One thing the current statistics don’t tell you, is there was a growing labor shortage in many low-wage sectors of the workforce, BEFORE the pandemic. In fact, here is a quote from the Monthly Labor Review, published by the US Bureau of Labor Statistics in October 2018:
The Affordable Care Act is credited for giving millions of previously uninsured Americans access to affordable healthcare coverage. But a closer examination of the facts reveals that ACA-compliant plans do not necessarily translate to usable coverage for low-wage, hourly workers.
To be compliant, a plan offered by an employer must meet both a required minimum benefit level AND an “affordability” threshold. For 2021, the IRS has raised the affordability percentage from 9.78% to 9.83%. This means that an “Applicable Large Employer” (ALE) cannot charge employees more than 9.83% of their income for an ACA-compliant plan.
With statistics from the Bureau of Labor, we find the average worker makes less than $40,000 per year. Under a compliant plan this average worker pays a little less than $4,000 a year for insurance. They are “covered.” It’s “affordable.” That is the implication, right? By offering an ACA-compliant plan, an employer has performed their duty. But let’s look at reality.
The Affordable Care Act, with noble intentions, no doubt, eliminated pre-existing conditions preclusions and removed limits on coverage thresholds. It does not take a statistics wonk to see that insurers’ risk skyrocketed. There were only two primary ways allowed to mitigate the risk of unlimited coverage: through deductibles and co-pays. So they sky-rocketed as well. For a Bronze plan, which is the “affordable” level that covers more than 33% of people who enroll in exchange plans, the average deductible is over $6,000 per year.
In many cases, the “average” worker therefore, must pay $6,000 toward their medical expenses before they satisfy their plan’s deductible and begin receiving more substantial benefits. The average worker rarely meets that deductible. In fact, it takes a catastrophic healthcare event to reach that deductible. That means, not only is the average worker paying almost 10% of their wages for insurance, they are also paying out-of-pocket for ordinary doctor’s visits, unexpected emergency room visits, outpatient surgery and the like.
Surveys reveal that the average worker has less than $1,000 in savings. They don’t have disposable income. So that $6,000 deductible can produce severe financial hardship on low-wage, hourly workers, when they are forced to pay for their everyday healthcare needs. Do they get the new tires they need on the car? Or do they take their kids for a strep throat test and treatment? All totaled, the low-wage, hourly worker is disproportionately negatively affected by the healthcare act that is meant to protect them. The bottom line: the government program designed to guarantee affordable healthcare does not meaningfully provide for everyday medical needs, because of that $6,000 average deductible.
Fixed Indemnity insurance bridges that gap. Under the right plan, workers can get valuable, usable benefits to help cover the cost of doctor’s visits, emergency department visits, outpatient surgery and the things they are statistically more likely to need in a year. Our internal studies go even farther, finding that employees who are offered our Fixed Indemnity plans stay with their employer 47% longer – proving the connection between usable, effective benefits and job satisfaction. Fixed Indemnity helps level the playing field for these workers who have fallen through the cracks under the ACA.
While industry professionals have proclaimed supplemental insurance like Fixed Indemnity as almost a necessity, we have seen recent, politically-motivated invectives calling this “junk insurance,” as we exposed in our previous news release. These attacks are misguided at best, and the proposals being made to regulate them further will only harm an already vulnerable segment of the population.
As an employer, it is imperative for you to discern between truth and fiction when it comes to employee benefits and strategies.
Recently we have seen a handful of misleading news articles about voluntary benefits which could lead employers to make consequential mistakes to the detriment of their employees and themselves. Let’s take a moment to set the record straight.
According to ehealthinsurance.com, “[a] fixed-indemnity insurance plan is a type of supplemental health plan that gives you a fixed cash benefit payout in case you experience specific illnesses or injuries covered by your policy.” Thanks to advancements in digital payment technologies, the cash benefit can even be paid directly to the provider with any benefit above the cost of care going back to the plan participant. Insurance Applications Group, as well as others, provide Fixed Indemnity medical coverage that pays toward doctor’s visits, emergency care, out-patient surgery and much more; coverage that is inaccessible under the average $6,000 deductible of an “affordable” ACA-compliant plan. That is why this voluntary insurance provides a lifeline for low-wage workers, who on average have less than $1000 in savings.
Because of the value provided to vulnerable segments of the population, human resources professionals have increasingly recommended “voluntary,” “supplemental” or “Fixed Indemnity” as almost a necessity for low-wage workers to cover their yearly medical expenses. Companies even consider it a valuable recruiting tool. These plans provide a base level of medical coverage for the most common healthcare needs — in other words, day-to-day benefits they can actually use.
But now a relatively new think tank, the USC-Brookings Shaeffer Initiative (the “Initiative”), has made various blanket pronouncements that characterize Fixed Indemnity plans as a “problematic form of junk insurance.” The Schaeffer Initiative is focused on “Charting the Course for Medicare,” Assessing and Improving the Affordable Care Act (ACA),” and “Maximizing the Value of Innovation in Drugs and Devices.” While the cause is worthwhile, the blanket conclusions on Fixed Indemnity plans are false.
The Schaeffer Initiative arrives at its conclusions via a convoluted patchwork of anecdotal observations and inaccurate claims weaved together with an uninformed understanding of the insurance regulatory system and marketplace. The Initiative is being irresponsible at the very least, in labeling an entire class of insurance as “junk.” In one argument they claim that Fixed Indemnity was traditionally not meant to pay for medical care directly, but as an alternative source of income. In another assertion they claim paying providers directly is a “complex mechanism” which deceives families into believing that Fixed Indemnity is a primary source of medical coverage. This is hogwash and frankly offensive to those of us who take pride in delivering valuable, effective and usable healthcare coverage. Paying a medical provider directly is not a “scheme,” but a high-value convenience for plan participants, as our studies show, and as logical sense would conclude.
But providers and employers alike must be clear to their employees on what Fixed Indemnity is, and what it is not. It is not a substitute, and certainly not designed to be a “red herring” for major medical insurance. Whether you call it “replacement income” (for medical expenses) or a form of supplemental insurance (as it has been defined by professionals) is not the critical point. It has limits, which is why it is far, far less costly than the unlimited coverage of ACA-compliant plans. But it also provides valuable coverage for every-day medical needs that could otherwise bankrupt low-income workers. That said, like any insurance coverage, employers must carefully review the offerings and claims made, especially by industry newcomers and potential charlatans.
We do, however, support one of the Initiative’s recommendations, without reservation: enforcement against any who work to present these (Fixed Indemnity) plans as something other than what they are. We wholeheartedly support any and all efforts to hold sketchy companies, with misleading advertising, and questionable tax scheme’s accountable. As one of the largest providers of voluntary benefits to high-turnover, hourly industries like staffing, we consider ourselves both stakeholders and stewards of those benefit marketplaces. But we are all too familiar with bad actors in the field. In fact, in our position as respected industry professionals, we spend a great amount of time and energy educating the staffing industry and exposing sketchy schemes. In that regard, we applaud anyone’s effort to root them out.
That said, as a conscientious, ethical marketer of voluntary benefits like Fixed Indemnity plans, we are concerned by the sweeping generalizations, and anecdotally based (rather than evidence-based) assumptions and recommendations for regulations that may hurt the the very people the Initiative is trying to protect. By failing to understand the unintended ways the current iteration of the ACA has impacted both employers and employees in high-turnover, hourly industries like the staffing population we serve, the Initiative’s recommendations are at odds with the best outcome for certain segments of the population.
The best thing that you, as an employer, can do is to vet insurance providers, based on objective standards. What is the standard used to to determine the benefit payout? Does the Fixed Indemnity Plan cover at least most of the out-of-pocket medical expenses of your average employee? (The MSC Fixed Indemnity Plan covers a large portion of the average low-wage workers yearly medical expenses.) Does the company provide claim’s support or will your employee’s be on their own? These factors are critical in determining if the company is reputable and stable. History and reputation matter.
Hourly, part-time and temporary workers should get valuable benefits, just like their full-time counterparts.
Many part-time and temporary employees are actually underemployed. They may be working two jobs and even have some type of “gig” employment on the side, struggling to make ends meet. If your business utilizes a high proportion of part-time workers, voluntary fixed indemnity insurance could be a lifeline for them. Employee-sponsored voluntary insurance can take care of their everyday healthcare needs at affordable prices. Although there are such plans available on the consumer market, an employer can use their buying power to provide lower pricing and better benefits than the employee may be able to get on their own.
Consider this: according to actuarial firm Milliman Consulting, only about 16% of workers incur more than $5,000 in medical bills annually. Yet the average deductible on a full blown major medical plan is over $6,000. This means that the vast majority are never reaching their minimum spend deductible where they would actually receive any financial relief! In other words, everyone is paying the high cost of unlimited coverage, but only a small fraction of them ever get anything from it.
But there is a solution. Affordable fixed indemnity voluntary insurance can cover doctors’ visits, diagnostic tests, x-rays, emergency room visits and outpatient surgery — things the average worker needs the most. Studies show that most low-wage workers live paycheck-to-paycheck and have less than one thousand dollars in savings. Even a simple sports accident that requires a trip to the emergency room could cause financial ruin.
Your help to these vulnerable employees may be invaluable, and most employers don’t realize that coverage for a part time or temporary workforce is available. Additionally, one of the biggest costs to employers who employ low-wage workers is the cost of turnover. A voluntary, employer-sponsored plan that is affordable and provides true value will inspire loyalty and help keep your part-time employees. Studies show that affordable, valuable insurance can extend an employee’s tenure by 50%. Not only is voluntary insurance good for your employees, it is good for your business.
If you are under the employer mandate due to the Affordable Care Act, you already know that compliant, major medical plans require astronomical deductibles before full time employees can even access their coverage benefits. For these workers, voluntary fixed indemnity insurance can cover these gaps. In fact, HR professionals have been calling employer-sponsored voluntary insurance a “necessity” in numerous publications for years.
Insurance Applications Group’s mission is to “enable employers to maintain their moral and inherent obligation to provide for the health and welfare of their employees.” It is easy to see part-time or low wage workers in term of costs, or just numbers. They are even called human “capital.” But they are individuals who deserve respect and are indispensable to businesses. In fact, many workers now classified as “essential” may be in part-time jobs.
Again, your help to these part-time employees through affordable, valuable, voluntary medical insurance can make a real difference, and cost you nothing.
For the ninth year, Insurance Applications Group has been awarded the prestigious Soaring Eagle Award from the National Association of Health Underwriters.
2020 Soaring Eagle Awarded to Insurance Applications Group.
For the ninth year, IAG – parent company of Medical StaffCARE, has been awarded the prestigious Soaring Eagle Award from the National Association of Health Underwriters. This award is the highest honor given by the Leading Producers Round Table, a commission of the association, to recognize members who have achieved the greatest success in demonstrating exceptional professional knowledge and outstanding client services.
“Insurance Applications Group exemplifies the qualities that make health insurance agents and brokers such important resources and advocates for American consumers,” said Jennifer Lowery, President of the Piedmont Chapter Association of Health Underwriters. “IAG works tirelessly on behalf of all their clients to ensure they have the insurance coverage they need.”
2020 marks the 11th consecutive year IAG has reached the sales production threshold necessary to qualify for award consideration, having received Lifetime Qualification status and recognition just last year. Less than 1% of producers receive this distinguished award, placing IAG among some very elite company.
ABOUT NAHU
The National Association of Health Underwriters represents 100,000 professional health insurance agents and brokers who provide insurance for millions of Americans. NAHU is headquartered in Washington, DC.
Concerns over health, finances and family dominate the working class, impacting their lives on a daily basis.
Depending on the source, we can expect to see a Coronavirus vaccine by the end of the year, or even as early as October. After the devastation of the pandemic, there is light at the end of the tunnel. But will businesses ever really get back to “normal?” That is the looming question. What will be the lasting effects on the workforce, and what will be required of employers?
First, we need to look at the changes that have taken place in basic business operations since the pandemic started. As we know, controlling the virus started with business shutdowns to reduce the spread. When much of the workforce was mandated or encouraged to stay at home, employers scrambled to implement work-from-home strategies. But there is also a newly designated class of “essential” workers who have had to carry on as usual. While there are numerous ways to classify employees, this is new. With the exception of certain healthcare professionals, essential employees are likely to be the lowest paid workers, in service industries, or production of essential products. Despite the differences, with one class sequestered at home, and the other forced to go out into a newly dangerous work-world; the effect has been an overwhelming increase in stress.
Surprisingly, as an employer or human resources decision-maker, you are still dealing with the same basic issues, even though there is a seismic shift in the landscape. Your job is about recruiting and retaining the best talent; creating a good workforce management plan; and increasing employee engagement and satisfaction.
First, it is productive to look at employee issues before the pandemic started. What we find is that stress was already a growing problem. One of the biggest HR issues has been helping workers create and maintain a good work-life balance. The pandemic just exacerbated these problems. MetLife’s 18th Annual U.S. Employee Benefit Trends Study, 2020, reported that 4 in 10 employees struggle to navigate the demands that come with today’s more flexible, “always-on” work-life world in 2019.
This struggle translates into stress for employees which affects their well-being, productivity and job satisfaction. Employees reported that the top 3 sources of stress in their lives were personal finances, work, and personal or family health, in 2019. Now, according to the MetLife study, 67% of employees are feeling stressed because of the COVID-19 virus. Lower income workers are feeling the effects at a higher rate. 70% of workers who make less than $50,000 a year are stressed because of the virus. The added stress is reported as coming from fear of contracting the virus, fear of a loved-one or friend getting the virus, and the effects of social distancing or isolation. If you overlay that against employee stresses before the virus, you now have a boiling caldron of employee fears.
Numerous studies have reported an increase in adverse mental health conditions. A CDC study shows that during late June, 40% of U.S. adults reported struggling with mental health. 51% of essential workers reported an adverse mental or behavioral health condition, including anxiety disorder or depressive disorder. In addition to the fears of getting the disease, the virus has had an effect on the top 3 sources of pre-COVID stressors. Financial stress due to layoffs or furloughs has increased. Job stress has increased. Stress about personal or family health has increased. And workers financial stresses and health concerns are closely intertwined. For low-wage workers, ACA plans leave a huge gap in coverage because of high deductibles and co-pays. On average, they have to spend $6,000 in deductibles and co-pays, before they access full coverage. With the average low-wage worker having less than $1000 in savings, an illness or injury could spell financial ruin. So how can an employer bridge these gaps and provide employees with much-needed peace of mind, in face of these uncertainties?
There is good news. You can provide employer-sponsored voluntary insurance to cover everyday medical necessities, not covered by ACA plans. This voluntary insurance requires no contribution from the employer, and pays first dollar when employees need healthcare services. Not only can the right plan be affordable for workers, the benefits are in demand. BusinessWire reported, “in terms of benefits, employees say life insurance benefits that offer lump sum or cash payments, such as indemnity or critical illness insurance would help ease their stress, if offered by their employer.” According to MetLIfe, and our own studies, employees are seeking help to cover in-patient hospital care, out-patient surgeries, emergency room visits and doctor’s office visits. For the highest impact, employers should look for voluntary plans that are offered at a discounted rate, not available on the retail market. This provides true value, and increases your employees’ goodwill and job satisfaction.
But needs are changing, as ongoing research shows. More primary care physicians are moving to virtual office visits, a trend that is likely to continue. These visits need to be covered. Mental health benefits are also becoming more important to employees. The insurance industry will have to adapt to meet changing needs.
Employers have the moral duty to care for the health and well-being of their employees. Employees have always felt like their employer is responsible for their well-being, as reiterated in the independent MetLife study. The same study finds that employees now see benefits as an employer requirement, a belief that has risen to 80%, after the virus. Workers across all spectrums of the workforce are dealing with exponentially increased stress in the new reality. And employers can help provide peace of mind for these workers through voluntary medical insurance, with valuable, usable benefits. It is a win-win solution, that employers need to act upon now.
There has been a growing trend in the marketing of employer-sponsored voluntary benefits that would have you believe that “more is better” and employees demand variety so they can choose benefits to fit their unique lifestyles.
What we see now are things like prepaid legal counseling, pet insurance, travel insurance, mortgage protection, tuition reimbursement, elder care insurance and many, many more. Employers may feel like if it is voluntary, why not offer it? And we are being told consumers want these choices. This is a slippery slope, at the very least.
A Harvard Business Review article published in June 2018 entitled “How Many Choices Do Consumers Really Want” found that consumers almost always tell researchers they like many versions of a product. Yet, we need to go back to 2000 when psychologists Sheena Lyengar and Mark Leper from Stanford and Columbia Universities, respectively, did a famous study that upended this generally accepted marketing premise. On the first day of the experiment, shoppers at an upscale grocery store were presented with twenty-four varieties of gourmet jam. Those who sampled the product got a dollar off any jam. The next day, shoppers were presented with only 6 varieties. When the time came to purchase, people who saw the large display were one-tenth as likely to buy as the people presented with the small table.
So why did Harvard researchers find that people almost always say they want more choices? The Harvard study found there were nuances. Consumers’ perceptions of how many choices they prefer change depending on whether they intend to use a product for pleasure or for a functional need. Other studies show that there is a point when consumers get choice overload, no matter what the product or their perceived desire for more variations.
So how does this apply to your benefits strategy? First, insurance is a functional product. That means it won’t take much to reach decision overload. In his book, The Paradox of Choice, Barry Schwartz writes that when consumers have too many options, they may end up not choosing at all. Schwartz shows the results of employees who were offered fifty mutual funds, versus 5 funds, in which the employer matched contributions. Those who were offered fifty funds were ten percent more likely NOT to enroll in anything at all and walk away from the employer’s matching funds. Decision paralysis is proven when employees turn down free money from their employer.
You could end up in a similar position. Employer-sponsored voluntary health insurance benefits meet a critical need for low-wage workers, that only you can give them. You bring buying-power and vetting knowledge to the table, that employees cannot get on their own. The high deductibles and co-pays under ACA plans mean workers must come out-of-pocket with thousands of dollars to even get to any coverage. Your voluntary health insurance benefits fill that critical gap in coverage. But when an employer lumps this essential medical care coverage in with dozens of non-essential voluntary benefits, overwhelmed employees may just walk away. This is nothing short of a tragedy. Low-wage workers may be one accident or illness away from financial ruin that could have been prevented.
The bottom line is you are bringing no value to your employees by offering a smorgasbord of benefits that they could get more easily, at the same price, on their own. In fact, it is a disservice to them if they end up turning down valuable healthcare benefits because it’s too overwhelming to decide. And finally, many of these benefits are not meant to be administered in a payroll-deducted environment. So, on top of everything else, you may end up in an administrative quagmire, with angry employees.
Voluntary medical insurance is more critical than ever in the world we live in today. Not only can you provide for the health and welfare of your employees, you will find that these valuable benefits will give them peace of mind and increased job satisfaction which leads to better employee retention.
As a recruiting tool, employers commonly compete by offering what insurance companies or brokers have traditionally referred to as robust or benefit-rich plans.
The term “robust” has carried an implied meaning in insurance-industry terminology: major medical insurance coverage with small co-pays for doctor’s office visits, emergency room visits, inpatient surgeries, dental, vision, and other common ancillaries.
This traditional definition of robust implied valuable and comprehensive coverage, with medical providers filing the claims, making the user-experience easy and hassle-free. This health care coverage also inspired loyalty and created a bond between employer and employee, as it demonstrated that employers truly cared for the health and well-being of their workers, by ensuring their employees would be protected medically and financially in case of any health-related catastrophe. But then Affordable Care Act changed the landscape.
The new regulations brought sweeping change to health insurance plan design, most notably the elimination of pre-existing condition limitations, followed by the removal of limits on claims liability and loss ratio parameters. These changes were constructed to help those with the greatest needs receive care, no matter their health condition or ability to pay. But consequently it changed the variables that insurance underwriters use to derive the cost of insurance based on its risk factors. Insurance companies could no longer mitigate risk through limits in coverage, that can make insurance more affordable. Employers with younger and healthier workforces were no longer able to obtain plans commensurate with lower health-risk factors. The unlimited risk imposed by the ACA has predictably translated to rising premiums, higher co-pays, and soaring deductibles.The new reality in today’s healthcare marketplace are expensive plans that require stiff monthly premiums and a lofty four-figure deductible from the patient before any medical services will be reimbursed.
Another consequence of the ACA rules was the homogenization of coverage under any qualified plan. The only difference between bronze, silver, and gold level plans is whether the premium is higher and deductible lower, or vice versa. In the end, qualified major medical plans cover all costs once a patient’s deductible/out-of-pocket maximum is met. This has rendered the term “robust,” once used to describe policies with broad and deep coverage, as meaningless. Now all major medical plans under the ACA are technically considered robust under the traditional definition, at least in terms of coverage. Even so, the least expensive of these plans, affordable to low-wage workers, created a gap in coverage, whereby they have to pay out-of-pocket for everyday healthcare needs and medical expenses before they ever get to coverage dollars.
One solution emerged to fill this gap—for employers to add affordable voluntary medical benefits for smaller, day-to-day claims. Limited indemnity voluntary plans are indeed valuable additions to an employer’s healthcare offering. The right plan can help the most vulnerable in the workforce with the common medical expenses they need most, benefits that the ACA essentially pushed out of reach.
Reaching back to the term “robust” employers can help create insurance coverage that meets this traditional definition: broad and deep coverage (through your ACA plan), and coverage for every-day medical expenses, through the right voluntary medical benefits plan.
But here is where the distortion begins. Providers of other types of non-essential benefits like gym memberships, commuter reimbursement, pet insurance, financial counseling programs, and other similar offerings are now claiming THIS is what makes for “robust” benefits. Employers are being bombarded with more and more voluntary benefits and being told that if voluntary medical insurance helps create a robust plan, then the more voluntary products offered, the more “robust” your benefits plan is. That is simply untrue. In fact, adding these superficial additional voluntary products actually dilutes the perceived value of your core medical benefits, benefits of true substance and value. As a integral part of creating a truly robust core benefits plan, you are lumping your voluntary medical benefits plan into a list of almost gimmicky coverages. This can create confusion whereby your employees decide to choose no voluntary benefits at all. And there goes your true “robust” coverage strategy for core benefits.
What we see today is an expansion of the definition of core benefits to include products and services that dilute the importance and impact of employer-sponsored medical and healthcare insurance. By experience, the more non-essential voluntary benefits an employer offers, the less the participation in the valuable, important and usable voluntary medical benefits plans. In addition, there are challenges to the effective communication, implementation, and fulfillment of valuable benefits to employees, that most non-essential benefits providers cannot provide. If you DO happen to get employees to sign up for these superficial benefits, it can be a stress on your internal systems, when the providers have trouble communicating, implementing and fulfilling the benefits. And the buck stops at you, the employer who endorsed the benefit and provider. Instead of creating the goodwill you expected, you are now facing complaints.
But these non-essential benefits can be presented as very attractive and enticing, like an all-you-can-eat buffet, with something for everyone. “It’s big, it’s impressive, Mr. Employer. It’s robust. Your employees are gonna love it. What’s not to like?”
Here is the truth. Employers provide true value to their employees, by leveraging their buying power to deliver a needed service or program at a cost an employee cannot get on their own. The worst deception is calling a plan robust, when it is not. Adding non-essential voluntary benefits such as pet insurance, identity theft protection, and gym discounts do not counterbalance for a lack of benefits that employees find usable, valuable, and affordable. Your benefits strategy may be the biggest difference between business success and failure. Don’t be led astray by headlines that read “pet insurance is now an essential benefit” to offer. Or “employees demand voluntary benefit choices.” Not only can it backfire, you may be depriving your employees of, or directing them away from, what the need the most: voluntary medical benefits of substance, voluntary benefits that meet the gaps in coverage with your ACA plan and help create a truly robust insurance plan.
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