Newsletter - August 2008

Individual Health Policies Leave Many Behind

Nearly 18 million people nationwide buy their own insurance because they're self-employed, are students or have jobs that don't offer coverage. The so-called individual health insurance market works well for some, but some cases show it is fraught with complexities for many others.

Unlike group plans offered by employers — which provide coverage to everyone, no matter how sick — there is no guarantee in most states that individuals can get insurance. Even if they can, their policies may not cover existing medical conditions such as hay fever, depression or pregnancy.

Fixing the problems in the individual market could go a long way toward expanding health coverage in America, where 47 million people are uninsured. State and federal lawmakers — and the presidential candidates — propose changes that could reshape that market. One approach would loosen regulations, which could prompt insurers to offer a wider range of plans to more people. The other would increase government oversight to make it easier for people with health conditions to get coverage.

Among recent developments:

• In the past few months, regulators in California, Connecticut and several other states have fined or taken other action against insurers who revoked individual coverage after policyholders fell ill, leaving them with thousands of dollars in unpaid medical bills.

• In Congress, Sens. Ron Wyden, D-Ore., and Bob Bennett, R-Utah, are pushing the first sweeping, bipartisan health care proposal in years, one that could shift many workers from getting coverage through employers to buying their own insurance. Breaking the link between employment and insurance, they say, would let people keep their coverage when they lose or switch jobs. The proposal requires everyone to have coverage and forces insurers to sell to all applicants.

• Both presidential candidates say they want to improve options for people who buy their own coverage. Democrat Barack Obama says he would create ways for individuals to buy insurance in groups and would require insurers to sell to everyone.

That would allow "individuals and small firms to get all the benefits of the purchasing power of big firms," Obama adviser David Cutler says.

Republican John McCain has made individuals the centerpiece of his health plan. He proposes $2,500 to $5,000 tax credits to all Americans to purchase their own coverage and would end the tax breaks workers get for job-based coverage.

McCain says that would even the playing field between those who get coverage at work and those who buy their own.

Insurers "will not cover the sick if they can avoid them," says Len Nichols, an economist with the New America Foundation, a centrist think tank.

Nichols and other experts say limits on who can get coverage is one of at least three major problems with the individual market that must be addressed.

The other two are cost and coverage: Is the policy affordable? And will it pay for what's needed when you get sick?

Availability

The problem: People who have health problems may be unable to get coverage in the individual market.

Even if they can, insurers may choose not to cover applicants' "pre-existing" medical conditions. Excluded conditions vary by insurer.

In a 2001 study by Karen Pollitz of the Georgetown Health Policy Institute, researchers submitted applications to 19 insurers on behalf of seven fictitious applicants, who had medical conditions ranging from HIV to allergies. Of 420 applications, 37% were rejected.

"What we have shown is there are carriers who will turn you down if you have hay fever," Pollitz says.

Insurers say the market isn't all that tough.

A December report by America's Health Insurance Plans, the industry's lobbying group, examined nearly 1.9 million individual applications. About 18.5% were withdrawn before the insurer reviewed the person's medical history.

Of the rest, nearly 89% got coverage, although that varied widely by age: About 10% of those ages 30-39 were denied, compared with 29% of those ages 60-64.

Federal law requires insurers to sell policies to certain people who lose group coverage — including those laid off from their jobs — but sets no limits on what an insurer can charge.

State efforts and the candidates' solutions: Five states — Maine, Massachusetts, New Jersey, New York and Vermont — require insurers to sell individual policies to everyone, regardless of their health. Washington state requires insurers to take individuals with some health problems.

In May, Iowa Gov. Chet Culver signed a law that requires insurers to cover pre-existing conditions in new individual applicants — if they previously had insurance for those conditions and did not let it lapse.

America's Health Insurance Plans says requiring insurers to cover everyone would raise costs, but its members would agree to offer policies to more applicants in less-than-perfect health if states would cover those with the most expensive conditions.

McCain would not require insurers to sell to people with health conditions.

He says he would work with the states to provide some way for people who are rejected by insurers to get coverage, likely through a state-run program.

Obama would require insurers to sell policies to all applicants.

Affordability

The problem: Health insurance costs on the individual market vary widely, depending on age, health and benefits selected. Generally, younger, healthier people pay less than older and sicker ones.

The industry's lobbying group says a survey of 2006-07 data from its members found that premiums paid for coverage ranged from an average of $1,163 a year for children under 18 to $5,090 a year for people over 60.

By comparison, the average yearly cost to employers for single coverage last year was $4,479, and workers paid an average of $694 toward that, says a survey of workplaces by the Kaiser Family Foundation, a non-partisan group that studies health policy.

Family coverage averaged $12,106 for employers, and workers paid $3,281. Those plans tend to include more benefits than individual plans.

State efforts and the candidates' solutions: Eighteen states set some limits on how much can be charged to individuals, often allowing prices to vary based on age, gender or geographic location, according to the Kaiser foundation.

Two, New York and New Jersey, basically require insurers to charge everyone the same price. Merrill Matthews of the free-market advocacy group Council for Affordable Health Insurance says such restrictions raise costs for younger, healthier people.

A Washington state law took effect in June reinstating the insurance commissioner's ability to regulate rates. Florida's governor signed a law in May allowing insurers to sell lower cost "no-frills" insurance with sharply limited benefits, such as no coverage for specialists.

Obama says allowing individuals to pool together to buy coverage would help drive the cost down.

He would not allow insurers to charge more based on a person's health, a move critics such as Matthews say could raise costs for the healthy.

McCain says his plan would help lower prices by allowing people to shop in any state for health insurance.

Critics such as Georgetown's Pollitz say healthier people would flock to insurers in the least-regulated states, which could raise rates in other states that end up covering lots of sick people.

Sustainability

The problem: Most states allow insurers to cancel policies after patients rack up large medical bills if insurers find out the applicant purposefully — or, in some states, even accidentally — left out medical details in the applications. Insurers say the ability to revoke policies is needed to protect them against fraud.

State efforts and the candidates' solutions: In California, regulators over the past year have lodged fines of more than $12 million against several insurers and ordered three — Blue Cross of California, Kaiser Permanente and Blue Shield of California — to reinstate people they had dropped, saying they had failed to show the applicants did anything wrong. Lawsuits from policyholders and the city of Los Angeles are pending.

In Connecticut, a law took effect in October requiring approval from the state insurance commissioner before an insurer cancels a policy.

The insurers' lobbying group wants states to pass laws requiring independent third-party review of policy cancellations after the policies have been canceled.

Neither presidential candidate has specified his proposal for dealing with policy cancellations.

Everyone in family insured

The Swaims didn't want to wait for the new president, Congress and the states to fix the individual market. For them, the solution came when William gave up his business and took a job with an electrical company that offers health coverage.

Since early May, the entire family has had insurance — with one of the insurers that had previously rejected Logan, now 8 years old and 44¾ inches tall.

"It would be nice if we could buy our own insurance," says Swaim, a substitute teacher in Resaca, Ga. "But the problem is that no one can touch insurers. They can say whether they insure you or not."

Solera Sales Lead Program

Art of Cross-Selling Insurance Products

Successful insurance agents know the secret of long lasting relationships with their clients is depth in products.  Generally speaking, the more products an agent sells to a client, the stronger the relationship with the client.

So what is Cross-selling?

Cross-selling is the systematic process of offering clients a broader variety of insurance products to better meet their individual needs.  Whether bundling a dental plan with an individual health policy, or quoting a package of ancillary products without health insurance, cross-selling is a critical component of long-term client relationships.

A well-implemented cross-selling strategy is one of the easiest ways to increase your income as well.  It’s a best business practice that successful agents use in their daily business.  Unfortunately most agents do not do this in their ordinary course of business and as a result are missing out on a great opportunity to increase their profits.

Learn Your Clients’ Needs

Agents that are successful with cross-selling know which products to offer their clients.  You don’t have to be mind-reader – just a good sales person.  Learning your clients’ needs is as easy as listening.  Ask direct questions and then listen to your clients.  They will tell you exactly what you need to know to offer the correct lineup of products to meet their needs.

A few examples of questions that lead to learning include:

• How old are your children?

• Have you had any changes in employment or family changes over the past year or so?

• Do you and your family regularly visit your dentist for preventive care?

Recommend Insurance Products that Meet their Needs

Once you’ve learned about your clients, simply discuss some insurance products that some of your currently clients enjoy.  When discussing some options, be sure to listen to your client’s responses and look closely at their body language for signals of interest or disinterest.

Here are some good ways to recommend some products:

• Sounds like your oldest is heading to college soon.  Did you know that most colleges now require health insurance for all students?  Also, you should know that if your student does not have a health plan when enrolling, she’ll be forced into the school’s plan, which often is more costly and offers less coverage than other plans.

• Sounds like your kids will be in braces soon.  I can offer you a dental plan that will provide nice discounts on orthodontics as well as most other services your family would need. 

• Since you’ve recently left your employment, I can show you some health plans that are less costly than COBRA.

The bottom line is that successful agents optimize their time with each client to maximize their earnings per client.  The best way to accomplish this is to sell more products to each client.  The additional benefit is stronger relationships with your clients.