Integration. It’s the new buzzword and a major theme at most multi-line carriers (the new term for major medical carriers offering supplemental products).

Specifically, the topic is integration of supplemental workplace voluntary benefits—such as medical gap, critical illness and accident insurance—into the medical plan.

As a consultant to several of the leading multi-line carriers, I can assure you that, if implemented correctly, this integration will be an absolute game changer.

At a recent LIMRA conference on voluntary benefits in Chicago, UnitedHealthCare executive Diane Souza shook up the crowd with her presentation on UHC’s vision and plans for integrating WVB into the medical plan. Not only did Souza share cutting-edge plan design concepts, but she described truly innovative ideas to leverage UHC’s ready access to their members’ health data. After hearing Souza speak, one attendee with a leading voluntary benefits carrier approached another UHC executive and, with a sense of awe, confided, “We can never do that. If you pull that off, we’re done.”

The first multi-line carrier to introduce a medical plan design that integrates these supplemental plans will revolutionize health insurance—never mind completely changing the game for workplace voluntary benefits. 

Frankenstein plans

Interestingly, some of the most progressive benefits brokers already are cobbling together radically innovative “health plans” that incorporate a very high deductible (from $3,500 to as high as $10,000) along with supplemental plans such as gap, CI and accident. The high deductible drives down the baseline medical cost, while the supplemental plans fill the gap of the deductible and help employees insure against the risk exposure of the deductible.

But these are what I call “Frankenstein plans,” exceptional health plans that are, like Doctor Frankenstein’s famous monster, highly functional but have been stitched together in a rather inelegant and piecemeal fashion. While these plans literally are getting brokers standing ovations from employees during group meetings, they won’t win any beauty contests.

But these Frankenstein plans do offer a highly instructive model for the forward-thinking medical carrier.

The iPhone inspiration

While these Frankenstein plans provide a model, the smartest multi-line carriers will look to Steve Jobs and the iPhone for inspiration on best practices for implementing this model.

Before the iPhone, tech-savvy consumers had access to a wide range of useful tech devices, including cell phones, mp3 players, digital cameras, GPS, video cameras and laptop computers.We carried our cell phones and mp3 players, had GPS in the car, and used our computers for mobile email and Internet browsing. Some of us had rudimentary cameras in our phones, but even then we carried our two-megapixel digital camera with us to capture special moments. We grabbed our video camera when we wanted to record special occasions.

Like today’s innovative brokers who are busily bolting gap, CI and accident plans to the medical to create a new and better type of health plan, we could have duct-taped our digital camera to our cell phone, along with our video camera and GPS. Then we could have taped that mass of electronics to our laptop. Unsightly and ungainly, to be sure—and quite impractical.

But in a manner of speaking, that’s exactly what Jobs did when he created the iPhone. He made it all so elegant and integrated, so pretty and sleek. No stitches, no duct tape. Now we had all of those multiple devices and functions—phone, mp3 player, digital camera, GPS, web browser, email, video camera, Internet access— available in one convenient platform.

Steve Jobs’ real innovation

But Jobs’ understanding of integration went far beyond just physically integrating these multiple devices into a single platform. In the iPhone, these functions are seamlessly integrated in their actual functioning. All of the formerly separate parts work together in a way that makes us forget they once were separate. And this is Jobs’ genius.

Use the iPhone’s camera to take a picture, attach it to an email, insert your message and click send.

Go online with the iPhone’s browser, search for restaurant reviews, tap the phone number of your selection, and speak with the hostess to make reservations.

Now tap on the restaurant’s physical address and have the GPS direct you straight to your table. After dinner, use the iPhone to shoot some video of your children’s silly dance on the sidewalk, add some music from your mp3 player, then email your video masterpiece to their grandparents. All in a matter of seconds, with ease.

Jobs’ genius was in realizing that the challenge—and the real value to users—was the integration of the functions, not merely the devices.

So let’s apply Jobs’ concept of integration to medical plans. Say, for instance, you have a $3,500-deductible medical plan and a hospital indemnity plan from the same carrier. Because of an infection, you’re admitted to the hospital. After your admission and three-day hospital stay, your carrier automatically sends you a check for $2,200 from your hospital indemnity plan: $1,000 for admission plus $400 for each day you are hospitalized. You can use that cash to help pay your out-of-pocket share of the hospital costs.

Two plans that function as one—that’s integration of function.

For the multi-line carriers, this should be a relatively simple challenge. As the administrator of the medical plan, they have all the data necessary to make this hypothetical situation a reality.

The future is here

In fact, Aetna already has done this with their voluntary hospital indemnity plan, which integrates with their medical plans. As the medical carrier, Aetna knows when the insured has been admitted to the hospital and the length of his stay, so the natural next step is to have the hospital claim on the medical plan automatically trigger the benefit payment by the supplemental plan. Steve Jobs would be proud.

In an article about Aetna’s new strategic alliance with Allstate Benefits to market Allstate voluntary plans to Aetna’s 17 million members, I stated that this should be a huge wakeup call to the traditional voluntary carriers. Aetna’s integration of their hospital indemnity plan with the medical should be an alarming shot across the traditional carrier’s bow.

Now the challenge remains for a multi-line carrier to actually integrate these supplemental benefits fully into the medical to create a new kind of health plan. Aetna’s integration play gives a tantalizing hint of what is possible with medical plan design using these supplemental plans.

Here’s the future

So let’s imagine what a $5,000 deductible health plan fully integrated with a medical gap plan, critical illness insurance and an accident plan might offer the insured (cue dream sequence music and graphics).

Imagine: Following a serious fall from a ladder, Hector is taken to the ER with a severely broken leg and a concussion. After outpatient treatment to set the leg, follow-up doctor visits, and a couple of physical therapy sessions, the medical expenses total $4,370, which falls entirely on Hector since he has made no contribution toward the deductible this year. But his carrier automatically sends Hector a check for the full $4,370 to cover his out-of-pocket medical expenses. This $4,370 check is provided by the accident insurance portion of the medical plan.

Imagine: During a routine office visit, Allen is diagnosed with cancer. Once the doctor submits a claim coded with the cancer diagnosis, Allen is automatically sent a check by his carrier for $5,000 to be used however he chooses: out-of-pocket medical expenses, household bills, etc. This $5,000 check is provided by the critical illness insurance portion of the medical plan.

Imagine: A very pregnant Sarah is rushed to the hospital by her nervous husband. After a complication-free delivery of a healthy girl, the hospital bill totals $7,430. Sarah’s medical plan covers the $2,430 above the deductible but the carrier also pays $5,000 directly to the hospital to cover Sarah’s deductible. The $5,000 payment to the hospital is provided by the medical gap component of the medical plan.

(Note: To avoid first-dollar coverage and preserve the consumer-driven health care goal of ensuring the employee has skin in the game, the accident and medical gap plans should include a deductible and possibly even co-pays.)

Seamless integration

In these hypothetical examples, the carrier uses the integrated supplemental plans to fill the deductible gap. But notice the seamless integration. No claim forms to fill out. No paperwork. No sense that there are multiple insurance policies in play. Just an automatic payment to the insured or to the provider to cover the deductible. To the insured, this is just a very benefits-rich health plan.

This is a big part of what only a medical carrier can do with these supplemental benefits and why the multi-line carriers are on the cusp of a revolution in plan design. The first multi-line carrier to crack the code and implement a totally integrated medical plan will dominate the market.

With iPhone-like seamless integration and functioning, these truly integrated health plans can provide the insured with more and richer benefits for the same premium as a $1,500-deductible PPO plan.

We all know how the iPhone revolutionized the smartphone market. That the iPhone went on to capture 28 percent market share should inspire—and motivate—multi-line carriers to make it a top priority to be first to market with a health plan that thoroughly integrates these supplemental plans with the medical.

Nelson Griswold, a former senior executive with a national enrollment firm, is an expert on workplace voluntary benefits, consultative selling and cross-selling. He can be reached at (615) 656-5974 or [email protected].