Mini-Med Interest Forces Brokers To Abandon Traditional Objections

June 1, 2008

1357 words

Mini-med interest forces brokers to abandon traditional objections: more and more brokers are overcoming their objections to mini-med and limited-medical programs and adding them to their roster of offerings - better serving their existing block of business in the process.

Robert L. Whiddon

Brokers don't sell what they don't sell. And right now many advisers still lump mini-meds and limited-medical programs into the pile of products that they won't touch. The objections are familiar at this point: Why should I do it? Can I make any money selling it? Won't they confuse workers and sour my client?

But some advisers have overcome those objections and are adding the programs to their list of offerings. Once they do, another set of questions emerges: What kind of participation can I expect? How do I identify good cases for these types of programs?

FIRST THINGS FIRST

A primary objection for many brokers is that they just don't do mini-meds. It's just one of dozens that they have not deigned to investigate, understand and market. Colonial Life's Tom Gilligan, who serves as SVP of marketing and branding for the carrier, says that's a position that is increasingly hard for advisers to justify given major medical insurance market dynamics.

"That's a fact," Gilligan says. "They don't normally do this. Most brokers deal with traditional major medical insurance."

If that's their focus then they should know full well that the ranks of employers unable to afford group or unwilling to even consider it are growing.

"Bottom line is the broker customer base is shrinking," Gilligan says, adding that limited-medical programs might be an option for those clients.

Advisers won't have to hunt too hard for a potential match for a limited-medical program.

Gilligan says certain industries are a good fit, regardless of the case size. Retail, health care, hospitality and construction should all be considered. Then there is the under-100 life market.

"There are a huge number of employers who have either given up on health insurance or they are not even starting because they can't afford it," Gilligan says. "It's a market that's got great opportunity for a broker. Do they want to play? That's their question."

Brian Robertson, executive VP of Fringe Benefit Group, says more and more brokers are reaching for a product to serve employers priced out of traditional group insurance. "There are brokers really coming around to the fact that Hey, I've got to have a limited medical benefit plan in my quiver. I've got to be able to shoot that arrow when an employer needs that piece of business,'" Robertson says.

Right now he says it's mostly brokers looking to better service their existing clients, as opposed to hooking new prospects with limited-benefit lures.

It's easy for brokers to take that first step, he says. Just look at your block of business and find out who is covered and who isn't and then ask some simple questions. Are uncovered workers on spousal plans? Are they priced out of the current offering?

"All those questions naturally occur at renewal time," Robertson says, but brokers don't need to postpone the investigation. "Of course the broker can begin looking at their block of business and what the needs are at any time. But renewal time is a very effective and easy time for them to do that."

SHOW ME THE MONEY

Once convinced of the potential need for a specific product or service, the adviser has to ask about compensation. Maybe a broker should sell it, but if the broker can't make any money selling it, they are unlikely to sell it.

Gilligan agrees.

"For brokers it's all about shelf space," he says. "How many things can they be an expert at? How many things are they going to market and promote? They shouldn't market something if they are not going to make a buck."

He says brokers can't simply market this the way they are used to rolling out medical programs. Simply passing out paperwork or hosting a group meeting and hoping employees see the value won't drive the participation a broker needs to make it worth the time and effort.

"I will tell you right now that that kind of traditional approach to enrollment gets you about 5% participation," Gilligan says. "If a broker is going to follow that strategy with a carrier, they are not going to make any money and they shouldn't do it."

Colonial says it's army of reps and face-to-face approach can drive participation rates near 40%.

But not every employer is going to agree to that approach. And some cases don't meet minimum carrier requirements for one-on-one meetings, according to Lee Stokes, national practice leader for limited medical plans for AmWINS Group Benefits.

Average employee base is just one hurdle even the biggest and best enrollment companies can't always overcome. Stokes says one client had 1000+ sites with just about 10 workers at each.

"The enrollment companies want to know if they are going to send enrollers out to a location that they are going to have a substantial number of people. That example - no enrollment company was willing to do that," Stokes says.

Such a case requires live Web outreach or a telephonic program, he says.

Then there are other situations where the employer just doesn't want the mixed messages that can result when carriers send reps out to handle the enrollment.

Some carriers with the manpower to cover so many locations want to be able to push more than just what the employer is trying to offer. Sometimes it's two additional products, or more. The dwindling pile of benefit dollars looks even smaller in those situations.

Stokes says he's seen cases where voluntary enrollments cannibalized core benefit participation.

BUT WHAT ABOUT THE RISKS?

Some brokers steer clear of limited-medical programs because they fear that they'll confuse workers and ultimately confound and potentially lose the client. It's too risky they say.

Gilligan's familiar with the concern and he agrees that communication is crucial when promoting a limited-medical offering.

"If an employee thinks they are getting major medical insurance for 100 bucks a month, that's a huge issue and the broker doesn't want to go near it. It's fire. It's bad news," Gilligan says.

Again, he says Colonial's high-touch approach can protect against such confusion.

"We're going to make sure that an employee understands what they are getting," Gilligan says.

THE PRICE OF HIGH-TOUCH

Colonial's high-touch approach sounds like it's a good way to address the fundamental concerns advisers have about limited-medical programs. The question then becomes who pays for the preferred approach. Broker commissions are an obvious place to trim when looking for ways to cover the costs of an army of carrier reps.

"You're right, something's got to give," Gilligan says.

But the carrier knew that being uncompetitive on the subject of broker compensation wasn't a viable strategy. The company's commissions are competitive, neither the highest nor the lowest. Gilligan stresses the participation rate when answering adviser questions about compensation.

"It's not the highest commission they can get. Where brokers are going to really win with us is we're going to drive significantly higher participation rates with a competitive commission rate," he says.

Jason Krouse, chief marketing officer for the Cost Containment Group, agrees that access to employees is crucial to driving participation, but he offers some different guidelines for participation expectations. His firm develops, manages and services limited-medical programs.

While he stipulates that participation will change by industry and individual case characteristics, if an employer is paying 50% to 75% of the premium a broker can expect 20% to 40% participation. If the employer contribution drops below 25% then participation expectations should be adjusted downwards to around 15% to 25%.

If the program is completely voluntary and is payroll deducted, participation can be expected to come in between 7% and 15%.

"It really depends on the access you get to the employees to be able to explain the benefits of the program," Krouse says, adding that the variety and frequency of communications - including group meetings, payroll stuffers, e-mail campaigns and all the other hallmarks of traditional enrollments - is also key.

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June 2, 2008