2007 is the year to decide if you’ll sell CDH plans

Many agents and brokers have stayed on the sidelines or actively lobbied against CDH offerings. But this approach has left the door open to competitors who have been using CDH proposals as a wedge to gain new accounts. With 2007 expected to be a tipping year for HSAs, many agents who have previously not endorsed consumer directed health care plans may need to rethink their strategy.

Information Strategies Inc.’s (ISI) studies show that CDH adoption is expanding strongly. Yet, there is evidence that a division based on company size is appearing. A majority of larger companies adopting a CDH program are opting for health reimbursement accounts (HRAs) with a strong representation in this group of corporations using flexible savings accounts (FSAs.) While larger firms, such as Deere and General Motors are offering health savings accounts (HSAs), more smaller firms are heavily utilizing them.

By 2010, HSAs are expected to represent 25 percent of the total marketplace, and CDH will garner 50 percent of the market. And according to ISI’s latest survey, almost 40 percent of companies offering HDHP benefits were previously uninsured.

The opportunity

In focus groups with agents and brokers, ISI has uncovered three major reasons why many professionals do not offer CDH options: lower commissions, more work to implement with employers, and a lack of understanding as to what they really deliver to employers and employees.

Despite many newly available teaching programs for CDH offerings, the burden of education and explanation falls to the agent or broker. Many view this as a problem, while others see this as an opportunity. But regardless of how one feels, CDH and HSAs are here to say.

Many aggressive brokers see CDH trends as an opportunity to garner new clients. One Baltimore, Md.-based agent says, “I love it when another broker leaves out the HSA option. I can walk in and deliver a package that is 23 percent cheaper than any other offering, including CDHP with a $30 co-pay.”

Many companies are being encouraged by colleagues and employees to investigate CDH offerings. In its surveys of more than 3,100 companies completed near the end of 2006 and the beginning of 2007, a majority (61 percent) of respondents said they were encouraged to look at CDH and HSA offerings by colleagues and/or employees. Yet these corporate managers also reported that they received HSA options in just 11 percent of their initial proposals. At the same time, though, these managers said HSA options were included in 55 percent of the final proposals.

More than a third (38 percent) of those surveyed said they did their own research and asked their current broker for HSA options — but it was not easy to get a comparative analysis. Many said they were forced to ask for bids from other agents who were pushing HSA programs. A significant percentage, (14 percent) said they were warned off of HSAs from their current broker and opted to seek outside counsel from other brokers.

Health care insurance executives also report a growing interest in CDH options, often initially focusing on HRAs but swinging to HSAs, particularly in smaller group situations. One major insurance provider said they were getting “a significant number of direct requests from company managers asking about CDH options.”

Within firms, there were differences as to the applicability of HSAs. One Des Moines, Iowa, firm reported that three of their agents were selling significant HSA and HRA plans, but the remaining five brokers had not sold any plans at all.

Agent/brokers are starting to realize, as surveys indicate, that the additional time needed to implement a CDH program often pays off in higher employee satisfaction and retention. In the latest survey of agent/brokers, 57 percent said they had quoted and sold an HSA account in 2006 — up from just 20 percent in 2005.

Change is always painful and it is often the agent or broker who bears the brunt of employer and employee angst. So, agents/brokers will find they’ll have to work harder the first year simply helping with the plan transition. What agent/brokers should remember is that they are viewed as the experts, so it’s important for them to be a very visible part of the process.

Here are a few dos and don’ts that agents should impress upon their clients when offering CDH plans:

1. Implementation should begin early in the year and include on-the-job meetings.

2. For HSAs, total replacement is the best way of getting employees to sign up.

3. CDH programs require employees to take control of their medical spending.

4. “Sticker shock” will set in when employees learn the real cost of health care.

5. For HSAs, the employer should take some of the premium savings to fund first-year custodial accounts.

6. Wellness and other programs should be implemented along with CDH offerings.

7. Employees need to know that management is behind the program.

8. Personalized examples and comparison charts will help employees understand the new program.

Agents and brokers must decide what’s best for their clients and themselves. With the growth of CDH, the time is rapidly approaching when they need to make the jump or start losing clients.

With all this effort, the agent/broker plays an important role that will grow — not diminish — with the expansion of CDH.