Understanding Health Insurance Markets and The Educational Role of the Agent as a Licensed Intermedi

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Understanding Health Insurance Markets and
The Educational Role of the Agent as a Licensed
Intermediary January 13, 2009

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Wisconsin Agent Organizations
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About these Agent Organizations

• The Wisconsin Association of Health Underwriters
  (WAHU) and the National Association of Health
  Underwriters represents over 20,000 health
  insurance agents, brokers and employee benefit
  consultants nationally, 600 in Wisconsin.
• The Independent Agents of Wisconsin (IIAW)
  provides education and advocacy services to over
  5,000 professional business people throughout
  Wisconsin so that we can faithfully serve the
  needs of the insurance consumer.
• The Professional Insurance Agents (PIA) is an
  association dedicated to the growth and
  perpetuation of our members as professional
  business people who market insurance products to
  fulfill the needs of consumers.
• The National Association of Insurance Financial
  Advisors (NAIFA) represents 1,700 and growing
  Wisconsin insurance and financial professionals
  who provide Wisconsin citizens with financial
  security and wealth accumulation strategies. 

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Role of Health Insurance Agents, Brokers and
Consultants

• In addition to selling the insurance products
  agents help their clients, with all sorts of
  employee benefit issues, including assistance
  with claims processing, COBRA administration,
  privacy issues, and more.
• Most agents are independent health insurance
  agents, brokers or consultants, and many are
  small-business owners themselves.
• Agents, brokers and consultants have a
  distinctive knowledge of the health insurance
  marketplace, including an understanding of what
  consumers want, the underwriting process, the
  perspective of the business owner and the
  economic realities of health insurance markets.

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Wisconsins Healthcare Dollar Where Does It Go?
Physician Clinical Services 22
Physician Clinical Services 22
Source Adapted from Centers for Medicare and
Medicaid Services, 2008
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Health Insurance Markets
Individual Coverage Can be for a single person
or any type of family
Small Group 2-50 Employees
Large Group 51 or More Employees
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Individual Health Insurance
Todd Catlin President, Liberty Insurance
Group Brookfield, Wisconsin
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What does the individual market consist of?

• Short-Term or Temporary Insurance Plans
• Long Term Individual Coverage
• Health Insurance Risk Sharing Plan (HIRSP)
• BadgerCare Plus
• Limited or Defined Benefit Plans

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Who is buying in these markets?

• Short Term Plans
• College graduates
• New employees in their companies waiting
  period
• Recently laid off or people in between jobs
• Long Term Individual Coverage
• Independent Contractors
• Sole Proprietors
• Employees without group coverage
• Employees purchasing child only coverage or
  for all dependants
• Employees who have group coverage available
  but find individual insurance as a lower cost
  option
• Groups under 5 lives and sometimes larger
  groups

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Who is buying continued

• Health Insurance Risk Sharing Plan (HIRSP)
• Those people with uninsurable medical
  conditions
• People who get offered coverage with
  exclusions they find unacceptable
• Families who find themselves in the family
  way by accident
• BadgerCare Plus
• All children under 19 years of age
• Certain others who meet income criteria
  including pregnant women, farm families, self
  employed, and adult caregivers
• People gaming the system
• Limited or Defined Benefit Plans
• Strictly price shoppers or those who are
  not well informed

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Individual Insurance by the Numbers

• In Wisconsin approximately 150, 000 obtain their
  insurance through individual plans (excluding
  HIRSP and BadgerCare Plus)
• For some it is their only option since they do
  not qualify for group coverage. For others it is
  their best choice
• Individual market is growing
• Cost is the primary driver for individual health
  plan purchasers
• Major players in this market are Anthem Blue
  Cross, Humana, UnitedHealthCare/Golden Rule, WPS,
  and the regional HMO plans

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How the Market Works

• Individual companies are more limited than group
  insurance companies in their ability to spread
  risk
• Most Federal HIPAA provisions do not apply in the
  individual market
• Based on the above companies in the individual
  market underwrite much differently than in the
  group market
• Declination of coverage
• Exclusion rider(s)
• Rate the policy
• Offer of rating or exclusion rider
• Companies underwriting policies and risk
  tolerance vary widely from company to company,
  hence the need for an experienced agent
• Everyone is GUARANTEED acceptance of coverage

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What Happens at Renewal?

• Everyone is guaranteed renewable
• No one is singled out for specific claims they
  may have had
• The urban legend that people can just be
  cancelled is wholly untrue
• Companies will pool you along with all their
  other individual clients and give renewals for
  that entire block of business
• Variations can exist for product type and age
  band changes
• Good agents, brokers or consultants will explain
  your renewal, options available, and shop the
  market for you just like group insurance

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Regulatory Impact Community
Rating
Varying regulatory climates can have a profound
impact on insurance affordability. Consider the
differences in individual rates for two
30-year-old males living in a Philadelphia suburb
located across the bridge from each other in
different states.
September 2007 Lowest and Highest Rates for PPO
Indemnity Plans 1000 Deductible 80/20
Coinsurance In Neighboring Philadelphia Suburbs
NJ
PA
599 - 6,009 Haddonfield, NJ 08033
70 - 260 Wayne, PA 19087
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Functions of an agent in the individual market?

• Finding out the person/families needs - asking
  questions!
• Educating the client about what is available to
  them and steering them clear of potential
  pitfalls
• Shopping the market for the best available plans
  that match the persons needs and presenting it
  in an easily understandable manner
• Advocating on their behalf for claims or other
  issues
• Advising at renewal as to what options are
  available
• Educating, acting as a resource, and problem
  solving

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Small Group Health Insurance
Chris Hanson President, Hanson Benefits,
Inc Kimberly, Wisconsin
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In the beginning was
HIPAA
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HIPAA

• Small group is 2-50 employees
• Guaranteed issue
• Guaranteed offer of all plans
• Guaranteed renewability
• Portability for employees

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Backwards, upside-down, confusing
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Forward and right side-up doesnt change
things
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Who started it? Whos going to fix it?

• Health Insurance provides the ability to pay
  beyond the insureds resources
• Patients/Consumers medical care to
  achieve/maintain good health
• Consumer Demand affected by media/TV/Internet
• Medical Technology always advancing with
  latest/greatest to compete in marketplace
• Medical Advances consumers will live longer,
  but at what cost to the systems?
• Practitioners practicing defensive medicine
• Medical Malpractice financial incentives for
  lawsuits
• Pharmaceutical Industry Miracle Drug costs -
  into research development

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How Small Businesses Select Coverage
HMO, PPO, or POS?
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Insurance Agent Specialist/Advisor
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Medical Insurance Comparison
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Dental Insurance Comparison
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Life Insurance Comparison
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OCI Employee Application
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Factors That Affect Premiums
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Pure Community Rating
425
FACTORS Benefits Location Family size
425
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Modified Community Rating
650
650
ADDITIONAL FACTORS Age Sex Industry Group size
200
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A POOL
IS A POOL
IS A POOL!!!
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Health Insurance Consulting
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Health Insurance Consulting

• Helping control their costs of health insurance
  through
• Education
• Knowledge
• Behavior

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Consumerism, Lifestyle Wellness
  Arvid R. "Dick" Tillmar Shareholder,
Diversified Insurance Services Waukesha,
Wisconsin
BETTER HEALTH, BETTER BOTTOM LINE
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Consumer Driven Health Plans
Health Reimbursement Accounts Flexible
Savings Accounts Health Savings Accounts High
Deductible Plans
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Consumer Driven Health PlansUtilizing HSAs,
FSAs, and HRAs
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Which Plan Is Best For My Client?
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Health Care Economics

• Five Statements
• Cost the unit price of the health service X
  (times) utilization (how much of it we consume)
• Health insurance is not what causes health care
  to be so expensivethe cost of health care is
  what causes health insurance to be expensive.
• There are for factors that influence our health
• 20 is genetics
• 20 is environment
• 10 is the health system and
• 50 is individual lifestyle choice

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Why Wellness?
Determinants of an Individuals Health Status
Genetics 20
Lifestyle Choices 50
Environment
20
Access to Care 10

• Mercer Management Journal 18, The Case for
  Consumerism in Health Care

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Health Care Economics

• Five Statements Cont
• Obesity, smoking, hypertension, diabetes, stress
  and inactivity, all, according to the Wellness
  Council of America, are related to lifestyle
  choice and account for 80 of this nations
  medical costs. Each is preventable or
  significantly modifiable.
• The healthcare in this country, in the main, is
  designed to keep you from dying once you get
  sickit is not designed to keep you from getting
  sick.

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Employer 2008 Strategies

• Increase payroll contributions
• Increase prescription copays
• Increase deductibles
• Drop coverage entirely
• Increase office copays
• Introduce a tiered network for physicians /
  hospitals
• Restrict eligibility for benefits

Kaiser, Survey of Employer Sponsored Health
Benefits 2007
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• These methods of health cost reduction are
  typically known as.
• COST SHIFTING!!

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• Rising costs are merely the symptom
• and cost sharing just relieves the symptoms

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1,500-3,500 in Excess Claims for Each
Additional Lifestyle Factor
Source Dee Edington, Health Management Research
Center
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From Following the Costs to Preventing the Costs
Health Care Resources ()
Population
18
25
80 Well
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14 Episodic
24
5 Chronic
1 Catastrophic
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Death
High Risks, Acute and Chronic Disease
Unhealthy Behaviors
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Death
High Risks, Acute and Chronic Disease
Low Cost
High Cost
Unhealthy Behaviors
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Health Risk Assessment

• Assesses risk behaviors, chronic conditions,
  symptoms, medications and major health conditions
• Fitness, Heart Health, Nutrition, Body
  Composition, Substance Use, Stress, Coping,
  Safety, Cancer Risk, Osteoporosis, Health Age

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Wellness Team Members

• Provide an enthusiastic and positive attitude
  toward all learning and development efforts
• Promote Team Initiatives
• Assist with the planning, implementing and
  evaluation of Team initiatives
• Communicate current Health Advisory Team offering
  to employees.
• Provide feedback regarding suggestions or
  comments related to the Health Advisory Team

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How does it work?

• The Wellness Team supports Employees and the
  Employer By
• Setting goals and policies
• Selecting program topics
• Developing program protocols
• Promoting healthier lifestyle behaviors
• Encouraging employee participation
• Providing feedback regarding the needs of the
  employees
• Offering input to company leadership
• Working as a team to develop incentive ideas.

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Telephonic or Onsite Health Coaching

• Process that equips people with the tools,
  knowledge, and opportunities they need to develop
  themselves
• Build trust and understanding
• Put new behaviors into action so new behaviors
  become natural
• Focus on identified risk factors that matter to
  you

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Six Unhealthy Truths Tell the Story of the Rise
of Chronic Disease and Its Impact on Health and
Health Care in the U.S.

• Truth 1 Chronic Diseases are the 1 cause of
  death and disability in the U.S.
• Truth 2 Chronic diseases account for 75 of the
  nations health care spending
• Truth 3 About two-thirds of the rise in health
  care spending is due to the rise in the
  prevalence of treated chronic disease.
• Truth 4 The doubling of obesity between 1987
  and today accounts for nearly 30 of the rise in
  health care spending.
• Truth 5 The vast majority of cases of chronic
  disease could be better prevented or managed.
• Truth 6 Many Americans (five in six) are
  unaware of the extent to which chronic disease
  harms their health and their wallets.

www.fightchronicdisease.org
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The Preventable Causes of Death in Wisconsin

• Tobacco 8,100 /- deaths per year in Wisconsin
• Poor Diet Physical inactivity 6,900 /- deaths
  per year in Wisconsin
• Microbial agents 1,700 /- deaths per year in
  Wisconsin
• Alcohol 1,600 /- deaths per year in Wisconsin
• Toxic agents 1,000 /- deaths per year in
  Wisconsin
• Medical errors 1,300 /- deaths per year in
  Wisconsin
• Motor Vehicles 800 /- deaths per year in
  Wisconsin
• Firearms 400 /- deaths per year in Wisconsin
• Sexual Behavior 400 /- deaths per year in
  Wisconsin
• Uninsurance 300 /- deaths per year in Wisconsin
• Illicit drug use 300 /- deaths per year in
  Wisconsin

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Large Group Health Insurance
Dean M. Hoffman Consultant, Diversified Insurance
Services Waukesha, Wisconsin
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Who Buys Large Group?

• Private sector Employer Groups
• Governmental Employer Groups
• Customary size threshold
• Fully Insured 51 Employees
• Self Funded 100 Employees

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Fully Insured Group Plans

• Traditional Insurance Carriers
• National, Regional and State
• Customized plan design
• Multiple plans, networks and or carriers
• Managed Care and Plan Design
• Health Maintenance Organization
• Preferred Provider Organization
• Exclusive Provider Organization
• Indemnity Plans
• Consumer Driven Health Plans

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Fully Insured Group Plans

• Insured Funding Arrangements
• Traditional Insurance
• Experience Rated Agreement
• Retrospective Agreement
• Minimum Premium
• State Insurance Regulation
• Mandated Benefits
• New and Renewal Rate Calculation
• Under 300 Lives Blend of Manual, Demographic
  and Experience Pricing
• Over 300 Lives Actual Claims experience

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Typical Fully Insured Model
Employer Group
Pays Premium
Insurance Company
Managed Care Network

Prescription Drug
Employee incurs a medical claim at a healthcare
provider
Claims Administration
Utilization Review
Disease Management


Case Management
Reinsurance Pooling
Healthcare Provider Paid
Lifestyle/Wellness Plan
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Self Funded Group Plans

• Prior to 1974 regulation of self-funded plans
  were Wisconsin controlled
• Employee Retirement Income Security Act (ERISA)
  placed regulation with federal government
• Self-funded plans under ERISA avoid state
  regulations including insurance regulation and
  mandated benefits are at their discretion

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.
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Self-funded Group Plans

• Who self funds group plans
• Employer elects custom benefit design
• Employer funds medical claim account
• Employer hires a Third Party Administrator
• Employer purchases stop loss liability insurance
  protection for abnormal risks
• True self-insurance

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Typical Self-funded Model
Employer Group
Managed Care Network
Third Party Administration
Pays
Prescription Drug
Utilization Review
Contributions
Disease Management
Claim Account
Interest Income
Case Management
Refunds claims beyond limits
Pays claims
Transplant Carve Out
Stop Loss Protection
Stop loss

Healthcare Provider
Lifestyle/Wellness Plans
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Stop Loss Protection

• Specific Stop Loss
• Protects against a single catastrophic claim
• All eligible claims below the individual stop
  loss level are the responsibility of the employer
• All eligible claims in excess of the individual
  stop loss level are reimbursed by the carrier
• Aggregate Stop Loss
• Protects the group as a whole
• Total Claims under aggregate stop level are
  employer liability
• Claims exceeding aggregate stop loss level are
  reimbursed by carrier

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Functions of Agent, Broker or Consultants

• Strategic Benefit Planning
• Market Review
• Financial Modeling
• Risk Tolerance Analysis
• Health Claims Analysis
• Administrator Audits
• Network Disruption Analysis
• Plan Document Contract Review
• Employee Contribution Strategies
• Lifestyle/Wellness Strategies

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Questions?
wahu_at_ewahu.org 608-268-0200
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Role of the Agent, Broker or Consultant
James J. Scholl, CLU, CHFC Owner of Scholl
Associates and BOSSupport Lone Tree, Colorado
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Employee Compensation
Employer

• Financial Needs
• Lifestyle
• Risk Management
• Property and Liability
• Health expenses
• Disability
• Premature Death
• Savings and Investment
• College
• Retirement

Income
.60
1.00
Taxes 40 ___________ Living Exps Pay
Debts Save/Invest
FICA Match Health Life Disability Cafeteria Pensio
n/401k
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2008 FEHBP

• 27 Medical Plans
• 7 HMO
• 17 FFS (PPO)
• 1 CDP (HRA)
• 2 HDP (HSA)
• Savings Plans
• Flexible Spending Accounts
• Health Reimbursement Accounts
• Health Savings Account

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Which Plan Is Best For Me?
1.
2.
3.
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7 HMO Plans
Out of Pocket 1,750
Unlimited Maximum
HMO Plan
Member Responsibility Copays
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17 FFS (PPO) PlansIn-Network
Unlimited Maximum
Maximum Out of Pocket Deductible
300 Coinsurance 4,200 Maximum 4,500
FFS Plan
Member Responsibility
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2 PPO HSA PlansIn-Network
Unlimited Maximum
Maximum Out of Pocket Deductible
2,000 Coinsurance 1,000 Maximum
3,000 Plus Copays Yes
HSA Plan
Member Responsibility
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Which Plan Is Best For Me?
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Which Plan Is Best For Me?
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Employee Compensation
Employer

• Financial Needs
• Lifestyle
• Risk Management
• Property and Liability
• Health expenses
• Disability
• Premature Death
• Savings and Investment
• College
• Retirement

Income
.60
1.00
Taxes 40 ___________ Living Exps Pay
Debts Save/Invest
FICA Match Health Life Disability Cafeteria Pensio
n/401k
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Questions?