While few of us are experts on health care reform legislation, we're all aware that Jan. 1, 2011 was a major milestone regarding carriers' loss ratios: For both new and in-force individual policies, the carrier must pay out 80 percent in claims. In order to offset the increase in claims costs, most major medical carriers have significantly reduced commissions on their individual polices.

If you're writing health insurance and seeing your commissions go down, it may be time to pay close attention to the low-cost supplemental accident products in the marketplace. Not only do these supplemental products fall outside the new legislation — hence outside the mandated loss ratios and resulting commission cuts — but supplemental accident and expense products are valuable for clients, too.

As you know, we're seeing more restrictive and expensive major medical plans, with a resulting trend of clients buying health care coverage with higher deductibles in order to reduce monthly payments. However, that leaves a lot of expenses uncovered. Supplemental accident coverage is a perfect companion to clients' existing high-deductible plans, and an economical and intelligent way to protect families from expanding health care costs.

Features to look for in low-cost supplemental accident products include:

  • Reimbursement plans. Are your clients' expenses covered? This is a huge benefit and selling feature for your clients. Look for supplemental plans that will reimburse clients for actual expenses incurred.
  • No primary/secondary payer. Plans that don't coordinate with other coverage offer the best value because they reimburse your client for actual incurred expenses up to the benefit limit, regardless of what other coverage might exist. There's no back-and-forth hassle about which carrier pays what. For example, say your client purchases a non-coordinating supplemental reimbursement plan with a $100 deductible, then has an accident incurring $2,000 in expenses. Since there is no need to determine a primary or secondary payer, the supplemental plan simply reimburses your client for $1,900, regardless of other major medical coverage.
  • Direct client payments. Clients will appreciate the benefits of a supplemental plan that reimburses policyholders directly instead of going through another provider.
  • Individual plus family coverage. Supplemental products can be selected for an individual and for families, as well. Some plans offer affordable coverage for all family members, with options where each family member's claims can contribute to a common deductible threshold.
  • Customization. While supplemental policies hold particular appeal for clients with high deductibles, these plans are valuable even to clients with low deductibles. Some supplemental products allow your clients to choose the benefit amounts based on their individual needs, as well as to choose any hospital, physician, or medical facility. Your clients aren't restricted to a particular network of service providers under the supplemental plans that offer simple reimbursement of covered expenses.
  • Critical illness riders. Consider products with critical illness riders. In this scenario, a client choosing a rider could receive a lump sum upon the initial diagnosis of the covered condition (such as heart attack, stroke, or invasive cancer). The rider would terminate after the disbursement, as would the premiums being paid for that portion of the policy.
  • Technology. While online application filing is generally available for major medical and life insurance, supplemental products often fall through a technology gap. Paper forms can be time consuming and have more potential for errors, thus slowing down the approval process and creating roadblocks for client satisfaction. Supplemental products are catching up with this technical divide, and some offer secure, expedited online processes. Smart technologies allow you to sign clients up for supplemental products at the same time as new major medical policies, thereby empowering clients to take care of everything at once.

In these times of rising costs, higher deductibles, and complex new regulations, supplemental accident products are a convenient and affordable way to fill the gap in protection. And since supplementals aren't subject to the new loss ratios, commissions tend to remain intact – making them a good option for consumers and producers.

Jay Drucker is vice president at American General Life Companies, where he is primarily responsible for accident and health products, including supplemental accident products. He can be reached at jay.drucker@americangeneral.com.

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