The PatientProtection and Affordable Care Act has made life interesting—tosay the least—for all of us over the last few years, but no one'shad a wilder ride than those in the limited medical benefitbusiness.

First the law threatened the very existence of these and similarindemnity plans with onerous deductible limits and medical-lossratio requirements.

Of course, politicians and regulators being who they are changedall of that with hundreds of waivers and a redefined MLRrequirement, buying limited plans a stay of execution. For now. Allof that will come to end with the close of 2013.

That's if nothing else changes between now and then.

So it's against this backdrop of regulatory and economicuncertainty that a company such as The American Worker has managedto flourish since its inception back in 1992. Their goal? Toprovide affordable medical benefits products to part-time andtemporary employees, a group that despite its exponential growth intoday's work force, all too often gets lost in the shuffle.

Jon Duczak, co-founder and senior vice president at The AmericanWorker, is involved with new product creation and development inaddition to his work on new market initiatives and generating newbusiness sales.

“Business has been very good for us over the last severalyears—especially when we're talking about affordable benefits forpart-time and temporary employees,” Duczak sums up. “So we've beenriding a real high for the past eight to 10 years. I'm very proudand confident of our staff and abilities to not only come up withcreative solutions to clients' issues whether that be by productdesign or building a unique service and admin platform, but ourgrowth's been there because that intellectual capacity and ourability to service our clients and maintain good relationships withthem.”

BS: Do you find that, given what your product is versus that ofa typical broker's, it changes the dynamic of your relationshipwith your clients?

JD: Yeah, I think I know where you're going and I would describeit as this: We don't sell product. We have products. What we sellis solutions and concepts and ideas. And the application of thoseconcepts and ideas are solutions that lead us back to our products.So our success is built on the fact that we recognize what we'reselling in the voluntary benefits environment. We understand it'snot a product sale as much as it is a service and administrative orsolution sale. So I would say there are a lot of vendors in ourmarket who are product vendors and we've moved past that. We're avendor that not only has product but has service, admin,communication and enrollment solutions.

BS: What would you say drives your success?

JD: I'd say integrity. My father's been in the business for morethan 35 years. He constantly reminds me of the first group plan hesold in 1975. But the most important takeaway for us is we reallyvalue our reputation. So we're not gonna cut corners, we're notgonna do things that are unethical in order to generate revenue.We're gonna service our clients and the revenue will come to usbecause of that good service and integrity. 

It's really the combination. We really go to great lengths toprovide additional service to our clients that will save themmoney. I think there are a lot of vendors in the market who aregonna provide product and those products are gonna be cost negativeor they might be cost neutral. It might not cost the companysomething or they might be cost negative because the client isgoing to pay the service and administer those programs. So in termsof product point, why we succeed is [because] we've been very goodat making voluntary benefits cost positive. And we can make it costpositive because we're willing to make an investment back into ourclient and spend our revenue wisely on providing them service.We've been able to make our programs cost positive because we'reoffsetting costs we normally absorb.

BS: What's been the driving force behind the moremainstream acceptance of limited medical plans?

[Read "Whatwill happen to limited medical plans in 2014?"]

JD: I specifically have to point to the inflation in the majormedical market. In my hometown (Chicago) and my core market, rateswere on the rise in the late 1980s and early 1990s. And we'realready driving people out of major medical roles. So definitelythe inflation that's occurring within the major medical market isdriving the need for the supplemental health-type product. And thenthere's been an explosion of agents who have—after long strugglesin major medical markets—now adopted voluntary benefits and have tounderstand how they're used and the value of them. So you've alsogot increased distribution.

BS: Do you think the major medical cost increases we're seeingnow are sustainable?

JD: No, absolutely not. I mean I think they're projecting rightnow that by 2020—eight years from now—we could be looking at anaverage family cost of $29,000 a year for major medical coverage.So without a doubt the current path is unsustainable.

BS: So where do we go from here — and, in particular, wheredoes your market end up?

JD: We've got a lot of answers on that. You're seeing agroundswell in the amount of people looking at an indemnity-typepolicy or supplemental health plan to be used as what it wasoriginally intend to supplement a health benefit program. So Itruly believe you can cover more people for less money, but theonly way you can do that is by being very realistic about the typeof coverage you're gonna provide. And so I think in the future thatthe minimum essential benefit structure has some legs. However, Ithink the minimum essential benefit has to include a slightlyhigher deductible than what has initially been talked about at$2,500. So we think for the supplemental health market the futureis actually bright because if employers are safe with a minimumessential benefit, we think most employers are gonna go to theminimum essential and level the playing field in term of the smalland larger employer group markets. And so if that minimum essentialis the $2,500 deductible and with increases over the next severalyears it might be $5,000 or it might eventually get to $10,000.

So I actually think the future's very bright if you're smart,intelligent and understand how our product within your corebenefits strategy. So our marketing might change. We might see lessparticipation in these hard-time populations. We also might see alot more part-time employees out there but our marketing there willchange. I think, though, that there is a way to transcend it, tocross over to that client core benefit strategy by using the planas it was initially designed or intended.

BS: So do you do your own enrollments?

[Read "Howto work with the right enrollment firm"]

JD: We don't physically perform the enrollment function. We'reusually going to work with an administrative partner. But we'vedone that by design. Administrative functions and enrollment andclaims payments is not a very high profit industry. So if we weregoing to submit to doing the administration we need to commit to itso we can make it a program or we can make our admin models ones wecan generate revenue to support the organization and provide goodvalue to our employees.

We are involved, though, in 100 percent of the clientrelationship from sales to implementation to ongoing service.And—to specifically answer your enrollment question—we are involvedin the design of our enrollment documents and those specificallyconsist of postcards that are pre and post open enrollment, membercommunications during the year, posters that are hung in thelocations, custom benefits booklets and guides. So we are notnecessarily physically performing the enrollment but ourexperience, our intellectual capacity, is creating enrollmentmaterials that are performing positively within our existingaudience.

BS: And that sounds like there's a lot more communicationoutside the enrollment itself.

JD: There is. Our market turnover is a big deal. Most of ourclients are turning over almost at least at a minimum of 100percent so we do a lot of active—well, I like to refer to it asparticipation management programs where we do a lot of activeoutbound new hire communication and notification, and outboundcommunication to existing members. So we're constantly out thererecruiting new enrollees that benefit our plan, our organizationand benefit our clients as we continue to help them with theirrecruiting and retention goals.

BS: On the communication level—given what you justtalked about with regard to turnover— you're dealing with adifferent class of employee, I don't mean that in a negative way.But I think given what you have to deal with, communication isprobably more key than ever outside of the enrollmentprocess.

JD: Right. I completely agree. If you're calling, you know we'reselling solutions, we're selling service, we're selling admin. Andso if we're selling products we're just selling products. Butproducts won't serve our clients well because the real issue is howto communicate and enroll benefits. It's designed to makecommunications very hands off and for us to take ownership of thecommunication process so it's an enrollment process with continualinput from our clients on what works, continual analysis of whatisn't working and what may not be working. And constant tinkeringand modification.

BS: What trends are you seeing in your market right now?

[Read "Healthtrends to watch in 2012"]

JD: I'm seeing that there's a lot of people trying to sell moreof the traditional work-type programs. The critical illnessprograms, the accident programs, even some of the lighter policiesout to the part-time and temporary worker market. And I haven'tseen any of that be very successful. And I'm uncomfortable with it.I'm uncomfortable with it because I think that for those types ofindividuals in our market the primary need is medical and afterwe've satisfied the medical needs then we can address anyadditional needs.

I'm also seeing some employers who've gotten creative. We'vebeen looking at the possibility of using [CDHC] programs tosupplement the indemnity plan. So now that's a little bit differentconcept but the indemnity plan is there to pay and once theindemnity plan benefit maybe exhausted we have some clients thatare interested and we've done this, we've had some implementationof this, not many but—where we've now funded an HRA so once thatlimited med program is exhausted any additional claims can get paidfor out of that HRA.

BS: And the response to that's been pretty good so far?

JD: Limited but good. I approach this topic with a littlehesitancy but so far it's been good. I'm hesitant just because it'sa good concept but it just hasn't been out there. We haven't doneenough of it to really know if there's potential with it.

BS: What's your expectation of what brokers should be doinginstead of what they're doing right now?

JD: What I definitely want to see is higher deductibles. I'dlike to see office visit copays go away and I'd like to see moreeducation of the members about how to spend health care dollars.And so there is a part of me that would like to see penalties forpoor behavior for health decisions because I think the onlyreinforcement that works in our market sometimes, unfortunately, isnegative reinforcement.

I think higher-deductible policies would make a lot of sense,and I think that benefits sales for years have been flawed. Foryears, benefit producers have gone out and they've sold the groupthe lower-deductible plans with the lowest possible costs. And whenyou look at utilization patterns there's only anywhere from 10percent to 20 percent of the members in a group utilizing coverage.But selling the benefit to the lowest possible cost with the lowestdeductible, highest benefit, you're catering to the minority.

You're catering to the minority while you're ignoring themajority. And the majority is who have been suffering because costsare going up and they can't justify a return on investment with thepurchase of the medical policies. So if you change the dynamic—youincrease the deductible and lower the contribution—you cater moreto the majority of employees within the client group. And then youget all the advantages a high deductible has, namely, reducedcost.

Now, I want to see brokers sell more high deductible and I thinkby selling more high deductible they can then, especially with youraudience, sell more voluntary worksite programs. Including planslike indemnity as a supplement to that high deductible. But in thattype of environment, you're not necessarily in a definedcontribution environment and you're not necessarily in the definedbenefit market. You're creating protection for your employeesagainst financial loss and ruin based on medical claims with ahigh-deductible policy. And if you can then recognize that worksite programs inclusive of supplement health and backfillout-of-pocket costs for the individual member, those members canbuy those policies through a cafeteria approach and now you'vecreated a choice for the members and you've allowed the individualmember within your group to decide the type of coverage and thelevel of coverage they need the most. And so that's really what Ithink really needs happen in the market. I said here earlier I kindof like the minimum essentials and I think that we can cover morepeople for less money if we do it right and this is how I kind ofthink you're doing it right. You increase the deductible, reducefixed costs until you get the majority of people covered for lessmoney. Now we can backfill with supplement and voluntary worksiteprograms at an individual level through our cafeteria approach atthe worksite.

BS: And you think this approach is something employers, and byextension employees, would be receptive to?

JD: I think so. We've seen clients who've increased theirdeductible. I can point to a specific client that, when theyanalyzed their claim and benefit utilization, they determined inthe year prior that 68 percent of their members spent less than$1,000 in medical services or consumed less than $1,000 inbenefits. So 68 percent of the population paid more incontributions than they accessed in benefits.

The following year that client increased their deductible from$600 to $3,000, from $1,200 to $6,000. And overnight 68 percent ofthe people in that employer group benefitted because they're payingless in contributions than they're collecting or consuming inbenefits. Now as you get up in the chain, though, you're eventuallygoing to get to about 10 percent who are now paying less incontribution but much more in out-of-pocket costs. Within thatclient there's several wellness and education programs on how theycan get healthy, how they can spend their deductible out-of-pocketcosts dollars more wisely.

I don't really think anybody has a choice. I say that because asthe employer you really don't have any other option left today. Youeither decrease benefits or increase contributions. So I don'tthink an employer really has a choice on whether they want to lookat a high-deductible because they're going to have to maintain abenefit package. It's just economics.

And on the employee side, if the employer can't afford yourprogram and this is what they can afford, that's your choice. And Ithink that the environment right now in the job market allows someemployers the opportunity to put a high-deductible policy plan inplace, to make wholesale changes to their program that will allowthem to move into the future with competitive and more manageablepricing.

BS: So you've kind of taken a tough love approach, but it's outof necessity as much as anything else.

JD: If I'm going to preach that I want high deductibles, I'vegot to be prepared for what that means. But let's take meindividually. Even with our plan, I would never [hit thedeductible] unless it's a maternity year. But if you offered me ahigh deductible and reduced my fixed costs for an individual [plan]I'd be happy. I understand the margins. I might, though, with myreduced contribution and extra pocket money, I might use that tobuy a disability policy. I might use it to buy more life insurance– things that will protect me and things that won't make me aburden to somebody else.

Now I could take another individual in my office who might be55. Now faced with the high deductible and faced with someone who'sa little bit older and maybe might have ongoing medical conditions,they might want to offset that out of pocket. And now they havefree dollars to do so. They, in turn where I might buy life anddisability they might buy supplemental health or critical illnessor accident. Anticipating that they're gonna need to offset thatout of pocket. But then it's a choice and it's an individualdecision they've made to build what they need not what wearbitrarily told them they needed because we're focused on theminority.

BS: So, you're going to be at Benefits Selling Expo?

JD: We've got some great clients coming, clients that have atleast several thousand employees, so we're really excited we canget them to come to the conference with us. We're in the processright now of soliciting a lot of our top agents and consultants forthe types of questions they'd like to have answers from. We want itto be a session that's informal and informative to your audience.To give them answers and get them to gain a little insight into theworkings, the strategy and the decision making that some of theselarge employers.

BS: What is it you want brokers to get out of yoursession?

JD: I'd like to think brokers will walk away from that sessionwith their eyes a bit more wide open. I think what they're going tosee when they talk to some of these clients that, even thoughthey're large, they're still looking for solutions. And they'rewilling to be creative to get those solutions. And so I think I'dlike to see brokers walk away with a real sense of effort and maybethinking a bit more outside of the box as these large clients do.And the solutions they're looking for aren't readily available sosmart thinkers in the future will win.

Photo by Bob Stefko