Rate hike revolt

Doug Dano has a problem. The president of Nashville, Tenn.-based Compensation and Benefit Consultants Inc. is getting an earful from angry clients upset about rate increases on high deductible health care plans, especially at renewal time. Complaints about price hikes aren't new, but the term high deductible means the insurance companies Dano represents paid little, if anything, in claims in the past year. If so little is being expended, clients wonder, why is the cost going up?

"I live my life by objections," Dano jokes. "I can't really say much more than 'trust me.' But then I compare [my clients'] plans to the overall market to show them it's in line with what's out there."

Skyrocketing costs continue to fuel objections to benefit plan recommendations, making it that much harder for brokers to overcome client skepticism when cross-marketing other core and ancillary products and services.

As if that weren't difficult enough, Avon, Conn.-based Eastbridge Consulting reports new sales in the voluntary market have grown to more than $4 billion in annualized premium, and in-force annualized premium exceeds $13 billion. As more employers look to the voluntary market to contain costs, employees are increasingly involved in the decision-making process, adding another layer of objections that the broker must overcome.

"I describe the current environment as price insane," says Michael Lovis, co-founder of About People, a psychological consulting firm in Colbert, Wash. "Benefit brokers have two strikes against them before they even step up to the plate. The way to overcome this is to extract information and criteria based on the values of the prospect. Obviously, price is important, but what else is there of value?"

Lovis explains that a small business has different needs and values than a major corporation, and they have to make choices accordingly. Lovis separates managerial decisions into two groups -- the personal decisions of the employer and those that must be made for the entire enterprise or business unit. This, he claims, will make it easier to address the concerns of each.

"Too many benefit brokers approach prospects like an insurance salesman selling auto, home or life -- almost like it's an impulse buy," he says. "For God's sake, start farther out. They have to take more of a strategic view of the whole park -- rather than just the on-deck circle. This is where the consultation conversation occurs. This should essentially be, 'How can we work together?' as opposed to 'I'll save you X amount on a particular benefit plan.'"

Lovis believes that "The consultative approach to this business will save this business." This approach begins with effectively analyzing, and matching, the psychology of the client. Over the course of the conversation, if the broker cannot read and match the client's body language, mannerisms and voice control to get an accurate profile of whom the client is and what's important to him, then the broker must be a novice at his job.

"If I go to buy plywood and the man at the lumber yard asks me some basic questions that reveal I don't need plywood but rather some other type of wood, then he's done me a great service," he says. "If he just sells me the plywood, it's a commoditized product that I can get anywhere. He may know everything there is to know about the product, but at that point, who cares?"

Price and quality
Adding to the confusion, employers and employees are understandably hesitant to sacrifice quality for price. Specifically, Robert Poli, vice president with Rockville, Md.-based Insurance Marketing Center, is seeing continued conflict involving the move from managed care to PPOs.

"It's easy from the carrier standpoint because they all have some sort of transition platform," Poli says. "But employers and employees want PPO service at managed care costs. We see this quite a bit at renewal, and the challenge is explaining that more choice equals more cost. If they want to minimize expenses, then the company is going to tell you which doctors you can go to."

The most attractive renewal plans Dano sees have a 5 percent to 8 percent increase, but more often it's in the 20 percent to 25 percent range. He believes one problem was that the initial rates were so low on high deductible plans, and now they're coming back in line. He would gladly have accepted initial rates that were a bit higher and not have had such a subsequent sharp increase.

"It would have made expectations much easier to manage upfront, which is key to minimizing and overcoming objections," he says. "But when we do a comparison of the entry-point price levels, they still see that high deductible plans are much less expensive. I haven't had anyone say that they want to go back to the old [lower deductible] plan."

Like many brokers, Dano still receives resistance from employers to offering disability insurance. And even though it's offered on a voluntary basis, he's receiving resistance to purchasing it from employees. He continues to point out that the workplace is one of the only places rank-and-file employees will be exposed to disability insurance. And it's one of the only times that it will be affordable. Even if someone wanted to go out and get it on their own, Dano insists they wouldn't know where to begin.

"Disability insurance still encounters resistance," agrees Glenn Cassity, principal with Houston-based Benefit Concepts Inc. "This amazes me. Everyone wants dental, but they don't want disability. We ask them, 'which would you rather lose: a tooth or your family's paycheck.' We then try to get at least a base employer-sponsored plan implemented, and then get the employees to buy up."

Cost ownership
To deal with cost issues, Cassity's firm offers an analysis of partially self-funded plans versus fully insured plans for businesses with as few as 20 employees. Because smaller companies struggle to afford their prices, carriers respond with greater flexibility. Cassity says Denver-based Great West Life has a partially self-funded program that caters to companies of this size. They also provide a significant amount of information for employers at little or no extra charge.

"Now employees, as well as employers, are objecting to high costs," he says. "At that point we tell them that if the lights aren't turned on, the company won't charge you for the electricity."

Cassity conducts lunch-and-learns and other educational seminars to educate employees on what they can do to minimize costs. He emphasizes that they have an increasing interest in ensuring they stay as low as possible.

"We try to get across that their usage is having a direct impact on their out-of-pocket expenses," he says. "We suggest that the employer involve his employees in the cost ownership. We suggest they do something along the lines of the United Way model. Each year companies that participate in fundraising for the United Way have an illustration of a thermometer to track the goals they've set. Employers can do something similar by tracking claims data, and in turn disseminating the data to employees."

For example, Cassity explains that the employer can put a claim cap of $100,000 and post the thermometer in a high-traffic space. If they come in under the cap, the employer can reward employees by contributing an extra 2 percent to their 401(k), hosting a party or something similar. Cassity emphasizes that this is not meant to discourage people from going to the doctor. It's meant to modify behavior in other areas, such as looking into generic as opposed to brand-name drugs, and stress that employees have an active involvement in controlling their out-of-pocket costs.

Since cost hikes show little sign of slowing, especially in the near term, Dano's advice is to be prepared for objections of this type for some time.

"I've been in this business since 1972," he concludes. "Back then, people objected to $6 or $8 a month. And they obviously complain about the $300 or $400 a month, and they most likely always will."