The Patient Protection and Affordable Care act is creatingenormous opportunities for brokers to sell supplemental plans, notonly to help cover increasing deductibles in employer-based andexchange-based plans, but also as a cheaper alternative toboth.

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The opportunities to sell supplemental health plans to coverout-of-pocket expenses when illness or accidents occur are comingfrom a variety of fronts, experts say. As more employers facemandates to provide major medical insurance to their employees,most will likely opt for plans with high deductibles to mitigatethe additional costs—increasing the need for supplementalplans.

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Some employers will transition full-time employees to part-timeto avoid providing major medical insurance, and those employeeswill need supplemental plans because the exchange-based plans allcarry high deductibles. Finally, there are opportunities forbrokers to sell supplemental plans to people who choose not to buyexchange-based plans and self-insure instead. Supplemental planswill cover those people in worst-case scenarios.

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“Health care reform, higher-deductible health plans, and aworkforce that's more financially fragile have created a perfectstorm for voluntary benefits. If you can be in front of employerstalking about how voluntary benefits help address issues likethese, you have an even greater opportunity to sell [these]products.”

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In the end, it's all about tackling skyrocketing health carecosts no matter how they’re delivered—something the PPACA did notresolve, experts say.

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“The plans required by [PPACA] still have affordability issueswith increased deductibles, and brokers still help employees fillthe gaps by selling gap plans and hospital indemnity plans, as wellas accident and critical illness plans,” says Dan Johnson, vicepresident of sales and marketing for voluntary benefits atTrustmark Insurance in Lake Forest, Ill.

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Whether or not employers are funding supplemental plans fortheir workers, employers are still saving dollars because they havelowered their base health care costs by choosing plans with higherdeductibles, Johnson says.

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“There is enormous opportunity for brokers and insurance agentswho sell supplemental policies to do even more of that because ofPPACA,” says Michael Zuna, chief marketing officer at Aflac Inc. inColumbus, Ga.

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“A trend that is not changing is the rising costs associatedwith health care.”

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As previously uninsured workers either purchase medicalinsurance through their employer or an exchange, they will have tochoose between three types of polices: gold, silver and bronze.

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“All three policies are designed to cover the majority ofmedical expenses, but not all of them,” Zuna says. “All of themhave out-of-pocket maximums—it's just a matter of how fast you getthere.”

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Which might prove difficult for millions of workers: The AflacOpen Enrollment Survey, conducted last August, found that 83percent of employees indicated they were only willing to spend$1,000 or less for deductibles each year, and nearly half ofemployees surveyed (46 percent) have less than $1,000 in disposablesavings for medical expenses.

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“Bringing major medical to the masses is not designed to coverall of the costs associated with getting coverage bought underneaththe auspices of Obamacare,” Zuna says.

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Making insurance policies cover more “essential benefits” is agood thing for employers, but they do have to pay out-of-pocketexpenses for these rich benefits—which spells another opportunityfor brokers to sell supplemental plans, he said.

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While there has been a delay in the employer mandate formid-sized employers with 100 or more employees until 2016, having agreat benefit package is just “good business,” Zuna says. Employeesare more productive when they believe their employer's culture isall about well-being. Having good benefits increases jobsatisfaction, retention and productivity.

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According to the 2013 Aflac Workforces Report, nearly 60 percentof workers would consider a job offer with lower compensation but amore robust benefits package.

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“I would encourage employers not to wait until the governmentmandates that they provide health care insurance, as it's smartbusiness to provide employees with the best package that includessupplemental benefits to help pay for their out-of-pocketexpenses,” Zuna says.

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Staying Supplemental

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Jeff Culbertson, manager of products and market development atUnum Group in Chattanooga, Tenn., says the supplemental plan thecompany markets to large employer groups—mainly through brokers—has“definitely” increased this year, “but whether that is directlyattributable to the ACA is still up in the air, particularly beforethe employer mandates kick in.”

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Unum also sells its supplemental health plans on some privateexchanges and continues to have discussions with other exchanges asthey are developing, Culbertson says.

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“We still need to protect our risk in the exchange environment,ensuring we get the spread of risk and that groups are large enoughthat we can hit our participation targets,” he says. “We’re workingthrough the different exchanges to see what works out better forour business model. There's a change in distribution that'soccurring with the addition of the private exchanges, so we want tobe a part of those conversations—we want to be involved where it'sappropriate.”

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Unum also has spent a lot of resources investing in simplifiedenrollment solutions for smaller employers, which are designed tomake it easier for them to offer supplemental financialprotection.

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“Having a benefits counselor siting one-on-one with employeesdiscussing all of the voluntary benefits options makes sense forlarger employers, but when you get under the 100-employee market,that's an expensive model,” Culbertson says.

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Unum provides brokers an enrollment solution in which they canenroll employees the same way they would enroll a traditional groupproduct, but with simplified choices of coverage options. Forexample, the company can offer a high benefit of $10,000 and a lowof $5,000 for critical illness, whereas Unum's typical options comein $100 increments, with a total of 46 choices. Employers can alsochoose to offer benefits through a self-service platform or througha third-party solution with the same levels of simplification.

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Financial Fragility

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Colonial Life is a unit of Unum based in Columbia, S.C., thatfocuses more on smaller employers with few as five employees,working directly with them as well as through brokers. Randy Finn,Colonial Life's assistant vice president, product development, seesa number of ways that PPACA has increased opportunities for thefirm to sell supplemental health plans.

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Even if employers maintain their employee health care plans anddon't eliminate any workers, costs are still rising, and moreemployers are continuing to shift responsibilities to theiremployees by offering plans with higher deductibles, Finn says. Butnews coverage of the implementation of PPACA also is increasingawareness of the need for supplemental health products. Half of allhouseholds say they couldn't raise $2,000 within a month ifneeded.

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“Health care reform, higher-deductible health plans, and aworkforce that's more financially fragile have created a perfectstorm for voluntary benefits,” Finn says. “If you can be in frontof employers talking about how voluntary benefits help addressissues like these, you have an even greater opportunity to sellvoluntary products.”

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Moreover, whether or not employers continue to provide majormedical coverage to their employees, they can still offer voluntaryplans to attract and retain employees— and distinguish themselvesfrom their competition, Finn says.

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“And, better yet, because voluntary plans are paid for byemployees, they create a stronger benefits package with no addedcost to the company's bottom line,” he says. “Because we meetindividually with employees, we can help them understand howvoluntary benefits work with their medical coverage, regardless ofwhere their health insurance was purchased.”

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Zach Zinser, account manager at Zinser Benefit Service Inc. inLouisville, Ken., doesn't think a lot of employers are going todrop medical coverage for their employees, because benefits arestill an important part of retaining employees.

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“I know this white-collar professional making six figures whosecompany cut its contribution to his health care benefit, and basedcontribution on the amount of income their employees made,” Zinsersays. “He was upset enough to start looking for another job.”

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Then there are brokers capitalizing on many people's resistanceto being forced to buy health care insurance—or at least theiranger over sticker shock at the higher prices of some of theexchange plans due to the mandated inclusion of “essentialbenefits” such as maternity care, even for post-menopausalwomen.

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The Growth Of Self-Insuring

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Bill Brann and Mike Tracy are founders of ObamacareAlternatives, an insurance agency based in Corpus Christi, Texas,that sells critical illness plans and other products to employeesof small businesses, including those whose employers do not offerhealth insurance and who choose to not buy plans on the exchanges.Sales have doubled from last year.

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“Our sales exploded after October, when the exchanges opened andpeople saw how much those policies would cost them,” Brann says.“We see a lot of individuals self-insuring and not going onto theexchanges. They are not afraid of the penalty, because the IRScan't go after you.”

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While the IRS can deduct the PPACA penalty from an individual'stax refund, the agency doesn't have the usual levers to forcepeople to pay the penalty if they aren't due a refund—the IRS can'tfile public liens on property or charge interest on thepenalties.

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Most of Brann and Tracy's clients, such as restaurant owners,give brokers access to their workers, Brann says. The employers maynot be able to provide major medical insurance for their workers,but they want their employees to have access to supplementalplans.

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“If we tell employees that for $50 a month, they can get $50,000in cash if they get cancer or have a heart attack, that is a lotmore meaningful to them than an exchange-based plan,” he says.“They can always enroll in an exchange-based plan next year, sothey are not eliminating any options by buying a supplemental plannow.”

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Another issue brokers discuss with workers is the exchange-basedplans’ prohibition of out-of-network coverage, Tracy says. Ifpolicyholders on those plans get cancer they have limited options,but with supplemental plans that pay cash, they can go to thedoctor of their choice.

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“While exchange-based plans have included ‘essential benefits’such as maternity care, they have added nothing for cancer to thepolicies,” he says. “They stripped the most expensive part out ofthe plans that would pay for cancer specialists, as well as heartattack specialists. But critical illness health plans that pay$100,000 in cash would enable people to get specialized care.”

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The brokers also sell a large-sum critical illness plan thatsits on a $250,000 life insurance chassis. Brann and Tracy alsorefer workers to nearby for-profit clinics that give discounts ifpeople pay in cash.

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“The plans we sell are all about good consumerism,” Tracy says.“If you got sick and you got $100,000 in cash, then you’re going towant an explanation of every dollar spent for your treatment. Somehospitals charge $70 for a water bottle, but with insurance, nobodycares. When it's your own money, you’re not going to allowthat.”

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Katie Kuehner-Hebert

Katie Kuehner-Hebert is a freelance writer based in Running Springs, Calif. She has more than three decades of journalism experience, with particular expertise in employee benefits and other human resource topics.