67 PD Hot Topics in Voluntary Supplemental Health Products Sold at Work Sites
Moderator:
Michael J. Fish, FSA
Presenters:
Anita Marie Recchio, FSA, MAAA
Darrell D. Spell, FSA, FLMI, MAAA
SOA Health Meeting 2014
Hot Topics in Voluntary Supplemental Products
Mike Fish
The Hartford
June 2014
Copyright © 2014 by The Hartford. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford.
Agenda
• Industry Trends
• Private exchanges
• Group carrier approach to worksite
• Risk considerations
• Summary
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2
HCR is accelerating many existing trends
Impact
Business Implication
Increased employee benefits broker activity as alternative to declining medical revenue
Supplemental market
expansion continues



Opportunities in new
products & channels


Gap filler products fill deductibles & out of pocket expenses
Collaboration
between ancillary and
medical players


Importance of product bundles through exchanges
Increased
Competition


Numerous players entering and/or investing in market to capitalize on opportunity

Some risk of increased government oversight, fees and regulations applying directly to ancillary products

Potential impact to loss costs and premium growth due to changes in provider & consumer behaviors
Possible
Margin
Pressure
Continued shift to defined contribution funding & consumerism of benefits
Impacts will vary by segment as employers implement benefit strategies based on regulatory, competitive and other business considerations
Proliferation of private exchange platforms Employers desire for integrated health & productivity programs
Exchanges amplify rate‐based decisions
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3
The market continues to evolve
Size of Benefits Business
Strong
<$ 3B
Voluntary Capabilities
Carrier A
Weak
+ $5B
Carrier C
Key Takeaways
Carrier B
Carrier D
Carrier E
 Carriers heavily investing &
moving toward hybrid model
 Ancillary/supplemental space
getting more crowded
Carrier F
Carrier G HIG
Carrier J
True
Group
4
$3-$5 B
 Investments centered on:





Carrier H
Carrier I
Business Model
Product & distribution
Online enrollment
Self Service
Marketing & communication
Data & analytics
Traditional
Worksite
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4
Carriers are expanding their portfolios
Products
Company
STD/LTD/Life
Critical
Illness
Accident
Hospital
Indemnity
Dental
Vision
Medical
49%
10%
12%
8%
13%
5%
n/a
Workers
Comp
Non Medical
The Hartford
Company B
Company C
Company D
Company E
Company F
Company G
Company H
Company I
P&C
Worksite
Medical
Company J
Company K
Company L
Company M
Company N
Company O
Company P
Company Q
Company R
Company S
Company T
Company U
% Voluntary
Sales Prem1
n/a
1. 2014 Eastbridge Study
Copyright © 2014 by The Hartford. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford.
5
High activity with enrollment vendors
Brokers, TPAs & Carriers
V
e
n
d
o
r
P
l
a
y
e
r
s
Selerix , Plan Source, Business Solver, BenefitFocus
Outsourced Enrollment
Private Exchanges
Hewitt, Fidelity
Outsourced Ben/Admin
Market
Segment Driver
National Account employer cost pressures led to ben/admin outsourcing
Technology Solutions for carriers selling voluntary benefits to Middle Market & Small Accounts
Private Exchanges build or rent technology to support marketplace for benefits purchasing for all market segments
Carrier
Response
Plug & Play
Build or Rent Capabilities Carrier Specific Exchange Strategy
% Market
Current > 95%
5yr Projected 65‐70%
Current <5%
5yr Projected 30‐35%
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6
Speaking of private exchanges…
Top Five Employer
Exchange Barriers
Employer View1
 Immaturity of the private exchange market
What We Know
80%
60%
 Stability or track record of exchange administrator
40%
20%
 Limited information about private exchanges
0%
Exchange
Barriers
 Employee readiness
Exchange View2
Brokers/consultants, carriers, “pure play TPAs”
Products
Client specific plan designs, single carrier focus, emerging ancillary & supplemental products; group platform
Pricing
Pricing/underwriting via individual case level RFPs
Services
Enabling enrollment with call center support
Employers
Interest high but adoption low; Limited current interest in full DC funding; Concerns over consultant conflict of interest
Players
Value propositions promoting sizable cost savings for employers; aggressive marketing
Products
Consumer centric, simplified canned designs with fewer client specific offerings, multi‐carrier medical
Pricing
Product bundling and volume discounting; requests for pooled risk approach
Services
In addition to enrollment, may manage billing and other administrative services
Employers Rapid exchange adoption (30%+ within 5yrs) with increased focus on wellness and consumerism
Current
Traditional
Approaches
Exit Health Care
Private Health
Exchange
Accountablity
Plans
What We Hear
60%
50%
40%
30%
20%
10%
0%
1Private
22014
 Stability of cost over time
Players
Exchange Evaluation Collaborative (PEEC) 2013 Private Exchange Survey
Aon Hewitt’s Annual Health Care Survey (1,230 employers)
3‐5 Years
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7
Agency size matters regarding ancillary benefits & private exchanges
Impact of Healthcare Reform on How Agency Offers Ancillary Benefits
Size of Agency
No change in how we offer benefits
24%
24%
26%
23%
Agency will create a private exchange option for medical, and include
ancillary benefits
6%
22%
14%
22%
41%
3%
15%
22%
2%
45%
26%
20%
11%
2%
12%
2%
10%
8%
9%
12%
Total
Producers
Local
'A'
Regional
'B'
National
'C'
Agency will partner with a private
exchange option for ancillary benefits
Agency has reviewed our strategy in light of HCR and decided not to work
with private exchanges
Agency has not made any decisions
around private exchanges or HCR
Other
Source: The Hartford 2014 NPS Broker Survey
QC8b) How do you anticipate Healthcare Reform will impact how you offer ancillary benefits to your employer customers in the future?
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8
Why are group carriers offering worksite products?
Group and worksite distinctions are blurring
• Traditional individual worksite companies selling group products
• Employer cost shifting & movement to DC funding • No “one size fits all” model
Broker & employer expectations are changing
• Prefer broad portfolios with product bundling & package discounts
• Desire for “one stop shop” to simplify service
New distribution & growth opportunities
• Private exchanges adding supplemental products
• Further penetration of existing customers
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9
How are they approaching the market?
Group platform
• Level commissions (generally)
• Increased employee choice in plan design
• Guarantee issue (medical underwriting for high benefit amounts)
Flexible enrollment
• Online, paper, telephonic, group meetings (limited 1x1)
• Robust connections to TPA’s & online vendors
Consumer level service model
• Strong focus on self service capabilities (from employer to employee)
• Utilize eligibility feeds to drive automated billing & claims
Importance of communication & education
• Address gap created by defined contribution model
• Important to drive participation and spread of risk
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10
What are the risk considerations?
Underwriting
• More frequent requests for high GI levels
• Open enrollment options: • One time
• Ongoing
• Modified
• Ensure group underwriters & sales reps focus on enrollment conditions
Product
Pricing
Other
• Overly rich plans in relation to the employee demographics
• Prospective pricing and “bet on the come” based on enrollment event
• Participation levels under stress ‐
competition for wallet share
• Increase in product complexity via add‐on benefits
• Use of predictive modeling to refine rating algorithm
• Numerous products & plans complicates employee purchase decision
• Need for better data & metrics at individual employee level –
eligible & enrolled
• Pay close attention to regulatory environment (state & federal)
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11
Summary ‐ Change Is Constant
• Healthcare reform will continue to influence the supplemental market
• Some impacts are already being felt while others are on the horizon
• Large opportunity in the market however margin contraction is inevitable
CHANGE
AHEAD
• Enrollment method & approach remains a key to success
Copyright © 2014 by The Hartford. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford.
12
Voluntary Enrollment Methods and Risk
A Case Study Approach
Anita Recchio, FSA, MAAA
1
June 24, 2014
1
Agenda
 What are Voluntary Benefits?
 How Big is the Voluntary Market?
 How do Employees Buy Voluntary Benefits?
 3 Voluntary Enrollment Case Studies
2
2
What are Voluntary Benefits?
It’s not Core
 Voluntary Benefits are employee-paid supplemental
insurance products sold at the worksite
 Premiums are payroll-deducted
 Both Individual and Group Contracts
 Most popular voluntary products include:
3
 Life
 Disability
 Accident
 Cancer, Critical Illness
 Hospital Indemnity, Supplemental Medical
 Dental
 Vision
3
How Big is the Voluntary Market?
Sales are increasing
New Business Premium (in millions)
$7,000
$6,500
$6,644
$6,000
$6,030
$5,500
$5,000
$5,397
$5,657
$5,234
$4,500
$4,000
$3,500
4
$3,000
2009
2010
2011
2012
2013
Source: Eastbridge Consulting Group, U.S. Worksite/Voluntary Sales Report, Carrier Report for 2013
4
How do Employees Buy Voluntary Benefits at the Worksite?
Are voluntary benefits bought, or sold?
Voluntary Enrollment Method
2013
2014
Group meeting followed by one-on-one meeting
29%
28%
Voluntary one-on-one meeting only
24%
20%
Mandatory one-on-one meeting only
23%
15%
Voluntary group meeting only
9%
15%
Mandatory group meeting only
9%
16%
Internet/web
4%
4%
Call center
1%
2%
Enrollments involving one-on-one meetings are most common
5
2014 trend shows increase in group meeting only enrollments
Source: 2014 Benefits Selling/Eastbridge Voluntary Survey
5
Case Study #1: One-on-One
Hospital
Eligible Employees: 1,600
Location:
Voluntary Products
Oct. 2011
Oct. 2012
Oct. 2013
Individual Accident
231
173
188
592
37%
Individual Cancer
152
99
66
317
20%
Individual Disability
220
236
144
600
38%
Individual Term Life
21
104
67
192
12%
Individual UL
261
236
146
643
40%
-
72
26
98
6%
Group Critical Illness
6
Midwest City, 4 locations
Total Sold
After 3 consecutive annual enrollments, 1195 (75%) employees purchased
2,442 voluntary products
Average monthly premium per participating employee = $79
Claims experience 10% better than expected
6
Case Study #2: Call Center
Audiologists
Eligible Employees: 392
Location:
150 Retail Locations across 38 States
Enrollment Period:
Feb 18 - Feb 28, 2013
Included Mandatory Core Enrollment
Voluntary Products
Underwriting
Participation
Group Accident
Guarantee Issue
72
18%
Group Term Life
Guarantee Issue
110
28%
Individual Cancer
Cancer History Question
58
15%
Individual Disability
Guarantee Issue
66
17%
182 (46%) employees purchased 306 voluntary products
7
Average monthly premium per participating employee = $59
Claims experience running as expected
7
Case Study #3: Self Enrollment
Refrigeration Warehousing
Eligible Employees: 505
Location:
6 facilities throughout Southeast
Enrollment Period:
November 2013
Online Self Enrollment via Product Hosting
Voluntary Products
8
Underwriting
Participation
Group Accident
Guarantee Issue
254
50%
Group Hospital
Indemnity
Guarantee Issue
172
34%
Group Critical Illness
Guarantee Issue
88
17%
Individual Cancer
Cancer History Question-Application
Required Agent Follow-up
72
14%
•283 (56%) Employees purchased 586 voluntary products
•Average monthly premium per participating employee = $55
•Lapse rate after 4 months 45% higher than expected
8
Key Takeaways
 Enrollment Method Impacts:
 Participation
Spread of Risk
 Persistency
 Average Premium
 Claim Experience
 Commissions and Expenses
Anti-Selection
9
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