance.

The Patient Protection and Affordable Care Act (PPACA) requires public exchanges that have been in business for more than a year to pay for their operations using a combination of grants, state-government money and exchange revenue.

See also: PPACA 2016: How will exchanges pay their way?

C4HCO Public Benefit Corp. concept supporters say the ancillary benefits affiliate could bring in cash by selling consumers helpful personal protection insurance products.

The C4HCO board has published some documents related to the public benefit corporation effort online, including a description of the public benefit corporation charges and preliminary public benefit corporation financial projections.

For agents and brokers, the documents give a peek at how a business partner and potential competitor sees the ancillary business. For some points that might be of interest to producers, read on. 

See also: Colorado, California exchanges work on vision benefits

Covered California

1. C4HCO is not the only exchange looking at the ancillary benefits market.

C4HCO now lets adults buy stand-alone dental coverage through its enrollment system without first buying qualifying health plan (QHP) major medical coverage.

Most other PPACA exchange programs do not sell stand-alone dental coverage to adults to adults who don’t buy QHP coverage, but Covered California recently announced that VSP Vision Care has started marketing stand-alone vision plans through a link on the Covered California enrollment website.

Covered California managers note that consumers can use the VSP link to buy vision plans all year round, without worrying about the PPACA open enrollment calendar.

Managers of the state-based exchange in Hawaii were talking about setting up an ancillary benefits program there before technical problems forced the exchange to begin using the U.S. Department of Health and Human Services (HHS) Health enrollment system.

An advisory panel at MNsure, Minnesota’s state-based exchange, even talked in passing about the idea of finding a way to distribute long-term care insurance (LTCI).

See also: Could a PPACA exchange sell LTCI?


Clarification: An early version of this page gave an incompletedescription of public exchange dental plan sales. Most exchanges sell “stand-alone dental plans” to adults, but the adults have to buy QHP coverage to get access to the dental coverage.


2. C4HCO ancillary benefits program designers picture the exchange using ancillary benefits to beef up revenue outside the PPACA open enrollment period.

PPACA eliminated the medical underwriting procedures health insurers once used to keep consumers from waiting until they got sick to pay for coverage.

Insurers, regulators and exchange managers developed the “open enrollment period” system, or tight restrictions on when consumers can buy major medical coverage without going through a complicated application process, to manage the free rider problem.

For public exchanges, the current open enrollment calendar system creates a major business activity problem: Most of the major medical enrollment work floods into the exchanges in the fall and the winter.

The C4HCO ancillary benefits financial projections show that the program would try to focus on selling ancillary products in the spring and summer, when major medical sales were slow.

The projections show, for example, that the program might bring in only about $300,000 in the first quarter of the year, then about $700,000 per quarter in the spring and summer. The projections show that spring and summer revenue might fall to about $500,000 per quarter in the second and third year of operations, as a result of market saturation.

The program might generate a total of about $536,000 in operating income on $2.4 million in the first year, $221,000 in operating income on $1.7 million in revenue in the second year, and $163,000 in operating income on $1.6 million in revenue in the third year, according to the projections.

In the first year, program designers are hoping the program could get about $13,000 from sales of vision insurance, $981,000 from sales of accident insurance and critical illness insurance, and $1.4 million from sales of life insurance.

In the third year, the program designers see the program getting $15,000 in vision insurance revenue, $507,000 in accident and critical illness revenue, and $774,000 in life revenue. The designers are hoping to get $290,000 from sales of products to be named later.

See also: Non-PPACA plan seller tells all

A hand making a payment

3. The ways the C4HCO ancillary benefits program designs the program might be nice for agents and brokers. 

C4HCO managers have made a point of trying to reach out to agents and brokers.

The public benefit corporation projections show that the program might pay $1.4 million in broker commissions in the first year, about $954,000 in the second year, and $883,000 in the third year.

The program could also spend $210,000 on marketing over three years. Extra spending on ancillary benefits marketing could increase interest in all ancillary benefits and ancillary benefits sellers, not just C4HCO Public Benefit Corporation.

See also: 

PPACA exchange wrestles with producer comp strategy

Assisters, brokers fight for credit in Colorado


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