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Calling All Agents
Another look at an old nemesis and preview of the next wave
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Business New Haven
10/20/1997
By: BNH
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To many, the advice to call an insurance salesperson may strain the credibility of this author. Nonetheless, the highly competitive insurance industry is continually offering new options that merit serious review.
Workers compensation insurance has seen important changes in recent years, and a new benefit, “long term care,” is appearing on the horizon as baby boomer employees and business owners begin to feel their age.
Managing Workers Compensation
The techniques of managed care have begun to be adopted to reduce workers compensation costs. According to Patricia Bechtoff, vice president of marketing for MasterCare, a firm that specializes in workers compensation insurance, “It's no longer the case that if you're in managed care, you're in the forefront. Many companies are there.”
Most traditional workers compensation plans allow employees to manage their own treatment. But that's not the best way to control costs. Says Bechtloff, “The key to success of the program is that the employee call us immediately.”
Bechtloff adds“[Provider networks] don't require as many specialists; you wouldn't need an OB-GYN, for example. You also don't need as many doctors and you mostly need them where you have employer sites.”
Jeffrey Berkman, M.D., chairman and CEO of Industrial Health Care, a provider of workers compensation, prevention, treatment and rehabilitation of worker injuries, agrees with the efficacy of managed care in workers comp, but cites other issues: “Across the state, 20 percent of injured workers are litigants, because they don't think the [workers comp] system is treating them fairly.”
Adds Berkman: “Sixty percent of every work claim is wage replacement, and an injured worker benefits by more treatment, not less Look beyond managed care for a good occupational health provider.”
The biggest change for many employers may be the new competitive landscape for workers-compensation insurance. The Chamber Insurance Trust, which markets benefits for chambers of commerce across Connecticut, and the Connecticut Business & Industry Association both started selling workers compensation programs focusing on the small and mid-sized business market in the past year. Says Stephen Glick, president of Coordinated Financial Resources in Orange and founder of the Chamber Insurance Trust: “Right now, the workers comp market is very competitive. Some companies are even buying business to get or stay in the market.”
You're Not Getting Any Younger
Many demographic observers believe that virtually every major market trend of the past 45 years - from the building of suburbia to the consumer economy and even today's record-breaking stock market - have the same origin: baby-boomers. The next big wave is readying for retirement. And on the horizon for executives and business managers is long-term health care insurance.
The need (although painful to contemplate) is pretty simple to understand. Nursing-home care is already running at upwards of $175 per day - or about $70,000 per person per year, according to the Connecticut Department of Insurance.
With figures like these and the curve climbing to the shape of the bell, government bean-counters are worried. With the certainty of enormous escalation in costs, both federal and state governments have begun to adopt laws to encourage the purchase of long-term health insurance. The Health Insurance Portability & Accountability Act, passed in 1996, provided some incentives. Premiums are deductible as a medical expenses for taxpayers who itemize their deductions (subject to the 7.5 percent of income restriction). The benefits themselves are tax-free, subject to certain limitations. Employers and self-employed individuals can deduct premiums. And finally, an employee's company-paid premium is not treated as income. The feds haven't however allowed long-term insurance to be tax-deductible in a “cafeteria” plan.
The state of Connecticut addressed a different problem and created its own powerful incentive. The problem was the poor reputation that early plans earned for stingy benefits, making the insurance nearly worthless.
The apparent solution was the Connecticut Partnership for Long Term Care. The incentive is simple: Protect your assets. Residents who purchase the insurance have the ability to protect a like amount of their assets in the event that the state is forced to pick up part of their tab for care. Buy $150,000 worth of insurance and protect $150,000 of assets - even if your care reaches into seven figures.
This incentive is available only for policies written by companies that participate in the state's “Partnership” program. According to David Gottchen of the State Office of Policy and Management and the Partnership director: “We needed to give consumers more confidence. We have a special set or regulations that [the insurance companies] must meet.”
One feature seems essential to attract people in their 40s and 50s where the insurance is still very affordable, Gottchen says: “We require the benefits inflate by five percent compounded. Inflation protection is the single most expensive provision of the plans.” The five percent the state insists on is the current compounded rate of cost increase in the industry.
With the new regulations and the state's seal of approval, policies have started to move, says Gottchen. “Sales of Partnership plans have tripled within the past six months.” Employers are moving more slowly, however. “We're seeing more employers offering access to the plans,” he says. “We think if the company could contribute even a modest amount, employees would feel they were getting something and more would participate..”
Rates are modest for most middle-aged workers, ranging from $130 to $250 per month for three to six years of coverage for benefits ranging from $3,000 to $6,000 per month. A typical nursing home stay is 2.5 years. Gottchen adds, “[Partnership plan] rates can only be increased for policyholders [on a non-individual basis] by the Department of Insurance.”
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