Newsletter - September 2008

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September 2008 News Story 1
September 2008 News Story 2
September 2008 News Story 3

In The News

Health Care Costs Seen Rising 10 Percent in 2009

Health care costs are expected to rise more than 10 percent into next year, according to a survey of insurers by Aon Consulting Worldwide.

But that increase is the smallest Aon has seen in six years. Experts say it shows... Full Story

Weakening U.S. Economy Takes its Toll on American's Health

To save money, many American are cutting back on medical care -- potentially putting their health risk -- according to new research from the National Association of Insurance Commissioners (NAIC).

A national survey of 686 consumers, fielded in July, found that 22 percent of U.S. consumers say they have... Full Story

Editorial Opinions Related to Health Care in the Presidential Election

The following are summaries of an editorial and several opinion pieces related to the election.

Full Story

Facts About Medicare

Medicare paid roughly $425 billion in benefits to senior and disabled Americans in calendar year 2007. In that year, about 44 million beneficiaries, or about 1 out of 7 Americans, were enrolled to receive benefits. During the first 40 years of the Medicare program, the United States has seen improvement in the quality of life of its seniors, which was one of Medicare’s primary goals. During this time, the country has seen a surprising increase in the life expectancy at age 65, and the proportion of the elderly who are living below the federal poverty line has declined.

Medicare Is Complicated

Medicare has several parts—Part A (HI or hospital insurance), Part B (SMI or supplementary medical insurance), Part C (generally known as Medicare Advantage or Medicare risk contracts), and Part D (prescription drug insurance). Both the benefits and financing of the Medicare program are complicated. The basic benefit structure is confusing since not all services and products are covered, and payments are limited by deductibles, upper bounds on benefits, and some coinsurance requirements (i.e., the sharing of the cost of benefits between the beneficiary and the program).

Recently, there has been a great deal of media coverage about the difficulties and confusion that some beneficiaries have experienced with enrollment in the new prescription drug program. Some Part D insurers have attempted to provide simplified benefits that modify the basic Medicare program, but that has also created an abundance of hybrid offerings that some seniors have difficulty comparing.

The financing is also complicated. Part A is financed largely from payroll taxes paid by workers and their employers. Part B and Part D are financed partially by premiums paid by beneficiaries and partially by appropriations from the general revenues of the United States. Part C financing effectively is a blend of all of the mechanisms used by A, B, and D, such that the money comes from Medicare in the form of a lump-sum payment.

Trends in Medicare Costs

If Medicare continues under current law, without changes in management and funding protocols, projected Medicare costs will rise to a very high level of federal expenditures and GDP over the next few decades. In this projection, there is roughly a 1.7 percent higher expected trend rate assumed for Medicare costs than for GDP. The observed differences in the past have tended to equal or exceed this level.

Under this projection, by 2080, Medicare costs are expected to consume ever increasing shares of GDP and total federal expenditures. How will this affect national funding in other areas such as education, public infrastructure, or defense? Government projections do not answer this question, but if Medicare consumes about 9 percent more of the federal budget as projected in 2020 versus 2005, this will create a need for substantial reductions in the proportion of the federal budget for other services. Cutting provider reimbursements repeatedly would reduce Medicare expenditures but could also cause seniors to experience substantial reductions in access to health care. Other solutions to reducing Medicare’s costs should be considered to avoid these potential problems in the future.

If we do not fundamentally change our direction, Medicare and Social Security together will consume virtually every dollar of the federal budget in a little more than 75 years. Further, note the rapid increase in the amount of funding coming from general Treasury revenue versus dedicated revenues (e.g., Part A payroll taxes and Part B premiums) and the revenue shortfall within Medicare; this portends a rapid acceleration of stress on the federal budget.

The history of Medicare and total national health expenditures shows that they both grow faster than GDP. Certainly, these estimates can vary significantly owing to factors such as growth of medical technology, changes in legislated reimbursement levels, and growth for the economy, etc. But without fundamental restructuring of Medicare, the trends suggested above can be expected to unfold.

Medicare Population Growth, Eligibility, and Design

When Medicare began paying benefits in 1966, the age of eligibility was 65 for seniors. Approximately 20 million people were immediately eligible for benefits. At that time, cost sharing by users was designed to represent a fairly significant part of costs. The program was estimated to have a controllable annual cost of under $10 billion for a significant period. Furthermore, contributions from Part A payroll taxes and premiums for Part B were expected to create substantial extra funds to be held in trust funds for use in the future.

Today, we have a much different picture, with about 44 million beneficiaries receiving larger benefits and paying relatively less out of pocket. At the same time, the source of the fiscal support for the program has shifted. For example, 2007 contributions to the SMI trust fund from the general revenues of the U.S. were about $178 billion. This total includes a little under $140 billion corresponding to Part B and about $39 billion corresponding to Part D (the new drug program).

What happened in the intervening 40 years to change the picture so dramatically? There was a sequence of events that has created today’s much different reality.

These events include:

The Medicare population grew faster than expected because of significant improvements in life expectancy, while the age of eligibility for Medicare benefits has not changed. Life expectancy increased in part owing to continuous development of new and more effective tools for prevention, diagnosis, treatment, and education. In 1965, when Medicare was passed, life expectancy was about 70 years. Today it is about 78, or eight years more.
Medicare benefits were expanded to provide protection for new groups, and benefits were added. For example, the disabled under normal retirement age became eligible in 1973, and prescription drug benefits (Part D) were added in 2006.
Medical costs, driven by general price inflation and new technology, grew at a rate faster than the rate of growth of wages and of the GDP. In the past several years, we have witnessed the appearance of innovations such as virtual colonoscopies, new and improving regimens of chemotherapy drugs, and medical devices that enable paralyzed muscles to move for a period of time.
The initial level of cost sharing by consumers in Medicare, as a percentage of total Medicare expenditures, has not been maintained. Rather, it has been allowed to shrink dramatically over the years so that government now pays a much higher percentage of total costs.
The working population grew at a much slower rate than the number of beneficiaries. At inception, there were over five workers for each Medicare eligible; today there are around 3.5, and the ratio is expected to drop to 2.4 by 2030.
The entire health care system changed and with it, Medicare utilization rates and costs as affected by behaviors of individuals and employers within the entire health care system. This entire system includes Medicare, Medicaid, other government programs, the uninsured, and the private market. Medicare changes have frequently influenced the U.S. health care system, whether positively or otherwise. Examples include changes in billing practices, types of coverage, care practices, etc. Likewise, changes outside of Medicare, such as the way health care is organized, financed, and delivered; litigation; and economic conditions, can influence Medicare and the entire health care system.

The total impact of all of these factors has been a rapid growth of Medicare costs with less growth in the payroll tax and costsharing contributions under the program. Medicare’s annual cost grew from $3 billion in 1967 to over $100 billion by 1990; with inflation at 5 percent to 6 percent per year, the $3 billion in 1967 would be a little above $10 billion in 1990 for normal growth in the GDP. Contributions to the system have also increased because of the increased amount of earnings subject to the payroll tax due to inflation and real economic growth and the growth of premiums paid by beneficiaries but have significantly decreased as a percentage of cost. The difference in cost growth and revenue growth has placed the program in the difficult position we are in today.

The growth in costs, to a significant degree, reflects Medicare design and management. In particular, the program emphasizes the high value we attach to top-quality health care and choice, and this, in turn, drives substantial demand for Medicare products and services. It has accommodated the heavy use of resources by continually shifting consequences to future generations, so that, in general, those receiving benefits closer to the beginning of the program reap the greatest rewards, and the farther you are from the beginning, the poorer your return. In general, the following can be stated about the program:

The design and management of Medicare often fall outside of traditional risk management practices such as balancing of premiums and costs or substantial managing of care.
The design and management of Medicare often encompass nontraditional accounting practices such as lack of a functional cost assessment or analysis.
Attempted control of Medicare expenditures typically focuses on limiting prices paid to providers, thereby putting pressure on providers to accelerate utilization of medical services and charges to private payers.

Serious consideration should be given to these design and management issues when reforms are considered.

Information you can use

Many successful brokers are using Medicare as a viable strategy with their clients to balance their employer groups. Furthermore, as an individual health insurance broker, this information should help you in better servicing your elderly individual clients.

Solera Provides Leads to its Agents

As previously mentioned in last month’s newsletter, Solera has been developing a Lead Program for Solera-appointed Agents. The program has been completed and Solera is ready to release these leads to participating agents. There are a few rules of engagement for these referrals. Here is how the program works:

Solera will alert a broker of an available lead in their area
Solera must receive a notification of interest from the broker
Solera will assign the lead to one broker. The broker that accepts the lead must contact the lead within four hours of receiving the lead from Solera.
Confirmation with Solera is required after contact with customer. If no confirmation is received, the lead will be distributed to another agent.
Brokers that accept leads from Solera must present Solera ancillary products as an add-on to the individual health insurance quote
Brokers must report back to Solera regarding the quote and the result of such quote
Solera will track sales of its products to these referrals to establish a capture rate for each broker that receives leads from Solera
Brokers with the highest capture rate will establish priority for additional leads
Brokers will earn full commissions on Solera products sold. Brokers will pay nothing to acquire the lead, however must pay to Solera a finder’s fee equal to 20% of commissions earned by broker for any non-Solera products sold to the lead.

If you are interested in receiving leads in your area, please contact Solera at agent.services@solerainsurance.com to start to receive leads from Solera. For those of you that have already contacted Solera regarding leads, you are already signed up for the leads program.

Solera will begin to distribute leads next week.

The Fine Art of the Handshake

by Michael Dalton Johnson

In today’s world of virtual offices, online meetings, email marketing and Internet selling, business people may be losing their ability to reach out and touch someone literally.

Your handshake says a lot about you. It can convey confidence, warmth, and honesty, or it can signal weakness, uncertainty, and disinterest. Either way, it sends a subtle yet powerful message about who you are, that is not lost on prospective buyers. Use these pointers to make sure your handshake sends the right signals, and creates a good impression with prospects and customers.

Avoid the power grip. A handshake should be firm, but not overly forceful. Beware of the unconscious tendency to pull the other person toward you as you shake. This can be interpreted as aggressive, and the prospect’s resistance to you will go up a notch or two.

Nothing wimpy. It may seem painfully obvious, but it‘s amazing how many salespeople offer weak, perfunctory handshakes. This is a major turnoff to many customers. Firm and friendly always wins the day.

Look them in the eye. As you extend your hand, establish eye contact and smile. Show some teeth! A warm and sincere greeting can make you an instant friend and all things being equal, people prefer to buy from friends.

Get a grip. Never grasp the other person‘s fingers. Take their entire hand completely in yours, and gently pump it two or three times.

Turn on the charm. You‘ve been talking with a customer on the phone for several months, and meet them in person for the first time at a trade show. To express your pleasure at finally meeting face to face, you may want to cover his extended hand with your left hand briefly during the handshake. This increases the familiarity and warmth of the handshake. Do not attempt this with someone you don‘t know. However, it is often a pleasant gesture when you are shaking hands with someone you‘ve met previously. It simply says, “I ‘m very glad to see you again.”

What to say? No handshake is complete without a spoken greeting. You can‘t go wrong with, ‘It ‘s a pleasure to meet you.” When meeting someone of high rank, such as the chairman of the board or founder of a company, you may want to up the ante with, “It‘s a great pleasure to meet you.” After the initial greeting, your conversation should begin while you are still shaking hands, for example, “John tells me you‘ve made some significant additions to your product line.” Your hand should be slowly and somewhat reluctantly withdrawn as the person begins to speak. This slow withdrawal indicates your keen interest in the person and what he is saying.

What‘s your body language saying? Posture is important, so stand erect, about three feet (one pace) away from the client, with your hands out of your pockets. Face the client squarely; never approach from an angle, or when the subject is engaged in conversation or otherwise distracted. Wait until you have his full attention before extending your hand.

Saying goodbye. When the meeting is over, it‘s time to shake hands again. You now have the opportunity to leave a lasting impression. If you‘ve established rapport with the buyer, it ‘s a good idea to gently grasp his right forearm with your left hand during the handshake, and restate any promises you may have made during the meeting, for example, “I‘ll put the technical report you requested in the mail to you today, and give you a call next Wednesday. I enjoyed meeting you. This two-handed shake signals your interest and commitment to your customer.

Practice makes perfect. Much like dancing, the fine art of the handshake takes practice. Stand before a mirror and extend your hand. Check to see if you‘re projecting an image of confidence, warmth, and enthusiasm. Keep in mind that your handshake reflects your personality, and should be a spontaneous gesture of friendly greeting that comes naturally from within. With a little rehearsal, you will develop the ability to tailor your handshake to every situation you face, and each individual you meet.

Your handshake is a powerful business asset that can help you close more sales, and build lasting and profitable relationships. The time you spend working on it will be time well spent.

Source For Valuable Leads

The Chief Marketing Officer (CMO) Council has just completed a study of channel executives, distributors, resellers, and other channel representatives. The results of the surveys may not surprise you, but the contrasts of the responses provide a shocking insight into the sheer volume of missed opportunities. This is good news for you, because missed opportunities by others can create new opportunities for you. While you may agree with the initial results of the survey, consider how you can adjust your approach to the market and leverage these opportunities.

According to the survey results by the Chief Marketing Officer Council, most valued source of leads is from customer referrals.

54% Customer Referrals
14% E-Mail or Direct Marketing
8% Internet
7% Events
7% Leads from Vendors
3% Third Party Lead Generation Organizations
8% Other

Would you agree that the best leads come from the referrals of satisfied customers? Is it surprising that customer referrals were ranked as four times more powerful and valuable than E-Mail or Direct Marketing campaigns? Customer referrals were ranked nearly seven times more likely to result in sales and new business than leads derived the Internet.

Customer referrals are a means of providing immediate credibility. With the increasing ability for consumers to share personal expression on the Internet, Blogs, E-mail, and word of mouth, the ability to communicate has enhanced the voice of the customer. In business-to-business transactions, a customer referral is more likely to lead to an appropriate contact with a relevant message, which is far more powerful and likely to result in success than a cold call from a third party lead generation. Events and trade shows can be a powerful platform to market a brand, but fall short in delivering valuable leads.

With all of this insight, how did the same channel executives, distributors, resellers, and channel representatives respond to the survey by Chief Marketing Officer Council with regards to tactics for generating new leads in the coming year?

14% Plan to use Direct Marketing and E-mail campaigns
13% Plan to use Sales Brochures and collateral
10% Plan to focus on Tradeshows for lead generation
8% Will use Seminars to generate leads
7% Will rely on Print Advertising
7% Plan to use Public Relations and Article Placement
7% Plan to use the Internet and Online Advertising
6% Will revert to Telemarketing
6% Plan to invest in Internet Search Engine Marketing
5% Plan to engage customers in User Group Gatherings
4% Plan to rely on Yellow Page Advertising
4% Will experiment on the Internet with Blogs and Social Networking
3% Will use Online Directories
3% Will create Webcasts
1% Plan to use Content Syndication
2% Will try something completely different

The results of the survey regarding lead generation tactics for new business acquisition are hardly surprising. Very little has changed in the planning and tactics as conveyed by the survey response, and yet, the contrast in comparison to the most effective and valued leads is staggering. Even though 54% of respondents acknowledged that the most valued leads are based on customer referrals, the first mention of leveraging this goldmine occurs in the 4% of respondents that plan to engage customers in user group gatherings.

Fortunately, it would appear relatively that fourteen percent of respondents believe the most valuable lead generation comes from Direct Marketing or E-mail, and fourteen percent plan to use this tactic for lead generation in the coming year. However, even though only seven percent believe that the best leads come from trade shows, there are ten percent planning to take this tactic, and another eight percent who will augment this activity with seminars.

Although only eight percent believe that the highest chance for success comes from leads acquired by the Internet, there is a staggering number of diverse plans to leverage this channel of communication. The tactics include seven percent Internet and Online Advertising, six percent investing in search engine marketing, four percent using blogs and social networking, three percent using Online Directories, and another three percent experimenting with webcasts. The Internet provides an exciting vehicle to be creative, showcase the brand, and communicate to a very large audience. However, is it targeting the most valuable audience by engaging the most valuable leads that come from customer referrals?

As you can see, the tactics are not groundbreaking or unusual. On the contrary, the approach to market is contrived on establishing a brand, shouting a message to the masses, and hoping that the merit is recognized by the appropriate lead. The Internet, Trade Shows, Brochures, and Advertising, provide effective, if not innovative vehicles for spreading the slogan. While it may be necessary to invest in these channels of communication to maintain competitive placement, there remains untapped opportunity for higher rates of success when tactics engage customer referrals.

Stop what you are doing right now and imagine how referrals from satisfied customers could generate valuable leads and grow your business. It does not matter what kind of business you are in, or what responsibilities you have in the organization. Every member of an organization contributes directly, or indirectly, to customer satisfaction. Your actions may results in testimonials, endorsements, or positive word of mouth. If you could harness the power of customer referrals, your sales force would blossom with representation from independent trusted advocates.

So, how do you encourage and empower customers to grow this incredible pipeline of valued referrals? You ask them, of course. However, before you make such a bold request, your customers must know that you are fully engaged and obligated to their aspirations. When customers are assured that you are a trusted advocate, committed to customer satisfaction, they have the confidence to share referrals and recommendations.

Once customer confidence is established and the relationship is mutually rewarding, then it is just a matter of creating the appropriate opportunity for referrals to occur. This can be as simple as asking for referrals, or as formal as creating gatherings for existing clients and potential prospects to meet and exchange experiences. Introducing existing clients to potential prospects demonstrates immense confidence in your own relationship with your customers, because you are not fearful of losing the mutually rewarding relationship. Group gatherings and communications creates a unique opportunity to endorse your customers, grow their circle of influence, and for them to provide a third party endorsement of your efforts.

There are many ways to empower customer referrals by engaging individuals in group gathering or discussions, leveraging the Internet or Advertising, or by collecting a powerful collage of testimonials. The tactics for getting the most out of this goldmine pipeline are as diverse as t he markets and customers in them. It all begins with recognizing the most valuable source for leads, acknowledging the value of these resources, and creating specific action items in a plan to unleash these untapped opportunities. Actively and effectively mining the most valuable source for leads will give you an advantage over 95% of your competition.