With so many new health insurance plans on the market today, it can be difficult for an agent or broker to determine which type of plan to recommend to a client. Most agents are well versed in the merits of major medical plans, but many have questions about the wide range of supplemental plans that are now available. Who should purchase a critical illness plan? Are accident plans a good value?
Less is known about the new breed of fixed benefit plans that have recently emerged on the market. They promise to provide set cash benefits for medical services, such as doctor visits, hospital stays and prescriptions. But will they provide enough coverage in the event of illness or injury? What are the risks?
The best way to sort through the myriad options is to start with the customer and a firm understanding of his or her needs and preferences. While that might seem obvious, many agents approach the sale — often unknowingly — with a particular product type already in mind.
Major medical plans have long been regarded as the gold standard of health insurance products. Every agent is familiar with this type of plan; most agents probably own a major medical policy of their own. They are well known in the marketplace and relatively well understood. For these reasons, agents take it for granted that their client wants a major medical plan. Other types of plan options may never enter into the discussion.
But assuming a major medical plan is always right for every client in every situation overlooks the customer’s preferences and the reality of their circumstances.
Weighing other options
Consider the fictional example of Julie. Let’s say Julie’s a single mother of two who needs to find affordable health care coverage for herself and her family. She enjoys her new job managing events for a small catering business, but her employer doesn’t provide health insurance. She’s struggling to pay the rent and make ends meet, and she can’t afford the monthly premium of a traditional major medical plan. To help make her coverage more affordable, her agent suggests a high deductible major medical plan. The plan costs $252 per month and has a $5,000 annual deductible.1
Julie now faces a dilemma. Although her monthly premium is down to a more acceptable level, it is still a significant expense for Julie. In addition to her monthly premium, she would be on the hook for paying the first $5,000 of medical expenses, which she doesn’t have and couldn’t afford to pay if she did.
For Julie and many others like her, a major medical plan might seem more like being uninsured because she feels like she is getting nothing for the premiums she pays. Julie doesn’t own a house, and she is not concerned with having catastrophic coverage to protect assets she doesn’t have. What Julie wants is access to the health care system. She wants to know she has an insurance card and can take her kids to the doctor and get prescription drugs if they need them. When the unexpected happens, she expects her insurance plan to cover at least some of her expenses. So when her agent offers her a choice with a high premium and a high deductible, it’s not much of a choice.
The good news for folks like Julie is that there are now affordable fixed benefit plans on the market that offer meaningful benefits. Unlike a traditional plan, where there are deductibles, coinsurance and co-pays, fixed benefit plans offer set cash benefits that begin right away.2 They cover a wide range of services, from everyday needs like office visits, preventive care and prescriptions, to hospitalization and surgery.
Benefits often can be significant. For example, hospitalization benefits can range from $50 to $6,000 per day, depending on the plan. The best plans offer network discounts, guaranteed cost estimates for common services and treatments, and personalized help navigating the health care system.
It is important to understand, however, that benefits are paid in specific amounts for covered services no matter their cost. The insured may have an amount left to pay after the plan pays the fixed benefits. Both the agent and his or her client should read through the schedule of benefits in order to understand what will be covered and how much the plan will pay for various services.
Choosing the right plan
So, how do you help a client decide between the set cash benefits of a fixed benefit plan or the broad protection of a major medical plan? To understand clients’ needs and make the right recommendation, answer these questions:
• What current insurance coverage do they have, and why are they looking to change it?
• How do they plan to use their coverage?
• What trade-offs are they willing to make between budget, usage and level of coverage?
• What complaints do they have about health insurance?
• What is their total health insurance budget, including premium and out-of-pocket costs?
For clients whose needs seem divided between a fixed benefit product and major medical, here are some additional guidelines to help the client decide which plan will work best.
Supplementing plan coverage
Once a decision is made between a major medical and a fixed benefit product, supplemental plans can be used to customize a solution to the client’s needs by filling gaps in coverage and creating additional protection. One of the most common needs for someone purchasing individual medical coverage, for example, is dental insurance. For around $42 a month, the single mom in our earlier example can obtain a supplemental dental plan for herself and her two children. Over the next year, Julie and her children each receive $100 for each preventive visit, up to two times per year. When her dentist recently found a cavity, Julie received $140 to pay for a filling.3
Other types of supplemental insurance worth considering include accident and critical illness. Accident medical expense insurance helps pay out-of-pocket medical expenses when an accident happens, so your client can concentrate on getting well. Clients with major medical insurance can think of it as money to cover their deductible and coinsurance. With a fixed benefit plan, it will help pay for costs above and beyond the fixed benefit amount.
In the event of a critical illness like cancer, heart attack or stroke, a critical illness plan pays cash benefits that can be used any way your client wants — from replacing lost income to paying for personal expenses like childcare arrangements. For clients with a major medical plan, benefits can be used to pay the cost of a deductible or coinsurance.
Major medical, fixed benefit and supplemental plans — each offers its own particular advantages. Which type of plan is right for your client depends on his or her particular needs and preferences. By asking the right questions, you can assist your clients in deciding which plan type will offer the most value and best serve their individual needs.
Mike Norderhaug, CLU, ChFC, is Assurant Health’s senior vice president and executive sales officer. Norderhaug oversees all of the company’s agent distribution channels and sales management functions. Since he joined Assurant Health in 1991, he has held various sales executive roles, including regional sales vice president, where he oversaw the company’s regional sales manager and the managing general agent distribution channels. Prior to joining Assurant Health, he spent 13 years at Lutheran Brotherhood.
Footnotes:
1. Based on a Time Insurance Company CoreMed plan for a 32-year-old woman in Maryland with 2 dependents.
2. Most plans have pre-existing condition limitations for the first 12 months of coverage.
3. Premium and benefit amounts based on a Time Insurance Company Dental Coverage – Intermediate plan, for a 32-year-old adult and 2 children residing in Maryland, when purchased with a major medical or Assurant Health Access plan.
