Reform means change. The new Medical Loss Ratio (MLR) requirement of 80 percent for the individual and small business market and 85 percent for large business coverage put in place by healthcare reform could have increasingly far-flung implications for a lot of insurers.

Around 47 million folks within the Country are enrolled in Medicare, and then around twenty five percent of those are enrolled in Medicare Advantage plans. MA plans were hit hard by healthcare reform. The government will severely cut funding to MA plans at the beginning of 2011 to try to match expenses with traditional Medicare. Based on a recent government survey of Medicare Advantage insurers by the Energy and Commerce Committee, two-thirds of MA programs fall short of this newly required 85 percent loss ratio, which suggests over 15 percent of their premium dollars, went to profit, advertising, along with other corporate and administrative expenses - not to medical expenses. In contrast, 98% of traditional Medicare’s money is spent directly on medical care. According to committee chairman, Henry Waxman, "This report shows Medicare Advantage insurers are squandering billions of dollars on overhead costs - in fact, they spend 10 times the total amount per beneficiary as traditional Medicare."

Issues in the Five-Star Rating System

Another problem for MA insurers will be the Five-Star Rating System. A few years ago, this federal government began rating Medicare Advantage plans with a scale of one to 5, with 5 being the best. The system was produced to assist Seniors when they are looking for health care. Under healthcare reform, the rating system will be used to award bonuses to the best programs, and MA companies will have an incentive to shed areas with low satisfaction and high complaint ratios, spurring even more dis-enrollments. But the rating system means little, if anything, to most Seniors, who choose their Medicare Advantage plan determined by cost and access, not ratings. The overwhelming majority of MA members aren’t in highly rated policies since the plans aren’t available in their areas, so bonuses make little sense and don’t benefit Seniors. They only add to the cost of MA plans. MA programs’ gross overspending and inability to satisfy the 85 percent MLR means many more Medicare Advantage insurers will continue leaving the marketplace as several have already. Meaning millions of Seniors could be turning back to Original Medicare and searching for a traditional Medicare Supplement.

If they spend money on a Plan F and have few claims, they've, nonetheless, still paid higher premium. With an HDF lower premium, they've an opportunity to maintain the difference in premium and contribute some part of those savings to our optional Reserve Fund Annuity at a three percent interest rate, which exceeds the return on most bank accounts and CDs. Whenever you sell an HDF plan (instead of a Plan F) with an optional Reserve Fund Annuity, it allows the customer to fund their annual deductible amount through a Company vehicle, while earning a really competitive 3 percent interest rate on their deposits. The RFA allows the Company to pay the policyholder’s medical expenses before their policy benefits take effect, using customer funds out of the RFA. Even with the $50 minimum monthly allocation towards the RFA, the client spends less overall than if they had purchased a plan F by itself. That frees up money for them to buy additional coverage they might need. And that can result in additional commission for you, not to mention a well-cared-for customer!

What is the future for Worksite sales?

The United States economy still may be limping, yet employers’ interest in voluntary benefits isn’t. Based on Eastbridge Consulting Group, leading consultants within the worksite marketplace, "As employers’ budgets have been squeezed and health insurance costs have continued to rise, the role of voluntary benefits has grown. We have heard from employers who believe in the importance of voluntary benefits, and these employers expect 2010 to be a good year."

During a survey of more than 500 benefit managers in businesses ranging from 10 employees to thousands of employees, Eastbridge found the percentage of employers offering at least 1 voluntary benefit increased during the last three years. Today, sixty six percent of all employers offer a minimum of 1 voluntary benefit, and employers with 10 to one hundred employees have seen by far the most growth in recent years. The Eastbridge survey showed the average number of products offered by an employer is three to four, but some employers surveyed offered as many as twelve.

The Future of Employer-Sponsored Benefits

For a lot of companies, employer-sponsored benefits are hanging by a thread. Year after year, employers of all sizes have watched their employer-sponsored benefit costs skyrocket. Although cost increases have lessened the past couple of years, the price and anxiety level continues to be high. With uncertainties generated by healthcare reform, many employers remain skeptical about their future benefit programs. How will healthcare reform affect them? Will they be fined when they don’t provide benefits? Just how much will they be fined? Do their current benefit offerings meet federal requirements? What are their obligations under the newest law?

Most of the federal government healthcare reform laws for primary health programs apply to companies with fifty employees or more. Nonetheless, concern is great among all employers regarding employer-sponsored benefits. Because of this, due to tax savings, more employers than ever are drawn to voluntary benefits’ variety of plans that enhance employees’ coverage without charge to the employer. A voluntary benefit offering can give their employees some extent of benefit stability, regardless of what happens within the future. Inside the Eastbridge year-end 2009 Confidence Index Survey, 84 percent of those who responded thought voluntary benefit sales would increase in 2010.