No one's ever confused me with Sir Isaac Newton, but I understand the law of gravity: what goes up must come down. Unfortunately, when it comes to the benefits business, that law often translates into, "when health insurance costs go up, our revenue stream goes down."
The National Coalition on Health Care reports average out-of-pocket health care costs for working Americans rose 115 percent from 2000 to 2004. Premiums for employer-sponsored health insurance in the United States have been rising four times faster on average than workers' earnings since 2000, according to one 2006 study. And it's not a new problem. In fact, the cost of health insurance has far and away outpaced the rate of inflation and workers' earnings over the past two decades, based on a 2005 Kaiser Family Foundation study.
It doesn't take a rocket scientist, then, to come up with a theory on why 47 million people don't have health coverage -- even though the vast majority of these uninsureds belong to a family with at least one working member, based on U.S. Bureau of Labor data.
So, why is this happening? Employers acknowledge that being able to offer affordable health care would help them attract and retain high-quality employees and be more competitive, but:
- Many smaller employers just can't afford it. LIMRA research reveals that barely half of U.S. small businesses with fewer than 100 employees offer a group life or health benefit to employees.
- In businesses that do offer health insurance, many employers are now subsidizing only the employee's coverage and contributing nothing toward coverage for the employee's family.
- Many larger businesses have significant numbers of regular workers who aren't eligible for the company's health insurance coverage.
As the number of working uninsured people increases, serious problems are emerging for you, your clients and their employees:
Your clients who can't afford major medical insurance are struggling to preserve the bottom line and still attract and retain top talent without a competitive benefits package. They also might see reduced productivity as workers bypass care for medical conditions while they are minor and more easily treated, ultimately resulting in extended absences.
Their employees face financial exposure for even routine medical costs that can disrupt their family's way of life. They may find themselves dealing with more serious health issues because of lack of coverage for basic and preventive care.
You face potential erosion in your client base because of a lack of workable options for smaller employers or those with large numbers of employees who aren't eligible for the company's health plan.
One way to meet this large and growing need is by offering your customers a limited benefit health plan. Remember those 47 million uninsured Americans? An estimated 13 to 18 million of them are actively working -- yet only about 750,000 employees nationwide are enrolled in such plans. That leaves a huge coverage gap and creates a strong market opportunity.
Targeting your markets
If this product sounds like something targeted only toward smaller employers not likely to be on your cold-call list, you might be overlooking the obvious. In South Carolina, we have many small towns and rural areas where smaller employers have yet to offer any kind of health coverage. But look at the facts: Almost a third of U.S. businesses have fewer than 100 employees. That's a pretty big market to ignore.
And the opportunity doesn't end there. In some parts of the country, particularly the Northeast, there's a trend of employers moving away from traditional health plans because of the rising costs, yet these employers still want to be able to offer their employees some kind of protection. In businesses that still offer health insurance, many employers are subsidizing only the employee's coverage and contributing nothing toward coverage for the employee's family. And many larger businesses have significant numbers of regular workers who aren't eligible for the company's health insurance coverage. Some of the industries where we're finding a positive reception to the limited benefit medical plan solution include:
Hospitality industry. Restaurants and hotels -- even the big chains -- often have an employee population that works part time or is otherwise ineligible for the company's major medical plan. Turnover is a big problem for these employers. Health coverage could be the competitive edge that helps them stand out when it comes to attracting and keeping good workers.
Manufacturing companies. Employers battling to keep costs down in an increasingly competitive global marketplace have sometimes been forced to eliminate their health plans. These employers often want to bring back some type of coverage and find a limited benefit plan is a good solution.
Health care providers. Hospitals are another industry where many employees work part time or are otherwise ineligible for the organization's major medical plan.
Auto dealerships. This is another high-turnover industry that could use benefits to keep good salespeople. However, when their small size makes a full major medical plan cost-prohibitive, a limited benefit health plan might be a good solution.
Science of carrier selection
Finding a good limited benefit health plan carrier to partner with isn't rocket science -- you just need to follow a few basic principles.
Here are a few key points we've found hit hot spots for employers:
Product design. Indemnity-based plans tend to be simpler to understand, enroll and administer. This leads to greater satisfaction for both the employer and the employees.
Benefits communication and enrollment. A well-designed plan should be simple to understand and use, but many carriers rely on self-enrollment for these plans. Self-educated delivery gets very low participation and sometimes leads to dissatisfaction from workers who don't understand what their plan does and doesn't cover. A top provider can meet one-on-one with each employee to explain the plan and help employees select the best coverage plan for their family's needs. That way, employees understand, appreciate and take advantage of the benefits of the plan. A provider that can enroll all employees, including other core benefits, also removes a major hassle for the employer.
Voluntary benefits. Limited benefit health plans aren't intended to provide coverage for catastrophic events, but offering voluntary products such as critical illness, cancer or disability insurance can help employees secure additional, affordable protection for their families. A single-source carrier for both voluntary products and the limited benefit health plan help solidify your presence in the account.
Group size. Many plans require 50 or more employees, but some cover groups as small as five. This flexibility opens even more doors for you.
COBRA eligibility. Individual health insurance plans that employees purchase on their own can be hard to find and qualify for, not to mention prohibitively expensive. The COBRA option in a group limited benefit health plan can be a strong selling point for the employer.
We might not be able to do anything about rising health insurance and health care costs, but with new solutions like limited benefit health plans we can keep our business from falling like Newton's apple. If you're ready to bring your customers new solutions and tap into a new market with growing potential, a limited benefit health plan should be part of your portfolio. Find the right carrier to partner with and you could find yourself discovering a new formula for success.
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