Most medical insurance brokers would agree that since the introduction of The Patient Protection and Affordable Care Act (PPACA), the past several years can best be described as being strapped-in on a winding roller coaster that has continuous ups and downs, stomach-dropping plummets and several upside-down loops thrown into the mix. Now that the ride has stopped, or at least slowed down, and the initial PPACA stages have been implemented, it has not taken long for brokers to recognize their commissions are going to be flattened. Last November, a member survey by the National Association of Insurance and Financial Advisors documented that 80% of brokers who sell health insurance have seen decreased commissions since Medical Loss Ratio (MLR) went into effect.
The question arises for brokers, what new revenue streams can be generated? How can they maximize a competitive edge and increase profitability while meeting the needs of a consumer-driven market in the wake of health care reform?
The answer to part of the equation could be something most health insurance agents already have in their product portfolio: ancillary products. The rationale behind this newfound value in ancillary products is three-fold:
- According to PPACA guidelines, the commission agents receive for selling an ancillary product is not affected by new regulations.
- Consumers are buying ancillary products because they provide first dollar coverage in a world where many people have high deductibles.
- Many ancillary products, such as accident hospital indemnity and dental, vision and hearing coverage do not require underwriting. As long as the applicant completes the application, they will receive coverage.
Many types of ancillary insurance coverage can protect the insured and their loved ones from extreme financial hardship. Ancillary products can help fill a gap and provide coverage for medical policies that have high deductibles.
1. Dental Plus Vision and Hearing – Despite dental being the third most requested benefit in America, according to the National Association of Dental Plans, a growing segment of the marketplace has no coverage or is significantly underinsured. For instance, I know of a Dental Plus Vision and Hearing policy with a low $50 policy-year deductible. The plan provides up to $1,200 in benefits per policy year for dental, vision and hearing services. This product qualifies for a 15% customer discount if sold in conjunction with a major medical policy. It can also be sold as a stand-alone policy.
2. Accident Hospital Indemnity Insurance – Every year, there are about 119.2 million visits to hospital emergency rooms for accidental injuries. Emergency room treatments, hospital stays and care can quickly add up to thousands. That is why stressing the importance of adequate coverage is so valuable to your insured. The out-of-pocket expenses can be staggering, especially for high-deductible major medical plans. The typical Accident Hospital Indemnity Insurance plan will pay the insured if they go to the emergency room and/or are admitted to the hospital due to an accident. For example, one plan I know of will pay $200 per day up to 90 days if they are admitted to the hospital due to an accident, an additional $200 per day for up to 30 days if they require a burn unit or intensive care, and $150 per visit if the insured requires emergency treatment from an accident without an overnight stay.
3. Critical Illness – This product is especially valuable because it helps to provide additional benefits if the insured is diagnosed with a catastrophic illness. For example, there is a critical illness plan that pays benefits when a policyholder is diagnosed with any of the following dreaded diseases: cancer, heart attack, stroke, and kidney failure and organ transplant. The full benefit is paid out upon diagnosis, with no restrictions on how the money is to be used. For an additional premium, applicants can choose the Extended Plan, which covers the conditions above but also protects against paralysis, severe burns, and loss of sight, speech and hearing. In some states, a Return of Premium Option is also available.
4. Short-Term Disability – According to the Council for Disability Awareness, 30% of employees across America will experience a disability before they retire. What agents need to ask their policyholders is if they were to become disabled tomorrow and couldn’t work for two or three months, would they have enough savings to cover their living expenses? Short-term disability insurance insures the beneficiary’s earned income against the risk that occurs when a disability creates a barrier for a worker to complete the core functions of their work. For example, the inability to focus or maintain composure, as with psychological disorders or an injury, illness or condition, could cause physical impairment or incapacity to work. It encompasses paid sick leave, short-term disability benefits and long-term disability benefits.
In closing, no one knows with certainty how the complete story will be written on PPACA. What health insurance brokers can count on is that in order to remain profitable, they MUST think outside the box. Ancillary products, with the substantial commissions they yield, can help brokers get back on track. Of equal importance is that ancillary products are of great value to the insured and can provide many beneficial coverage types.