VOLUME 34, NUMBER 5 SERVING CALIFORNIAS LIFE/HEALTH PROFESSIONALS & FINANCIAL PLANNERS FEBRUARY 2016

Wellness
Workout for
Brokers
Shaping up
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Also Inside:
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GA View from the Top Private Exchanges Life Settlements Life Insurance
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 TABLE OF CONTENTS
LARGE GROUP HEALTH WELLNESS
10 26
Navigating the 101 and Beyond Finding a Work-

FEBRUARY 2016
by Michael Wolff place Wellness
Brokers who are not selling in the large- Program Fit for
group space Every Client
may want to by Heidi Bowman
PUBLISHER think again. More employers un-
Ric Madden Agents are derstand the benefits
email: publisher@calbrokermag.com finding many of moving to a holistic
large groups wellness strategy.
EDITOR-IN-CHIEF
with no prior
Kate Kinkade, CLU, ChFC
coverage. Helping Employers Maximize the
email: editor@calbrokermag.com 29 Return on Investment in Wellness
SENIOR EDITOR Opportunities Abound for Agents in by Dinesh Sheth
14
Leila Morris the New Large Group Market How employers can increase the ROI
email: editor@calbrokermag.com by Neil Crosby from their wellness investments.
ART DIRECTOR/PRODUCTION MANAGER The year 2016 will truly
Steve Zdroik be a year of growth PRIVATE EXCHANGES
for agents and 31
ADVERTISING
brokers with limitless An Option for the Future
Scott Halversen, V.P. Mktg. opportunity.
email: scotthalversen@calbrokermag.com by Dorothy Miraglia King
Is a private exchange part of your clients
15 SALES & MARKETING benefit strategy? If not, you may want to
CIRCULATION
email: calbrokermag@calbrokermag.com consider it.
BUSINESS MANAGER Win Today or Relevance Tomorrow
How the Power of Consultative Sell- The Next Health Exchanges
ing Can Help You Grow Your Business 33 Have Already Been Built
Lexena Kool
email: lex@calbrokermag.com
by Jim McCabe by Joel White
LEGAL EDITOR Helpful tips for weaving consultative Congress has an op-
Paul Glad selling into your daily conversations to portunity to modify the
become more valued among clients. exchange system to
EDITORIAL AND PRODUCTION:
McGee Publishers engage consumers.
217 E. Alameda Ave. #207 GA VIEW FROM THE TOP
Burbank, CA 91502 16 LIFE SETTLEMENTS
Phone No.: 818-848-2957 by Leila Morris 36
email: calbrokermag@calbrokermag.com. General agen- A Primer for Healthy Insureds
cy executives by Robert Stark
Subscriptions and advertising rates, U.S. one year:
give their take Why a life settlement (traditional or
$42. Send change of address notification at least on challenges no LE) can be a great option in certain
20 days prior to effective date; include old/new and opportuni- circumstances.
address to: McGee Publishers, 217 E. Alameda ties in todays
Ave. #207, Burbank, CA 91502. To subscribe online: market.
calbrokermag.com or call (800) 675-7563. LIFE INSURANCE
38
California Broker (ISSN #0883-6159) is published Trends That Are Shaping Todays
monthly. Periodicals Postage Rates Paid at Burbank, DISABILITY
CA and additional entry offices (USPS #744-450). 24 Wealth Transfer Policies
POSTMASTER: Send address changes to California by Palmer Williams
Why Millennials Make Attractive Clients whove been hesitant to use life insur-
Broker, 217 E. Alameda Ave. #207, Burbank, CA 91502.
Disability Insurance Prospects ance for wealth transfer can now enjoy the
2016 by McGee Publishers, Inc. All rights by Jim Farden benefits and maintain control of the policy.
reserved. No part of this publication should be Dont miss
reproduced without consent of the publisher. out on the 401(K)
No responsibility will be assumed for unsolicited
opportu- 40
editorial contributions. Manuscripts or other nity to target
New Regulations for Employers
material to be returned should be accompanied by Millennials
by Ellen Bartholemy
a self-addressed stamped envelope adequate to for income
Brokers need to understand the latest regu-
return the material. protection
lations and guidelines when selling 401(k)s
solutions.
The publishers of this magazine do not assume and other qualified retirement plans.
responsibility for statements made by their
advertisers or contributors. Printed and mailed by Guest Editorial..........................6 News........................................ 42
Southwest Offset Printing, Gardena, CA. ALSO IN THIS ISSUE: Annuity Sampler......................8 Classified Advertising........ 46
New Products....................... 35 Ad Index.................................. 46

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GUEST EDITORIAL
DEMOCRATIC CANDIDATES DEBATE SINGLE-PAYER,
BUT WHAT DOES THAT MEAN?
H
ealth care has emerged as one of the flash points in the
Democratic presidential race.
Vermont Sen. Bernie Sanders has been a longtime
supporter of a concept he calls Medicare for All, a health
system that falls under the heading of single-payer.
Sanders released more details about his proposal shortly before
the Democratic debate in South Carolina. What a Medicare-for-
All program does is finally provide in this country health care for
every man, woman and child as a right, he said in Charleston.
Sanders main rival for the nomination, former Secretary of
State Hillary Clinton, has criticized the plan for raising taxes on
the middle class and said it is politically unattainable. I dont
want to see us start over again with a contentious debate
about health care, she said.
Some of the details of Sanders plan are still to be released.
But his proposal has renewed questions about what a single-
payer health care system is and how it works. Here are some
quick answers.
WHAT IS SINGLE-PAYER?
Single-payer is not the same thing as socialized medicine. In
a truly socialized medicine system, the government not only
pays the bills, but also owns the health care facilities and em-
ploys the professionals who work there.
The Veterans Health Administration (VA) is an example of a
socialized health system run by the government. It owns the
hospitals and clinics and pays the doctors, nurses and other
health providers.
Medicare, on the other hand, is a single-payer system in
which the federal government pays the bills for those who
qualify, but hospitals and other providers remain private.
WHICH COUNTRIES HAVE
SINGLE-PAYER HEALTH SYSTEMS?
Fewer than many people think. Most European countries never
had or no longer have single-payer systems. Most are basically
what we call social insurance systems, said Gerard Anderson, a
professor at Johns Hopkins Bloomberg School of Public Health,
who has studied international health systems. Social insurance
programs ensure that almost everyone is covered. They are tax-
payer-funded but are not necessarily run by the government.
Germany, for example, has 135 sickness funds, which
are essentially private, nonprofit insurance plans that negoti-
ate prices with health care providers. So you have 135 funds
to choose from, Anderson said.
Nearby, Switzerland and the Netherlands require their resi-
dents to have private insurance (just like the Affordable Care
Act does), with subsidies to help those who cannot other-
wise afford coverage.
And while conservatives in the United States often use
Great Britains National Health Service as the poster child for
a socialized system, there are many private insurance options
available to residents there, too.
6 | CALIFORNIA BROKER - CalBrokerMag.com -
By JULIE ROVNER for KHN.ORG
Among the countries that have true single-payer systems,
Anderson lists only two Canada and Taiwan.
ARE SINGLE-PAYER PLANS LESS EXPENSIVE THAN
OTHER HEALTH COVERAGE SYSTEMS?
Not necessarily. True, eliminating the profits and duplicative
administrative costs associated with hundreds of different
private insurance plans would reduce spending, perhaps as
much as 10% of the nations $3 trillion annual health care bill,
Anderson said. But, he noted, once that savings is achieved,
there wont be further reductions in following years.
More important, as many analysts have noted, is how much
health services cost and how those prices are determined. In
most other developed countries, even those with private insur-
ance, writes Princeton Health Economist Uwe Reinhardt, prices
either are set by government or negotiated between associa-
tions of insurers and providers of care on a regional, state or na-
tional basis. By contrast, in the U.S., The payment side of the
health care market in the private sector is fragmented, weaken-
ing the bargaining power of individual insurers.
WOULD MEDICARE FOR ALL BE JUST LIKE THE EXIST-
ING MEDICARE PROGRAM?
No, at least not as Sanders envisions it. Medicare is not nearly as
generous as many people think. Between premiums (for doctor
and drug coverage), cost-sharing (deductibles and coinsurance)
and items Medicare does not cover at all (most dental, hearing
and eye care), the average Medicare beneficiary still devotes an
estimated 14% of all household spending to health care.
Sanders plan would be far more generous, including dental,
vision, hearing, mental health and long-term care, all without
copays or deductibles (which has given rise to a lively debate
about how to pay for it and whether middle-class families will
save money or pay more).
WOULD PRIVATE INSURANCE COMPANIES REALLY
DISAPPEAR UNDER SANDERS PLAN?
Probably not. Private insurers are fully integrated into Medicare,
handling most of the claims processing and providing supple-
mental coverage through Medigap plans. In addition, nearly a
third of Medicare beneficiaries are enrolled in private managed
care plans as part of the Medicare Advantage program.
Creating an entirely new federal claims processing structure
would in all likelihood be more expensive than continuing to
contract with private insurance companies. However, Sanders
makes it clear insurers in the future would no longer be the risk-
bearing entities they are today, but more like regulated utilities. H
Julie Rovner, the Robin Toner Distinguished Fellow, joined Kaiser Health Network
after 16 years as health policy correspondent for NPR, where she helped lead the
networks coverage of the passage and implementation of the Affordable Care Act.
A noted expert on health policy issues, Rovner is the author of a critically-praised
reference book Health Care Politics and Policy A-Z, now in its third edition.
FEBRUARY 2016
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 ANNUITY SAMPLER

JANUARY 1, 2016
Type Mkt. Comm.
Ratings Product SPDA Initial Guar. Bailout Val. Min. Street
Company Name Bests Fitch S&P (Qual./Non-Qual.) FPDA Interest Period Rate Surrender Charges (y/N) Contrib. (May Vary)

American Equity A- BBB+ A- ICC13 MYGA (Guarantee 5) (Q/NQ) S 2.70%* 5 yr. None 9%, 8, 7, 6, 5, 0 Yes $10,000 (Q) & 3.00%, age 0-75 &
$10,000 (NQ) 2.10%, age 76-80**
ICC13 MYGA (Guarantee 6) (Q/NQ) S 2.90%* 6 yr. None 9%, 8, 7, 6, 5, 4, 0 Yes $10,000 (Q) & 3.00%, age 0-75 &
$10,000 (NQ) 2.10% age 76-80**
ICC13 MYGA (Guarantee 7) (Q/NQ) S 3.15*% 7 yr. None 9%, 8, 7, 6, 5, 4, 3, 0 Yes $10,000 (Q) & 3.00%, age 0-75 &
$10,000 (NQ) 2.10%, age 76-80**
*Effective 1/4/16. Current interest rates are subject to change on new issues. **Commission may vary by issue age and state. See Commission Schedule for details
.
American General Life A A+ A+ American Pathway S 2.50%*a 5 yr. None 8%, 8, 8, 7, 6, 5, 4, 3, 2, 1, 0 Yes $10,000 (Q &NQ) 1.5% age 0-75
Insurance Companies Solutions MYG 2.65%*b .75% age 76-85
(*Guarantee Return of Premium) (Q/NQ) *CA Rates Effective 11/2/15. First year rate includes 1.50% interest bonus. a (less than $100K ; b (100K or more)

American General Life A A+ A+ American Pathway S 1.60%*a 5 yr. None 9%, 8%, 7%, 6%, 5%, 0% No $5,000 (NQ) 2.00% age 0-85
Insurance Companies Fixed 5 Annuity 1.80%*b $2,000 (Q) 1.00% age 86-90
(*Guarantee Return of Premium) (Q/NQ) *CA Rates Effective 11/2/15. Includes 2.00% 1st year bonus, 1.00% base rate subsequent years. a (less than $100K) b(100K or more)

American General Life A A+ A+ American Pathway S 2.00%*a 5 yrs. None 9%, 8%, 7%, 6%, 5%, 4%, 2%, 0% No $5,000 (NQ) 3.00% age 0-85
Insurance Companies Fixed 7 Annuity 2.20%*b 1.50% age 86-90
*CA Rates Effective 11/2/15. First year rate includes 4.0% bonus 1st year. a (less than $100K) b(100K or more)

American General Life A A+ A+ American Pathway
$5,000 (NQ) 2.20% age 0-75 F 4.15%* 1 yr. None 8%, 8%, 8%, 7%, 6%, 5%, 3%, 1% 0% No
Insurance Companies Flex Fixed 8 Annuity (Q/NQ)
$2,000 (Q) 1.70% age 76-80 *(includes a 2% interest rate bonus for first year)
1.20% age 81-85

*CA Rates Effective 11/2/15

Genworth Life & A A- A- SecureLiving Rate Saver S 2.80%* 7 yrs. None 9%, 8, 7, 6, 5, 4, 3 Yes $25,000 (NQ) Varies 0-85
Annuity Insurance Co. 2.65% 5 yrs. None 9%, 8, 7, 6, 5, ,0 *Effective 8/19/15. Based on $250K or more.

Great American Life A A+ A+ SecureGain 5 (Q/NQ) S 2.40% 5 yrs. N/A 9%, 8, 7, 6, 5 Yes $10,000 2.50% 18-80 (Q),
0-80 (NQ)
Effective 6/8/15. Includes .25% first-year bonus and is for purchase payments over $100,000. Escalating five-year yield is 2.40%. For under $100,000 first-year rate is 2.25%. Escalating rate five-year yield 2.25%. 1.50% 81-89 (Q&NQ)

Great American Life A A+ A+ SecureGain 7 (Q/NQ) S 2.65% 7 yrs. N/A 9%, 8, 7, 6, 5, 4, 3 Yes $10,000 3.50% 18-80 (Q),
0-80 (NQ)
Effective 6/8/15.. Includes 1.00% first-year bonus and is for purchase payments over $100,000. Escalating seven-year yield is 2.54%. For under $100,000 first-year rate is 2.55%. Escalating rate seven-year yield 2.44%. 1.50% 81-85 (Q&NQ)

Great American Life A A+ A+ Secure American (Q/NQ) S 1.75%* 1 yr. N/A 9%, 8, 7, 6, 5, 4, 3 No $10,000 5.75% 0-70
4.65% 71-80
*Effective 6/8/15.. Eff. yield is 2.77% based on 1.75% first year rate, 1.00% available portion of 10% annuitization bonus (available starting in contract year two) and 0.02% interest on available portion of bonus at the rate of 1.75%. 4.40% 81-89
Surrender value interest rate 1.75%. Accepts additional purchase payments in first three contract years. COM12255

The Lincoln A+ AA AA MYGuarantee Plus 5 S 1.55%* 5 yr. None 7%, 7, 6, 5, 4, 0 Yes $10,000 (Q/NQ)
Insurance Company **Rates Effective 2/1/16 for premium less than $100,000 and are subject to change

The Lincoln A+ AA AA MYGuarantee Plus 7 S 2.00%* 7 yr. None 7%, 7, 6, 5, 4, 3, 2, 0 Yes $10,000 (Q/NQ)
Insurance Company **Rates Effective 2/1/16 for premium less than $100,000 and are subject to change.

North American Co. A+ AA- A+ Gaurantee Choice (Q/NQ) S 2.60%*a 5 yr. None 10, 10, 9, 9, 8 Yes $2,000 (Q) 2.50% (0-80)
for Life and Health 2.85*b $10,000 (NQ) 1.875% (81-85)
*CA rates effective 1/5/16 a (less than $200K) b(200K or more) 1.25 (86-90)

Reliance Standard A+ A Eleos-MVA S 3.50%* 1 yr. None 8%, 7, 6, 5, 4 Yes $10,000 3.25%**
*Effective 7/28/15. Includes 1.50% 1st yr. bonus. Min. guarantee is 1.00%. **Reduced 20% ages 76-80, and 40% ages 81-85

Reliance Standard A+ A Apollo MVA (Q/NQ) S 4.45%* 1 yr. None 9%, 8, 7, 6, 5, 4, 2 Yes $5,000 4.00% to age 75**
Includes 2.00% 1st yr. bonus. Min. guarantee 1.00% **Reduced 20%, ages 76-80, and 40% ages 81-85. Effective 7/28/15

Symetra Life, Inc. A A A Custom 7 (Q/NQ) S 3.05%* 7 yrs. N/A 8%, 8, 7, 7, 6, 5, 4, 0 No $10,000 Varies
*Effective 11/17/15. 2.55% base rate with no guaranteed return of purchase payments. Plus 0.50% bonus for $250,000 and above.

8 | CALIFORNIA BROKER - CalBrokerMag.com - FEBRUARY 2016

 Orange County Association of Health Underwriters
Business Development Summit 2016

When: 16 Feb, 2016 7:00 AM - 3:30 PM

Location: Hilton Costa Mesa Investment $30

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Impact of Insurer & Hospital Vision 20/16:
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Breakout Group Sessions

HIPPA Privacy & Security: Business Associates Responsibilities & Liabilities Part II
Dorothy Cociu (1-Hour CE | Course: 331833)
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OCAHU is proud to host its annual trade show and education day. The 2015 OCAHU event drew more
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HEALTHCARE
Navigating the
101 and Beyond BY MICHAEL WOLFF
N
o, this is not a travel log recant-
ing my last vacation along the
beautiful California coast. In-
stead, its a basic guide to selling in
the large group (101 and over) market
along with some reflections on recent
trends.
Brokers who are not selling in this
space may want to think again. Agents
are finding that there are more large
groups with no prior coverage than
they may have thought. The Employer
Shared Responsibility rules within the
ACA have brought these groups out of
hiding as they face penalties for not of-
fering coverage that is affordable and
of minimum value.
Although the small group market
continues to experience many chang-
10 | CALIFORNIA BROKER
es that require a brokers guidance,
there is more opportunity than ever
to help large employers make sound
decisions for their companies and em-
ployees. There are several differences
between marketing a small and a large
group. Brokers should keep these
in mind as they equip themselves to
bring the right solutions to the table.
DO YOUR HOMEWORK
A broker who is developing a large
group request for proposal (RFP) for a
prospect is a bit like an attorney who
is preparing for a trial. The research,
attention to detail, and time spent de-
veloping your case have a direct effect
on the outcome. So, not only do your
homework, but also you need to start
- CalBrokerMag.com -
A BASIC GUIDE TO
SELLING IN THE
LARGE GROUP (101
& OVER) MARKET
early not days or weeks, but months
ahead of the requested effective date.
Depending on the size of the group, 90
to 100 days is a good benchmark.
The process of formulating a large-
group quote is quite different from that
in the small-group market. Most nota-
bly, the underwriting of a large group
is done up front before a quote is re-
leased by a carrier. This means that
the time spent gathering an accurate
census and the required information/
documentation happens before you
even see a rate. (Yes, health condi-
tions play a large part in determining
rates as do current and anticipated par-
ticipation, age, gender, home zip code,
and industry). In general, the more
information that is gathered, includ-
ing claims and rate history, the greater
the chance there is of getting the best
possible rates.
Successful brokers know that the
key to a large-group strategy that
meets budgetary and coverage needs
is asking the right questions of their
prospects and listening carefully to
the answers before they develop
a proposal. The ACA has created a
whole new set of questions that need
to be answered to determine who is
eligible for coverage and whether an
employer is part of a larger population
by virtue of common ownership and/
or tax law. Many times, the composi-
tion of a group may not be what you or
even the owner thinks. At this stage, a
large group qualifying questionnaire or
checklist can be your greatest asset.
CHECK YOUR FACTS
Once you have a complete census
for your prospect and have gathered
information about current coverage
FEBRUARY 2016
The Highway Has Changed,
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HEALTHCARE
for groups who have a plan in place
(renewal, benefit summaries, etc.),
put on your underwriter hat and look
for details that dont add up or simply
dont make sense. These include dis-
crepancies between the renewal and
the census, invalid dates of birth and/
or home zip codes, and the absence
of any large claims data. It is best that
you find them before you submit your
RFP to the carrier rather than waiting
until later in the game when they are
requested of you. This also may help
your chances of getting a quote when
more than one broker presents the
group to the carrier a.k.a. duplicate
activity. Carriers will be more willing
to release a quote when the facts are
clear and complete.
PREPARE YOUR STRATEGY
A very successful large group agent in
the Inland Empire once told me that an
RFP without a sound strategy is tan-
tamount to throwing spaghetti against
the wall to see whether it will stick.
And any of the best large group car-
rier reps will always ask for the story of
why the group is shopping (better ben-
efits, lower rates, ACA compliance)
and what you believe to be the best
combination of products to meet their
needs. Be prepared to answer these
all-important questions by using what
you learned during your initial pros-
pect meetings, including any special
circumstances surrounding the group
(e.g. controlled group status, large vari-
ances in employee wages).
There are a lot of good options out
there for large groups. Your prospect
may want to consider a fully insured
program, partial or full self-insurance
and/or a minimum essential coverage
(MEC) plan combined with critical ill-
ness and hospital indemnity plans.
Self-insurance is on the rise, as
Employer Shared Responsibility rules
leave companies in search of an afford-
able option to increase participation in
the plan. With this option, remember
to always do your due diligence before
you select a claims payer or third-party
administrator (TPA).
Groups looking for a bundling of em-
ployee benefits and additional servic-
es such as HR, compliance, workers
compensation or payroll alongside em-
ployee benefits may want to consider
12 | CALIFORNIA BROKER
PEOs or private exchanges. Many of
these services can also be added to
core medical offerings through a bun-
dled technology solution.
The service and account manage-
ment strategy is of equal importance
when marketing large groups. Who is
the point person? Who is the service
person? Where does the buck stop?
These important staffing decisions
cannot be overlooked when managing
the expectations of a large employer.
Finally, be prepared with a plan of how
you are going to generate revenue. Will
you adopt a fee-based model or ask that
commissions be built into the rates?
You are ready to submit your RFP to
the carriers of your choosing when you
have examined all of the angles and
anticipated most of the questions you
may be asked during the underwriting
process.
BE READY WITH PLAN B
What if, despite your best efforts as
outlined above, the quote comes back
and you find that your prospect is not
a good fit for your proposed strategy?
If your prospect has not had prior cov-
erage and, like many, is striving for
ACA compliance, perhaps a two-year
strategy is in order. Employers that
have never paid a portion of their em-
ployees benefit premium are suffering
from sticker shock even when present-
ed with very competitive rates. Simi-
larly, employees who are contemplat-
ing the purchase of medical insurance
for the first time have a very different
understanding of affordability than that
which is derived from the calculators.
As agents try to balance all of the
moving pieces to keep their prospects
away from penalties, provide employ-
ees with meaningful benefits and not
break the budget, many find them-
selves putting one solution in place for
year one, with an end goal of achieving
a different solution in year two.
Remember, too, that in addition to
having a second strategy, coverage op-
tion, or funding mechanism in mind,
there may be room for negotiation with
carriers when it comes to holding rates
for the next effective date, reducing
commission in order to lower rates,
or writing a short or long contract to
achieve the groups ideal effective date
during year two.
- CalBrokerMag.com -
EXPLAIN THE OPTIONS
THOROUGHLY
Business owners and their staffs
know their industries, for certain, but
often they neither speak the language
of employee benefits nor have a realis-
tic idea of what benefits cost. Because
carriers can and do re-rate groups if as-
sumptions regarding the census, par-
ticipation or the health of the group are
different than the actual enrollment,
your thorough review with the pros-
pect must include the what-ifs.
You know your prospect better than
anyone does. If you know that the
decision-maker may take a while mull-
ing over the options, dont expect to
be able to close the deal in a couple
of weeks. Avoid putting the group
through a rushed enrollment only to
find out that you cannot meet partici-
pation or have missed the cutoff date
to submit your case.
READY, SET, GO
New to selling in the large group mar-
ket? General agencies employ spe-
cialists who are skilled at guiding you
through each of the steps above in
order to help you complete the sale
and provide your clients with the best
products and services for their particu-
lar needs and budgets.
When you have done an outstanding
job for your prospects, remember to be
actively involved throughout the year
with any and all that turn into clients
and revisit next year those you were
not able to convert. Remember, too,
that business owners know other busi-
ness owners and decision-makers, so
dont forget to ask for referrals to keep
your large group pipeline full. H
Michael Wolff is president of Dickerson Employee
Benefits, a general agency serving brokers and their
clients for the past 50 years. A graduate of Germanys
Albert Ludwig University of Freiburg, Wolff holds a law
degree with qualification as a superior court judge in
Stuttgart. Before joining Dickerson in 2005, he was
recruited into the German Diplomatic Service where
he headed the legal, press and cultural divisions in
several countries, ending with a post that brought him
to California with the Los Angeles German Consulate.
Dickerson Employee Benefits is headquartered near
Dodger Stadium in Los Angeles and offers employee
benefits and workers compensation products, con-
cierge service and technology tools. Wolff can be
reached at michael@dickerson-group.com.
FEBRUARY 2016
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HEALTHCARE
OPPORTUNITIES
ABOUND FOR
AGENTS IN THE
NEW LARGE
GROUP MARKET
BY NEIL CROSBY
T
he year 2016 is a year of change
for Californias smaller large-
group employers. As you know,
the ACA has changed every-
thing in the minds of many
employers that fall into the
51+ size margins. Employ-
ers with 51 to 100 employ-
ees had been in the mid-
market, large-group segment.
But they are preparing for the
fact that they are
now small-group
employers. Or
they kicked the
can down the
road one last time
and will have to deal
with the new provisions at
the end of 2016.
Meanwhile, large-group
employers are still trying to
determine what the ACA
provisions mean to them.
They are looking at having
to comply with the pay-or-
play employer mandate that
requires them to provide minimum-
essential coverage to employees,
comply with new IRS tax reporting
documents, and comply with many
other ACA provisions. What is certain
is that large employers, throughout
California, are searching for meaning-
ful, relevant information to determine
what they need to do moving forward.
They need their agent/broker to pro-
vide information and direct them down
the path of health care reform, such as
giving verbal advice, providing articles
14 | CALIFORNIA BROKER
and publications, and providing links to
valuable resources. Agents and bro-
kers also offer professional relation-
ships that come from their experience
and connections.
All of the ACA provisions suggest
that agents and brokers have new
opportunities to retain and grow their
large-group business, including the
IRS requirements as well as the new
size guidelines for large employers.
The fact that large groups can no
longer be declined for pre-existing
health conditions is a huge plus, which
opens many doors. Another opportu-
nity is that carriers are allowing lower
participation, so employers who have
not been able to meet normal partici-
pation requirements may now be able
to qualify for a large-group plan.
As you are aware, the ACAs Cadil-
lac Tax has been delayed another two
years, which will push it away another
four years from now. There is a good
chance that it will be repealed com-
pletely. Employers who were worried
about having more expensive plan
designs neednt worry about that for
the time being. Thats great news for
- CalBrokerMag.com -
agents and brokers. They no longer
have to help clients select reduced
benefit plans for employees and their
dependents in order to stay under
the allowed premium maximums and
avoid the 40% excise tax on premium
amounts over the allowed thresholds.
There is another provision that af-
fects large-group verses small-group
premiums. Large group claims ex-
perience is subject to an 85% MLR,
verses the 80% MLR for small group
and individual. Of course, all of this is
borne by the carriers, not the employ-
ers, but it leaves carriers a lower mar-
gin for error with many large-group
employers. It will give carriers more
flexibility with rates in the expanding
small-group market.
Overall, its increasingly clear to all
employers, whether small group or
large group, that they need help. They
need their professional agent/bro-
ker. They are keenly aware that
they need assistance from a
professional someone who
deals with the ACA on a daily
basis, can guide them without
crossing the line of providing legal
advice, and help them go back
to running their busi-
ness when they have
the confidence that
their benefit needs
are in order. Many
employers have told
me that their confidence
rises tremendously if their advi-
sor is a member of a professional
association, such as the Califor-
nia Association of Health Under-
writers (CAHU) or the National
Association of Insurance and
Financial Advisors (NAIFA). Em-
ployers have found that agents and
brokers who are members of these
great organizations are more prepared,
receive more information, and can of-
fer more pertinent advice than can
most of those who are not members.
The year 2016 will truly be a year of
growth for agents and brokers with lim-
itless opportunity. Keep reading, learn-
ing, and investing in yourself for your
future; it will pay off big time for you in
this ever-changing marketplace. H
Neil Crosby is director of Sales for Warner Pacific
General Agency.
FEBRUARY 2016

Win Today or Relevance Tomorrow
HOW THE POWER OF CONSULTATIVE SELLING CAN HELP YOU GROW YOUR BUSINESS
M
any brokers and agents in
California are meeting with
their sales managers to kick
off a whole new year of big, intimidat-
ing goals. We all have different goals,
whether its achieving a giant sales
number, learning a new product, or
adding a new territory. This article
will give you tips for weaving consul-
tative selling into your daily conversa-
tions to become more valued among
clients and prospects to meet your
2016 goals.
WHAT CLIENTS WANT
Its pretty simple why our clients
chose us as their agent or broker.
They want our expert help. They are
too busy to do the research, compare
pricing, and stay on top of legislation;
they expect their agent or broker to
do it for them.
Our clients also expect us to un-
derstand their business. We need to
know their operations, their competi-
tors, their pain points, and their suc-
cesses. As their agent or broker, its up
to us to know their financial and busi-
ness structure, their challenges, their
competitors, and their goals.
Consider helping your clients from a
holistic business perspective. For ex-
ample, are they trying to fill a specific
position? Help them network. Are they
running into a contractual challenge?
Recommend legal counsel. A little ef-
fort will create trust, and enhance the
business relationship, which will pay
off for everyone in the long run.
ASK QUESTIONS
How do you become more consulta-
tive? Ask questions beyond what you
need to get your job done. Find out
what problems your client is trying to
solve today and in the next three to
five years. What pain points are the cli-
ents problems creating? Do the prob-
lems span multiple departments or lo-
cations? Are the problems increasing?
Are there competing issues?
FEBRUARY 2016
HOW DOES YOUR CLIENT OR
PROSPECT MAKE DECISIONS
Who is the decision-maker? Your con-
tact may be in human resources or fi-
nance, but are there other stakeholders
in the mix? Since every company is dif-
ferent, make sure that your sales pre-
sentations speak to the full audience
ahead of time. It is 100% acceptable to
ask who will be reviewing your propos-
als. It is 100% acceptable to ask if there
are questions or areas you should cover
in order to satisfy all parties, even those
who wont be present at your meeting.
Know your client or prospects cul-
ture. When you present a solution, il-
lustrate how it ties into their culture.
Doing so will strengthen your offering,
and show that you not only understand
their culture, but also that you care
about why it is critical to their success.
Thats the sign of a true business part-
ner, not just a transactional vendor.
COST VERSUS VALUE
In any industry, most buyers fall into
two categories: those who value cost
and those who value quality and ser-
vice. The problem with buyers who val-
ue cost is that there is always a lower
cost option. Always. Clients who only
value cost will leave you at renewal if a
cheaper option comes along.
Be respectful of your own time,
and seek clients who are looking for
a long-term business partner. How?
When you present your solution, show
that youve done your research. Show
them the math, not only for the sale,
but also to show how it could save
money in the long run or for employ-
ees. Show the additional benefits of
your solution. Maybe its a tax benefit,
increased employee communication
and engagement, or something that
could help human resources improve
morale. If possible, offer evidence in
favor of your solution. If you are of-
fering something that will save em-
ployees money, demonstrate it with a
graph or calculator.
- CalBrokerMag.com -
SALES & MARKETING
BY JIM MCCABE
RESEARCH IS CRITICAL
TO UNDERSTANDING
Adjust your message to your clients
needs. Ask what is possible before
engaging. For example, if they say
the budget is $30,000, dont present
something that is $60,000. If your cli-
ent needs bilingual service, deliver that
option. Show that you are listening.
Secondly, use language thats con-
sistent with your clients style. If they
refer to employees at teammates, you
should too. If they refer to locations as
storefronts, you should too. Make it
easy for them to translate your propos-
al into their terminology to share within
their organization.
VALIDATE BEFORE OFFERING
YOUR SOLUTION
Do your fact-checking. Ten minutes
of your time could make a huge differ-
ence in your presentation. Also, inves-
tigate any internal politics. Is the issue
the same in everyones eyes? Since
your proposal may be shared across
departments, make sure that you are
sensitive to the whole organization.
KNOW YOUR STRENGTHS
Dont try to be all things to all people.
When you need help, find partners
who provide that expertise. Dont try
to fake it; it will just backfire. Maybe
that partner will remember you next
time and give you an opportunity.
GROW WITH YOUR CLIENTS
Keep up on industry trends and forward
meaningful information to your clients,
whether its a news article about them
or a competitor or about legislation. Join
LinkedIn groups to get relevant news
that helps you and your clients. Once
you create value, you will be valued, and
your clients will be more likely to stay
with you and refer you to their peers. H
Jim McCabe is a vice president of Sales Strategy for
Sterling Administration. For more information, visit
Jim.mccabe@sterlingadministration.com.
CALIFORNIA BROKER | 15
 GENERAL AGENCY
General Agency View From the Top
HOW HAVE GAs CHANGED OVER
THE PAST FEW YEARS?
David L. Fear, Sr., president and
CEO of Shepler & Fear General
Agency: The GA market in California
is different. In California, GAs have had
a strong role in delivering competing
health care products for many years.
However, like other industries, there
have been acquisitions and mergers,
which will continue as you see fewer
GAs in the California marketplace.
Some larger GAs have expanded with
a multi-state presence while others
remain as strictly regional. The big-
gest changes I see are that GAs are
not just product wholesalers anymore,
but have taken on more of a consulta-
tive role with their clients being agents
and brokers who no longer get the
support from the carriers that was pro-
vided in the past. GAs have expanded
their services into areas where carriers
have retreated due to cost constraints.
California is fortunate to have multiple,
competing GAs in this market, which
bodes well for their agent clients.
Dennis Fallon, senior vice president,
Insurance Field Sales and Services
for BenefitMall: To meet the changing
needs of their brokers, general agen-
cies have broadened their capabilities
16 | CALIFORNIA BROKER
By LEILA MORRIS
In this article, executives from Californias leading general agencies give
their take on critical trends in the health and employee benefit marketplace.
through diversified product and ser-
vice offerings. These additional offer-
ings are designed to increase agent
revenue streams, compete in the
marketplace, and address employee
and employer benefit needs to pro-
tect health benefit books of business.
Many general agencies are building
proprietary tools and services for their
brokers and employer groups while
others are partnering to create best-
in-class offerings to meet the needs
of brokers and employers. As todays
business environment continues to
evolve, general agencies are expand-
ing their geographic footprint. The
ability to provide not only a diversified
product and service offering, but also
multi-state support, is now a base re-
quirement to provide the support that
brokers and their clients expect.
Jessica Word, president of the Word
& Brown General Agency: The Af-
fordable Care Act (ACA) has undeniably
shaped our service model, putting an in-
creased emphasis on ACA compliance.
The transition of 51- to 100-employee
groups to the small-group market
has increased demands for products
and services that have been tradition-
ally reserved for the mid-sized market:
composite (tier) rating, rich coverage
options, customized benefit solutions,
integrated billing, and list enrollments.
That has led to these becoming require-
ments across our customer base and,
like our brokers, GAs have become part
insurance sales and support and part
technology developer.
Jim McCabe, vice president of Sales
Strategy for Sterling Administra-
tion (McCabe is providing answers as
they relate to a TPA, not a GA): Over
the past few years, consumers across
all types of businesses are doing busi-
ness via mobile. Weve seen a big in-
crease in our mobile customers. Weve
seen an uptick in our Spanish-speaking
- CalBrokerMag.com -
customers. We are also increasingly
being asked to provide more back-
shop support in compliance, technol-
ogy, and client communication to the
brokerage community.
Ken Doyle, executive director Sales
for LISI: Despite minor idiosyncrasies
here and there, the value proposition
of a GA basically remains the same.
The bigger question is how will they be
changing in the upcoming years, and
what will they choose to implement?
Colleen M. Gimbel, vice president
of Marketing/Recruitment/Compli-
ance for Berwick Insurance Group:
One of the biggest changes, over the
past few years, is the amount of com-
pliance information that agents are re-
quired to understand. Agents want to
know what they can and cannot do,
which increases the need for compli-
ance staff and training programs.
Jennifer Lisanti, director of Sales
with beere&purves: While general
agents continue to be actively involved
in marketing and sales of employee
benefits, their role in providing ongo-
ing, day-to-day service for existing
business has increased considerably.
Compliance has become more com-
plex and burdensome for employers
as a result of the ACA, along with the
constant introduction of state and fed-
eral regulations. General agents are
providing agents and agencies with
the resources and contacts to ensure
that they are informed on these mat-
ters. Employers are also looking for
ways to simplify benefits and HR ad-
ministration through technology. With
the proliferation of online HRIS op-
tions, general agents have respond-
ed by researching these systems so
agents can recommend viable solu-
tions to their clients. General agents
have introduced their own technology
solutions on behalf of agents for on-
FEBRUARY 2016
 ben e fit bro ker

\ ben- -fit bro-k r\

noun
A person who advises businesses
on employee benefit solutions.
Including, but not limited to:
medical, ancillary, benefits administration,
payroll, HR, tax/ACA compliance.

The definition has changed.

How will you respond?

Concord (800) 354-6926 | Orange (800) 966-3791 | Woodland Hills (800) 877-0101 | www.benefitmall.com
 GENERAL AGENCY
line enrollment, census collection, and
more, which improves data quality and
expedites group enrollments.
Michael Wolff, president of Dicker-
son Employee Ben
efits: During the
past few years, and
particularly since the
signing into law of
the ACA, GAs have
become centers of
education for agents
who pass the infor-
mation along to their clients. This is
particularly true with compliance and
legislation. GAs, like their agent cus-
tomers, are taking a more consultative
approach to working with employers
and individual clients. This often takes
the form of a total-solution proposal
that includes traditional and expanded
product and service offerings.
Jeff Papenfus, senior vice presi-
dent, Sales of Warner Pacific Insur-
ance Services: Over the past several
years, GAs have been doing more ad-
ministrative tasks for carrier partners.
With the implementation of healthcare
reform, broker education has become
critical. Vetting and partnering with
outside vendors for online enrollment,
HRIS, ACA, and ERISA compliance,
COBRA, travel insurance, and so on,
has taken that burden off the brokers
and their clients.
WHAT ARE THE MOST IMPORTANT
MARKET TRENDS THAT AGENTS
NEED TO BE AWARE OF THIS YEAR?
Dennis Fallon of BenefitMall: We
see three primary trends that are af-
fecting agents most heavily in 2016.
The benefit arena now reaches well
beyond the traditional broker market
with employee workforce services
and technology companies vying for
a piece of market. These competitors
are luring clients away through the
promise of free technology and other
value-added services. ACA compli-
ance is confusing consumers who are
often not savvy enough to be aware
when a broker-of-record is occurring.
Many employers will seek various on-
line workforce solutions and end up
with a new broker-of-record without
even being fully aware it. When this
18 | CALIFORNIA BROKER
happens, employers lose the valuable
expertise of their local broker. The con-
solidation of health benefit carriers has
expanded and can be seen in banking,
payroll services, and human-resource
management. With these consolida-
tions, we see diversification in product
portfolios, larger marketing spending,
and more growth in retail sales, which
often competes directly with the bro-
ker channel. Finally, for group agents,
there is a change in the small-group
definition in California to two to 100.
The continued creativity around multi-
carrier and multi-product offerings will
be a battle on the small-group front
as brokers strive to provide a compre-
hensive solution at an affordable price
with the service that clients are accus-
tomed to receiving.
Jennifer Lisanti of beere&purves:
Transitioning 51 to
100 groups into small
group products will be
an important focus in
2016. The small-group
market presents en-
tirely new rates, rules,
and product offerings
to agents who have
not focused in the under-50 market.
Working with a knowledgeable gen-
eral agent will provide a considerable
advantage in getting up to speed
quickly. Employers want to minimize
their management systems and points
of contact through an online HR system.
To remain competitive, agents are offer-
ing their own value-added services or
at least, they are becoming knowledge-
able enough to direct clients to the most
viable options. Employers are turning to
their insurance agents for help with HR-
related issues that are outside their tradi-
tional scope of business. General agents
provide much needed help with these
client demands, but agents also need to
stay up to date on their clients issues
and challenges, including vendors and
secondary resources to provide further
guidance.
David L. Fear, Sr., of Shepler & Fear:
The number one issue, this year, is
the full implementation of the ACAs
Employer Shared Responsibility man-
date. The government has not done
a very good job of communicating
- CalBrokerMag.com -
things to employers, which will show
up as large employers struggle to file
their 1094/1095-C reports this spring.
Theyll soon face the IRS and have to
provide proof that they have been offer-
ing affordable coverage to their eligible
employees that meets a minimum-val-
ue standard. Agents need to be at the
front of this new and confusing process.
The second issue is how agents will
provide solutions to reduce the cost of
their clients health insurance benefits.
Obviously, the cost of insurance cov-
erage has not come down. Many em-
ployers are getting closer to throwing
in the towel and dropping their group
health plan. Its become unaffordable.
Employees are not happy about their
high out-of-pocket costs under the new
ACA pricing and benefit requirements.
Agents need to provide solutions now.
Jeff Papenfus of Warner Pacific:
Since we just got through moving the
one to 50 groups into ACA-compliant
plans, the next focus should be on the
51 to 100 groups. Many of these groups
took renewals in December to delay
moving to ACA-compliant plans. Does
that sound familiar? The biggest chal-
lenge is that most of these groups will
have to go to an age-rated plan from a
composite-rated plan. However, a fair
percentage will actually save premium
dollars by moving into the new plan de-
signs and rating structure. While premi-
ums may be significantly higher or low-
er under the new ACA rating, there will
be employees in each group who are
winners and losers in regards to their
personal premiums. The other trend we
are likely to see, this year, is that car-
riers and brokers are working together
to move groups from the 12/1 renewal
date. I think all of us would agree that
renewing 80% of all business in a two-
month period is not good for GAs, carri-
ers, brokers, or their clients.
Jessica Word of Word & Brown:
Brokers would do well to get very cre-
ative this year. The old standard of sell-
ing an out-of-the-box solution is gone,
or will be soon. Multi-carrier packages
with unique funding options are win-
ning the marketplace as they offer
the most diverse coverage, providers,
and prescription benefits for a large
organization to meet the needs of its
FEBRUARY 2016

many constituents. Offering combined
solutions will keep insurance rates
low for customers while quality and
satisfaction remain high. Brokers can
deliver customized solutions to meet
each employees medical and finan-
cial needs by allowing them to choose
their own options within a set of car-
riers, plans, and coverage. The de-
mand for technology is growing, too.
If brokers dont have a solution and are
speaking to clients about it, they need
to find one (or more) to meet their cli-
ents needs. Or, they can partner with
a GA that is offering support in imple-
menting and running cases through an
online solution.
Jim McCabe, Sterling: The changing
legislative landscape
is one of the most
important things to
watch this year. The
Cadillac tax was de
layed, and more
changes are on the
way. A majority of
employees may have
less disposable income to handle larger
deductibles and out-of-pocket costs
with narrow networks and less choice,
and high deductible plans.
Ken Doyle of LISI: It will be another
interesting year with the second half of
the small-group market (51 to 100) hav-
ing to move. Being a highly politicized
year, more legislation will be introduced
in hopes of easing some of the ACA
pain. I also think that we will see a move-
ment to get viable software technolo-
gies in place before the fourth quarter.
With this shift in technology, it would be-
hoove you to assess whether you have
the aptitude, the resources, and the agil-
ity to keep up with all the trends. If you
cant respond with a vehement yes to cent cuts in carrier commissions.
these concerns, consider hiring some-
one or partnering with a resource to help
you take it to the next level. Re-evaluate
your workforce. Agents need a service
team that can keep up with todays pace
with tomorrows forward thinking men-
tality. Agents should be looking at the
concept of all-in-one-place platforms,
such as concierge services.
Michael Wolff of Dickerson: Agents
continue to look for ways to differenti-
FEBRUARY 2016
ate themselves. In 2016, it will be key
to access integrated technology and
compliance tools while keeping an eye
on products and services beyond the
traditional. For example, dont overlook
including voluntary benefits for small
and large employers. Agents dont have
to know all the answers. They just need
to know where to go for information
and creative alternatives.
DO YOU SEE ANY SPECIFIC TRENDS
RELATED TO THE SMALL GROUP
VERSUS THE BIG GROUP MARKET?
Michael Wolff of Dickerson: It will be
important to be sensitive to the chang-
es affecting mid-size groups that are
becoming small groups. These chang-
es include the move to small group
rating and underwriting guidelines, as
well as the employer shared respon-
sibility requirements that are new to
groups of 50 to 99. These groups will
look to agents to educate them on the
differences between large and small
group plan designs. They will seek the
account management-level service to
which they have become accustomed.
Jessica Word of Word & Brown:
With mid-sized employers (with 51
to 100 employees) moving into the
small-group marketplace, we are wit-
nessing a blending of requirements
in our small group product portfolio.
Benefit-administration systems have
typically been reserved for larger cli-
ents who could afford higher-priced,
integrated functionality involving pay-
roll, benefits, and billing. But cost-
effective solutions are emerging to
simplify the administrative burden of
tiny groups. We saw significant diver-
sification of our broker-customers in
2015 into new products and additional
marketplaces to make up for the re-
carriers, which provides access to a
Brokers who have been the servicing
agent on a single in-force policy are
looking to increase their reach into a
clients coverage portfolio to enhance
and further bind the relationship.
Weve seen brokers exit the market-
place some leaving the industry and
some selling their books of business
to rivals and larger agencies. That
consolidation has reduced our active
broker population by roughly 5%, a
trend we anticipate will continue.
- CalBrokerMag.com -
GENERAL AGENCY
Jim McCabe, Sterling: The need for
education in all things benefit-related
has to be more focused. All of the
voluntary products, retirement, and
tax efficient savings accounts require
more information about individual risk
tolerance as well as short- and long-
term goals. Companies have to pro-
vide more insight, and address em-
ployees financial goals based on their
life events.
David L. Fear, Sr. of Shepler & Fear:
Smaller employers are
looking into alterna-
tive funding, such as
HRAs, HSAs, and
FSAs to help curb the
cost of health care
and health insurance.
Many large employers
have done it success-
fully. Now its time for small employ-
ers to implement some of these ideas.
Even though small employers are not
subject to the ACA employer mandate,
they still have to deal with other things
out of their control. Small employers
are struggling to deal with health insur-
ance, which is one of the most regu-
lated products in the United State. They
are going to look to their trusted advisor
for solutions on how to comply with the
law and how to reduce costs while still
attracting and retaining good workers.
If the employer-based system remains,
its up to agents to help clients work
through these challenges.
Jennifer Lisanti of beere&purves:
The biggest trend we see is the move-
ment to private exchanges in the
small-group market. The private ex-
change model allows small groups to
implement cost controls through de-
fined contribution and offer multiple
significantly larger pool of providers.
This simply does not exist in the mid-
market segment (100+). Another trend
is the onslaught of fourth-quarter re-
newals. This year, it will affect an even
larger number of renewals due to the
51 to 100 groups taking advantage of
early renewal opportunities in 2015.
This trend will continue to create quot-
ing, enrollment, and approval challeng-
es for agents and agencies servicing
these groups.
CALIFORNIA BROKER | 19
 GENERAL AGENCY
Dennis Fallon of BenefitMall: Small
groups are weighing the value of con-
tinuing to offer benefits versus the cost
and compliance burden. Large groups
face the heavy costs of having to offer
benefits to everyone when they may
have only covered a portion of their
population. The compliance burden
may be heavier on the small group
sector since they dont often have HR
departments to take on the burden. It
falls on owners and managers who can
become overwhelmed by the task.
WHAT THINGS HAVE YOU NOTICED
THAT SET APART SUCCESSFUL
AGENTS?
Jeff Papenfus of Warner Pacific: Our
broker partners have
a passion for what
they do. They are
adapting to a new
marketplace and be-
coming more knowl-
edgeable. They are
evaluating what they
offer and looking to
technology tools with personalized
service to grow their business.
Michael Wolff of Dickerson: Agents
who have truly embraced consulta-
tive selling and the latest technolo-
gies are standing out among their
contemporaries. These agents are
educators as much as they are bril-
liant salespeople. They use all avail-
able communications vehicles to stay
in front of their clients face-to-face,
telephone, webcasts, social media,
print and email to deliver meaning-
ful information to their multi-genera-
tional client bases.
Dennis Fallon of BenefitMall:
Agents who are
evolving with the
trends are the most
successful. To com-
pete in our chang-
ing industry, agents
must be confident,
committed, and
passionate about
providing the best benefit cover-
age possible, and stay relevant to
employers and the management of
health benefits. Agents also need
to provide a complete human capital
20 | CALIFORNIA BROKER
management offering that ensures
that competitors do not compromise
their health benefit book of business.
No matter how valuable the benefit
consultation may be, an employer
group can be easily stolen in 80%
of scenarios when another provider
offers a comprehensive workforce
solution. Successful agents are con-
stantly bringing new solutions to
their clients, educating themselves
on market trends and new products,
embracing technology solutions, and
maintaining a level of service to be
responsive to the needs of new and
existing clients.
Jennifer Lisanti of beere&purves:
Agents who are open to change in
our increasingly complex industry will
have an advantage over those who do
business as usual. Agents who avoid
technology trends and compliance is-
sues expose themselves to competi-
tion and their clients to unnecessary
risk. Successful agents stay informed
of carrier product offerings and rules,
as well as state and federal legislative
issues. They are prepared to inform
their clients of any positive or negative
issues. Successful agents continu-
ally prospect for sales opportunities,
add new lines of coverage to existing
clients, introduce product lines, and
demonstrate the value they bring to
the agent-client relationship to ensure
client retention.
Jessica Word, Word & Brown: The
best brokers like the
best and most suc-
cessful businesses in
any maturing indus-
try are adaptable
and flexible. They
meet new strains
on their resources,
client requirements,
and government regulation without
resistance, always looking for and vet-
ting solutions that deliver meaningful
results. They are innovative, looking
for gaps in the solutions their competi-
tors provide, and delivering meaning-
ful ways that attract customers and
generate referrals. Finally, successful
brokers form deep partnerships with
organizations that fulfill these needs,
adapt to changes, and are responsive
- CalBrokerMag.com -
to requests for support. They pass the
labor onto service partnerships while
maintaining their focus on their own
business and on the growth of their
sales opportunities.
Ken Doyle of LISI: How do you
become scalable? Utilize partners
through this transformation and build
your sales/service model to meet the
new consumers needs through tech-
nology, and create an experience that
provides value. Cutting-edge agencies
understand analytics and how the in-
formation can help provide financial
solutions. These agencies are moving
from descriptive (what happened) to
diagnostic analysis (why it happened),
to predictive (what is likely to happen),
and to prescriptive (determining the
right outcome). This is where you will
see movement in the types of prod-
ucts offered in the market. A sharper
customer targeting approach and a
variety of wellness strategies will shift
the discussion for the agent in becom-
ing a preventative risk advisor.
Jim McCabe, Sterling: Successful
agents have a personal touch and at-
tention to detail. They also understand
where our client brokers are in their
life-cycle. Not every firm wants the
same things.
Colleen M. Gimbel of Berwick In-
surance Group: Its knowledge, train-
ing and confidence. An agent who is
confident with the material they rep-
resent will be much more successful.
It goes without saying that an agent
needs to know the material in order
to sell a plan. Many agents have the
knowledge, but they dont feel confi-
dent with the information. Every agent
needs a different amount or type of
training to feel comfortable enough to
sell a Medicare plan.
David L. Fear, Sr., of Shepler & Fear:
We see a group of younger agents who
approach this business in a very smart
way using tools that make them
more efficient with their time. We see
a lot of younger agents going out and
sharing ideas that employers have not
heard before. They are demanding
that our industry respond better to the
needs of their clients through online
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 GENERAL AGENCY
capability, simplification of processes,
and ease of communication. Success-
ful agents think out-of-the-box and
communicate more effectively with
their clients. Many GAs can assist in
providing these value-added services.
WHAT KINDS OF GA SERVICES ARE
MOST VITAL TO TODAYS AGENTS?
Jessica Word, Word & Brown: Two
key areas affect our brokers today:
compliance and technology. ACA
compliance is a maze. Each scenario
creates a different compliance require-
ment. Mandates are repeatedly re-
vised, shuffled, and updated. Brokers
have to align themselves, very quickly,
with emerging technology, find the so-
lutions that meet their clients diverse
needs, and learn to operate and imple-
ment these solutions for their groups.
Ken Doyle of LISI: To understand what
is vital to the agent,
you need to look at
the end-user (con-
sumer). What are
they demanding in
the way of customer
experience and me-
dium of information?
You are now hearing
that we are experiencing disruption in
our industry. This is true, but most peo-
ple think that disruption is in the soft-
ware being introduced that provides
benefit administration or HRIS linked
to payroll, time and attendance, and/or
compliance, etc. Well, its much more
than that. Think about customer experi-
ence. How do they interact with tech-
nology and the information they can
get at their fingertips? You will see the
adoption of the Internet of things and
other new technologies. But this follow-
the-leader paradigm of the industry will
mean that any edge that a GA has will
disappear quickly. Sure these technolo-
gies are impressive, even evolutionary,
and long over-due in our industry. Still,
they are not disruptive, nor are they rev-
olutionary. Revolution comes from prod-
ucts and services that do something
with technology to create a better expe-
rience through personalization. We have
a whole new generation of consumers
moving into the workforce who will
not accept how we have always done
things. This generation was immersed
22 | CALIFORNIA BROKER
in technology, and embraced it seem-
ingly before they were even wheeled
out of the maternity ward. So it will be
vital to help the agent comprehend and
deliver to this new and rising population
of consumers while keeping in touch
and relevant to existing clientele.
Jim McCabe, Sterling: Agents want
personal customer service for their
clients, as well as easy online access
to check balances and plan renewals.
Knowledge-based support, original con-
tent to share, sales education, and chan-
nel support are among the top requests.
Colleen M. Gimbel, Berwick Insur-
ance Group: Agents
want compliance
information that is
digestible and imple-
mentable in their
day-to-day activities.
They also need ac-
cess to sales support
staff. It is vital for an
agent to be able to contact the FMO
whenever they have questions.
Jeff Papenfus, Warner Pacific: The
most common need is probably quick
access to information. Because of fre-
quent changes to carriers products,
plan designs, networks, and compliance
requirements, agents need to find the
most up-to-date information quickly and
preferably in one place to be efficient.
With new technology-centered brokers,
agencies and brokers are asking us how
they can compete. When it comes to
online enrollment and HR systems, one
size definitely does not fit all.
Michael Wolff of Dickerson: Next
to product and price consultation,
ACA-related education and resourc-
es top the list of GA services most
often requested by our agents. And
in a blending of areas, agents are
looking for the most cost-effective
employee benefit solutions to help
ensure ACA compliance for their cli-
ents. In addition to core medical and
ancillary plans, products that were
once considered to be voluntary are
increasingly offered as employer-
sponsored coverages. Technology
tools are critical to the extent that
they can integrate enrollment, pay-
- CalBrokerMag.com -
roll, benefit, and HR data. A GA that
can provide these tools and the tech-
nical support to use them will help
the agent enhance retention as well
as create employer efficiencies and
mandated reporting capabilities.
Dennis Fallon of BenefitMall: Bro-
kers need solid general agency, back-
office support more than ever. The
basics of being accessible, providing a
timely response, providing insight and
guidance are still important. But offer-
ing access to tools being requested by
employer groups is probably the most
significant area of GA services. Gen-
eral agencies should provide a wide ar-
ray of services beyond health and an-
cillary including benefit administration
tools, ACA compliance, payroll servic-
es, tax compliance, and supplemental
products, such as workers comp and
401K. A combined product offering is
where the marketplace has moved.
A strong GA partner will provide safe
access to these tools and services
through a channel that will not com-
pete with or steal your business. If a
general agency is not helping agents
compete with product and technology
companies that are calling on their em-
ployer groups, the agent should move
to a general agency that is committed
to their success.
Jennifer Lisanti of beere&purves:
One would not necessarily consider
knowledge a service, but ensuring
that your general agent trains and ed-
ucates their staff so they know their
products and resources inside and
out is critical to an agents success.
General agents offer a wide variety
of services and technology tools, but
they are only as good as the expertise
of the people filling the service roles.
As employers face extensive com-
pliance requirements, they are ask-
ing their agent to help simplify these
daunting obligations with the aid of
educational resources, access to on-
line HR and compliance systems, and/
or vendor relationships with preferred
pricing. Working with a general agent
that understands an employers com-
pliance and technology needs not only
provides tremendous relief to an em-
ployer, but it also helps to strengthen
the agent/client relationship.
FEBRUARY 2016

WHAT IS THE MOST IMPORTANT
THING TO KEEP IN MIND WHEN
CHOOSING A GA?
Jessica Word, Word & Brown: It is
definitely the people; I encourage bro-
kers to vet a general agency by engag-
ing its people because service depends
a great deal on those who deliver it.
Each GA offers what appears to be
the same or similar services, at least
on paper. They all have products for
their marketplaces. They all have a
solution for quoting, whether its pro-
prietary or purchased. They all have a
sales team. Longevity of service is im-
portant. Is the general agency staffed
by experts who have worked in our
industry for a long time? That can be
a differentiator. And offering guaran-
teed accuracy of quotes is critical for
brokers and clients. Being adaptive to
whats happened in our industry in the
past five years is also important.
Jim McCabe of Sterling: When you
are choosing GA or administrator,
know what is most important to your
employer population. Do they need
bilingual access, mobile access, or
educational materials? Can the general
agency or administrator enhance your
client relationships? Can this relation-
ship assist in growing and retaining
profitable revenue? Can the GA re-
duce your cost of business by supply-
ing support so that you dont have to
invest in it on your own?
David L. Fear, Sr., of Shepler & Fear:
Who owns and operates the GA? Are
they aligned with agents and their role
in delivering insurance benefits? Does
the GA have a track record of support-
ing agents and brokers? Are they fo-
cused on meeting the needs of agents
or are they focused on profits? What
do they do differently than their com-
petitors and why are they different?
Are they a supporter of the industry?
Will the GA provide personal service
and attention to the agent and their cli-
ents? Will they go out with the agent
and meet with their clients personally
and act in a consultative role or are
they just trying to push products?
Colleen M. Gimbel of Berwick Insur-
ance Group: Work with people you like
and who are easily accessible. Many
FEBRUARY 2016
times we hear about agents who are
contracted with an FMO/GA that never
returns their calls. Thats a huge prob-
lem because the whole purpose of the
FMO/GA is to support its down line.
Too many times agents just look for
an FMO/GA who will give them leads;
they dont think about any of the other
services they might need. In my experi-
ence, agents who choose an FMO/GA
based solely on the amount of leads
the FMO/GA said they would provide
is often disappointed and disgruntled.
This is a crazy industry, and no com-
pany is perfect. But if you have a good
working relationship with your FMO/
GA it makes everything go much more
smoothly, and its more enjoyable.
Ken Doyle of LISI: Work with a
thought leader who understands in-
surance 2020. The central message
or strategy needs to be looking at how
they will keep pace with social media,
technology, economic, and political de-
velopments. Digitization will be key for
the GA, carrier, agent, and group cli-
ent. Previously everyone talked about
big data. Well, we have more data in
our industry than we know what to do
with, and therein lies the issue. As we
move toward digitization of informa-
tion, it will depend on algorithms and
analytical techniques that will reshape
customer targeting, financial advice,
and individual customization. With that
said, choose a GA whose approach to
the new market will complement you,
your agency, and your business phi-
losophies through transformation. Not
everyone is created equal, so it cannot
be a one-size-fits-all approach.
Jennifer Lisanti of beere&purves:
Agents should consider the total value
the general agent will deliver through
the entire sales cycle. General agents
provide value beyond quoting and en-
rollment form collection. Dont just fall
for the sales pitch. Make sure that you
work with a general agent who actu-
ally services your business so you
have more time to focus on sales. Ask
to see samples of their agent commu-
nications. Find out if they provide de-
ductible credit services or if they get in-
volved in claim and billing issues. Find
out if they offer online enrollment and
who does the setup. Ask to see their
- CalBrokerMag.com -
GENERAL AGENCY
average group approval turnaround
times. Ask enough questions to make
sure they will deliver value to your
agency and your clients. Also make
sure the general agent is knowledge-
able and exhibits expertise about the
products they sell and the rules that
must be followed in order to sell those
products. When a general agent has
educated and informed employees,
miscommunications and oversights
are minimized, allowing everyone to
work more effectively and efficiently.
Jeff Papenfus of Warner Pacific:
When evaluating a GA relationship,
brokers and agencies should ask what
are the most important aspects of that
relationship, the technology, the ac-
cessibility, the responsiveness, and
the personal touch. The answers will
point them to the right GA for their
needs.
Dennis Fallon of BenefitMall: When
selecting a general agency, you want
to select a partner whom you can see
yourself working with on a daily basis.
You need a partner who is not only able
to meet your needs today, but also an-
ticipate your needs. Most importantly,
you need a long-term partner who is
invested in your business and is a mu-
tually beneficial partner. As you build
a successful brokerage, you need a
partner who can provide a local view
of what is occurring in the employee
benefit industry. More importantly,
this partner needs to be able to help
identify the carriers, partners, trends,
and services on a national scope,
when your business needs demand it.
Michael Wolff of Dickerson: Be-
cause one solution does not fit all em-
ployers, it is important to work with a
GA that offers in-depth consultative
services and provides access to unique
employee benefit solutions. Whether
you have a 10-life group of high wage
earners or a 125-life group with a wide
range of budgets and family needs, a
GA needs to respond with a strategy
that includes a few well-thought-out
options from which agents and their
clients can choose. H
Leila Morris is senior editor of California Broker
Magazine.
CALIFORNIA BROKER | 23
DISABILITY
WHY MILLENNIALS
MAKE ATTRACTIVE
Disability
Insurance
Prospects BY JIM FARDEN
T
here three reasons why Mil-
lennials (born in 1980 to 2000)
make up an attractive group to
target for income protection solutions:
1. They know how to track expenses
and stick to a budget better than do
former generations.
2. They have witnessed the effect of a
financial crisis on retirement plans.
3. They are concerned about their fi-
nancial future, but they need educa-
tion to make investment decisions.
MILLENNIALS CAN
MANAGE A BUDGET
A recent study from T. Rowe Price
proves that Millennials, now in their
20s and 30s, are better at managing
a budget, tracking expenses, and pre-
paring for their financial future than are
former generations. Additionally online
budgeting tools and mobile apps make
it easier than ever for Millennials to
keep track of their expenses.
You can help them understand how
income protection solutions can fit into
their budget. Because this generation
relies on their smartphone to help man-
age finances, consider offering digital
tools, like income-protection calcula-
tors to help them understand the cost
and value of income protection on their
budget and financial future.
24 | CALIFORNIA BROKER
MILLENNIALS HAVE BEEN JADED
BY THE FINANCIAL CRISIS
Many Millennials were just beginning
their careers during the financial crisis
of 2008. Jobs were hard to come by;
promotions were few and far between;
and pay raises were not a guarantee
from year to year. Millennials faced
unparalleled college debt while strug-
gling to find and hold jobs to pay back
student loans and pay rent and car pay-
ments. They witnessed their parents
and grandparents retirement dreams
get shattered.
Millennials are realistic about their
financial future. They know that they
need to be prepared. While studies
show that they are ready to save, your
job is to help them understand how to
create a comprehensive plan to help
protect their financial future, including
solutions to help protect them from
unexpected illnesses and injuries. Mil-
lennials are still a bit jaded from the
financial crisis, so present them with
a strategy that considers all aspects
their financial future.
MILLENNIALS LACK EDUCATION
TO INVEST IN FINANCIAL FUTURE
Sixty-four percent of Millennials would
rather save than spend, which is a
promising statistic for this target audi-
- CalBrokerMag.com -
ence, according to a study by North-
western Mutual. But, while they are
concerned about saving for their fu-
ture, they often lack knowledge and
confidence in investing strategies.
Thats where you can offer your value
to this audience.
Fifty-three percent of Millennials
have set financial goals, compared to
only 38% of Americans age 35 and
older, according to Northwestern Mu-
tual. Thats a promising trend among
this group. Capitalize on their desire
to set financial strategies by helping
them see the bigger picture. Many
may believe that they are prepared
for their future because they invest in
a 401(k) plan. But retirement savings
is only a piece of the financial secu-
rity puzzle. Help them understand that
other options, like income protection,
can help prepare them for unexpected
roadblocks in their financial planning.
You can help them fill the gaps in their
financial strategy. Dont miss out on
the opportunity to target Millennials
for income protection solutions. You
can offer a lot of value to a target audi-
ence that is ready to start preparing for
their financial future today. H
Jim Garden is disability income regional vice presi-
dent at Principal Financial.
FEBRUARY 2016
New Graded Benefit DI
When your hard to High Limit Disability Insurance
place disability cases
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or declined, turn to
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Petersen
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per month. (800) 345-8816 F www.piu.org F piu@piu.org
WELLNESS

Wellness
Workout
for Brokers
Shaping up
Your Sales by Heidi Bowman

FINDING A WORKPLACE
WELLNESS PROGRAM FIT
FOR EVERY CLIENT
M
ore employers understand the
benefits of moving from a frag-
mented wellness strategy to a
more holistic one. So theres a fresh
responsibility for brokers to guide cli-
ents toward the most efficient and
effective course. By deftly navigating
the evolving terrain, the best brokers
are able to choose from the burgeon-
ing wellness options and incentives to
build upon the trust they have estab-
lished with their clients.
Over the past two years, we have
seen a shift among employers from
simply policing employee health to re-
ally focusing on employee quality of

26 | CALIFORNIA BROKER - CalBrokerMag.com - FEBRUARY

FEBRUARY 2016
2016
WELLNESS
life. Its a response to a greater under-
standing of the association between
weight loss and disease. For example,
diseases such as depression and obe-
sity can be treated before they be-
come expensive.
A closer look also unearths some
significant factors in the success of a
wellness plan. First, incentives are in-
tegral to getting employees on board
and keeping them engaged. Second,
the trend toward holistic employee
wellness encompasses not only physi-
cal health, but also mental and emo-
tional well-being. Brokers who have
the most success in this area build
upon a clients comprehensive well-
ness program strategy.
Leading wellness plan brokers know
that escalating health care costs mean
that companies need to implement
holistic programs that target problem
areas. Pinpointing the financial drains
and building a strategy to minimize
them is the calling card of an advisor
who provides solutions instead of just
reacting to the clients fire of the day.
Its also important to remember that
companies are rolling out wellness
programs with their employees, rather
than the more passive strategies of de-
cades past. Ten years ago, a company
might have tackled a type-2 diabetes
issue strictly by encouraging the em-
ployee to take their medication. Today,
that same company understands that
it makes a bigger difference to go be-
yond simply managing insulin shots to
helping an employee lose 50 pounds,
for example. As a result, we are seeing
an increasing number of companies
implement personalized wellness pro-
grams backed by leadership support.
PROVEN INCENTIVES
Offering incentives paves a proven
path to wellness success by keeping
employees engaged. Social programs,
such as health competitions, are ef-
fective in engaging employees in a
group. The latest health technologies
can also delight participants and keep
them involved. Encouraging wellness
programs that entail such incentives
can lay the groundwork for strong em-
ployee involvement, solidifying client
trust in your abilities as their solution
advisor and not just another vendor.
In the age of information, access,
28 | CALIFORNIA BROKER
and technology, it is important for bro-
kers to provide trusted wellness pro-
gram recommendations or risk losing
client trust. With wellness tools tied
to new technologies, companies can
Companies are
beginning to realize
that employees
want new ways to
nurture and nourish
themselves that
go beyond food
and fitness.
offer a myriad of options that would
have been too expensive in the past.
Brokers who are leveraging these new
technologies tell us that they are see-
ing an increase in utilization in wellness
programs as well as a longer engage-
ment time line for employees who use
the tools. Great brokers have their fin-
gers on the pulse of new wellness pro-
grams, technology, and incentives. At
the same time, they remain cautious
before jumping on a bandwagon so
they are not just promoting the flavor
The wellness focus
of many companies
is evolving from
strictly physical
improvements to
mental and emotional
enhancement as well.
of the day. It is difficult for companies
to sort through the myriad options so
its up to brokers to cut through the
clutter.
One proven incentive involves com-
panies covering half the cost of a well-
ness program, such as a weight man-
agement meeting. Even better, there is
a correlation between higher employ-
ee engagement and a greater subsidy.
Some companies cover up to 100% of
the cost. Companies have seen higher
engagement with these incentives be-
cause wellness programs are available
- CalBrokerMag.com -
year-round, and employees can sign
up for a fixed-price program. Often,
success is seen when employers inte-
grate programs with incentives, such
as providing company incentive points
for attending a wellness program.
MIND, BODY, SPIRIT
The wellness focus of many compa-
nies is evolving from strictly physical
improvements to mental and emotion-
al enhancement as well. Companies
are beginning to realize that employ-
ees want new ways to nurture and
nourish themselves that go beyond
food and fitness. Behavioral science
has shown that people have a better
chance at successful weight-manage-
ment when they find ways to take care
of themselves and put themselves
first. In other words, they are finding
and fueling their inner strength. Bro-
kers need to take note of this shift to
well-being when proposing programs,
making sure to advocate for programs
that make the necessary adjustments
to keep up with this trend. This in-
volves moving away from just losing
pounds to adopting a multi-faceted fo-
cus on weight loss and healthy living
that encompasses the evolving needs,
attitudes, and science around weight
management.
The quickly evolving wellness
realm poses fresh challenges for bro-
kers who want to keep their clients
ahead of the curve. With the proper
knowledge, brokers can offer their cli-
ents new opportunities for a happier,
healthier company. H
Heidi Bowman is senior vice president and general
manager of Weight Watchers Health Solutions.
Weight Watchers Health Solutions is a sub-divi-
sion of Weight Watchers International, Inc. Driven
by experience in the consumer and corporate
markets, Weight Watchers connects its platform
to organizations with a range of services includ-
ing: promotion and engagement, benefit offerings,
member data and reporting, and account manage-
ment and implementation. Weight Watchers also
offers a variety of packages that are adaptable to
various organizations, such as convenient meet-
ings; online and digital tools; and weight watch-
ers for diabetes, tailored to type 2 diabetes needs,
featuring all the benefits of weight watchers plus
unlimited access to a certified diabetes educa-
tor. For more information, contact Will.Harbour@
weightwatchers.com or 212-817-4442.
FEBRUARY 2016
 WELLNESS

Wellness
Workout
for Brokers
Shaping up
Your Sales

HOWTOHELP
EMPLOYERS
MAXIMIZE
THEIR
WELLNESS
PLAN ROI BY DINESH SHETH

W
orkplace wellness programs
exist for two key reasons:
to save employers money
while keeping employees and their
families healthy. Employers are always
seeking to realize the return-on-invest-
ment of their wellness programs from
human resources directors up to C-lev-
el leadership. Yet it continues to be a
challenge. This is because employers
often implement a program without a
strategy to drive engagement. Also,
spending happens now while benefits
come later. By shifting how companies
implement their wellness programs,
employers could multiply the ROI,
which hovers from $1 to $3 for every
dollar invested in wellness.
The wellness model must be trans-
formed from an open-ended system
with occasional contact with a well-
ness coordinator and enrollment in
some fitness programs or life-style
coaching. It must become a closed-
loop feedback system that hinges on
consistent, collaborative feedback
and ongoing monitoring and coaching
among employees, their families, and
wellness coaches.
For starters, employers should

FEBRUARY 2016 - CalBrokerMag.com - CALIFORNIA BROKER | 29

WELLNESS
More than 70% of
employers offer some
type of wellness
program, but without
the correct approach.
stop focusing on just the number of
employees participating in wellness
programs and begin examining the
needs of various sub-groups. Throw-
ing a generalized wellness program at
all employees is not very effective. A
non-tailored program usually attracts
the healthiest people who are already
highly motivated and are not driven
by incentives from their employers
and insurers. While this group enjoys
the benefits, the rewards are not the
reason for their healthy lifestyle. This
is the caveat behind most wellness
programs; the healthy people continue
their healthy habits while those who
need the support usually abandon the
wellness programs in a few weeks or
months. Employers must be aware of
health trends that affect their work-
force. Soon, 50% of the population
will have at least one chronic condi-
tion, according to the American Nurs-
ing Assn. Chronic diseases are respon-
sible for seven of 10 deaths each year,
and treatment for chronic diseases ac-
counts for 86% of the nations health
care costs, according to the Centers
for Disease Control and Prevention.
Employers can observe data in their
30 | CALIFORNIA BROKER
employee pool on epidemics like high
blood pressure, diabetes, and obesity.
They can offer programs for the em-
ployees with the most critical needs,
and help them change unhealthy hab-
its. To achieve behavioral changes in
targeted employees, the wellness pro-
gram should function as a closed-loop
system that generates constant feed-
back. With this model, the program
collects physiological data from em-
ployees and their families like weight,
blood sugar, and blood pressure as
well as behavioral data like activity lev-
els and caloric or fluid intake. After pro-
cessing this information, participating
employees get practical guidance on
how to tackle their health conditions.
Consistent communication and moni-
toring are fundamental features of a
successful wellness program. Studies
suggest that having readily available
guidance helps people achieve behav-
ioral changes much faster. It also pro-
vides the ROI that is noticeably absent
from most wellness programs.
An engaging guided wellness pro-
gram is an effective model. But, for
Employers can increase
their compliance
and commitment to
healthcare protocols,
and reduce healthcare
costs by leveraging
tools that support
engagement, guidance,
and feedback
throughout wellness
and chronic conditions
care programs.
employers, this approach raises con-
cerns over the expenses of providing
a dietician and a day-to-day coach for
each worker. However, newer technol-
ogy like remote monitoring, wearable
devices, and self-service care plans
are the answers to that issue. These
systems enable cost-effective moni-
toring and coaching of employees on
a large scale, allowing employers to
easily help workers who have the high-
est need for active participation with
- CalBrokerMag.com -
healthcare providers. Through this
method, each employee can get as-
sistance from a coach on a daily basis,
along with referrals for physicians as
needed, maximizing the wellness and
care coordination programs and result-
ing in a quantifiable ROI with reduced
medical costs.
More than 70% of employers offer
some type of wellness program, but
without the correct approach. Their ef-
forts are often wasted because they
lack accountability through collaboration
and communication, according to a re-
port by the Society for Human Resource
Management. Without engagement,
guidance, and feedback, employees
and their families are left unsupported in
their quest for a healthy lifestyle.
Even though employees and their
families have good intentions to man-
age their health, many fail to keep
up with their care plans. Even if they
see their doctor several times a year,
they dont always heed suggestions
that could have a significant effect on
their health. Also, the time between
appointments leaves time for minor
health issues to exacerbate and re-
quire more extensive and costly treat-
ment. The chances of staying on track
with a care and wellness plan increas-
es greatly when someone is there
to coach people daily along the way.
Therefore, employers must leverage
the tools and technology that leading
advocates of healthy life style changes
have begun to accept for ongoing col-
laboration and monitoring.
Employers can increase their com-
pliance and commitment to health-
care protocols, and reduce healthcare
costs by leveraging tools that support
engagement, guidance, and feedback
throughout wellness and chronic con-
ditions care programs. As the well-
ness program evolution continues,
the return-on-investment from such
engagement will be a higher quality of
physical, mental, and financial health
of the workforce. H
Dinesh Sheth is founder and CEO of Green Circle
Health, a medical services technology platform
provider that leverages advances in information,
communication, and sensor technologies to en-
hance the quality of healthcare services and im-
prove population health. For more information, visit
www.greencirclehealth.com.
FEBRUARY 2016
 PRIVATE EXCHANGES

Private Exchanges-
An Option for the Future by Dorothy Miraglia King

I
s a private exchange part of your
clients benefit strategy? If not, you
may want to consider it. Having the
right benefit strategy is critical to your
clients business success. Depending
on their company size, culture, and
business needs, a private exchange
may be able to help control health
care costs, offer employees more con-
sumer-driven options, and reduce the
administrative burden of providing an
employee benefit program.
Private exchanges are online mar-
ketplaces for health insurance and
related products. In addition to com-
prehensive medical plans, private ex-
changes also commonly include vol-
untary benefits, such as dental, vision,
life, disability, accident, and critical ill-
ness. Private exchanges should not be
confused with the public exchange or
Marketplace for individuals with poten-
tial subsidies, or the SHOP exchange
for small groups offered through the
Affordable Care Act (ACA).
Private exchanges are completely
separate, and can be established by
employers, insurance companies,
benefit consulting/brokerage firms,
and technology platforms. A private
exchange can be a more consumer
oriented delivery alternative for em-
ployees.
Private exchanges can be flexible
to address the needs of the employer
group unlike public exchanges, which
are targeted to individuals and small
groups. Private exchanges can focus
on communication strategies and
decision-support tools to address the
needs of the employee population.
Secondly, private exchanges facilitate
moving to a defined contribution mod-
el for health care costs while allowing

FEBRUARY 2016 - CalBrokerMag.com - CALIFORNIA BROKER | 31

 PRIVATE EXCHANGES
employers to retain some involvement
in their employees healthcare offer-
ing. And finally, moving to an exchange
reduces the employers administrative
burden.
Private exchanges offer the following
through a technology based platform:
Access to a portfolio of benefits: The
exchange contracts with or creates
its own set of health plans. Exchang-
es have varying levels of involve-
ment in health plan standardization
and design.
An ACA-compliant environment: The
exchange provides tools for the em-
ployer to meet its employer shared
responsibility requirements for em-
ployer-sponsored coverage.
The ability for employers to convert to
a defined-contribution arrangement:
The exchange allows a fixed-dollar
amount to be spent on health ben-
efits.
Decision-support tools and guidance:
Communication strategies and re-
sources to educate plan participants
about the choices available for them-
selves and their families.
 Simplified benefit administration:
Single-source administration for eligi-
bility, enrollment, billing, and reconcili-
ation.
For the past 20 years or more, com-
panies that offered health care ben-
efits to employees have done so on
a defined-benefit basis by offering a
standard set of health benefits and
taking on most of the financial burden
and risk of healthcare costs. This mod-
el has become unsustainable over the
past decade as healthcare costs have
more than doubled, creating an afford-
ability crisis for employers. Health care
reform is also affecting the employer-
sponsored insurance landscape, par-
ticularly the individual mandate, em-
ployer-shared responsibility, and public
health insurance exchanges. The goal
of healthcare reform was to make
health insurance more affordable for
individuals and employers. The indi-
vidual mandate and employer shared
responsibility provisions have changed
the way health benefits are offered
to employees, now offering multiple
channels to access benefits.
So what do we expect to see in
terms of the growth of private ex-
32 | CALIFORNIA BROKER
changes? About 6 million employees
selected health plans through private
exchanges for 2015, which is double
the amount from 2014, according to a
recent survey from Accenture. But it
is still a very small amount of the em-
ployer market. Accenture predicts that
40 million of the 150 million people
with employer based health insurance
will choose plans through private ex-
changes by 2018.
Options do vary for employers
adopting a private exchange depend-
ing on the size of their workforce, ac-
cording to a 2014 survey by the Kaiser
Family Foundation.
Employers with fewer than 50 em-
ployees are served primarily by single
carrier and broker-supported exchang-
es with a technology platform. These
groups are not subject to the employer
shared responsibility requirement un-
der that ACA. Their interest in private
exchanges is significantly less than it
is with their larger counterparts since
they have an alternative in the pub-
lic health insurance exchange. Some
small employers have even dropped
group health coverage, but use a pri-
vate exchange to supplement access
to the individual public marketplaces.
Employers with 50 to 2,000 em-
ployees are mid-size employer groups.
They have been targeted by single car-
rier and broker supported exchanges
as well as some direct-to-employer
models. Much of this enrollment is
driven by brokers and insurance com-
panies attempting to move their exist-
ing book of business to this new ap-
proach.
Employers with more than 2,000
employees are large employers. They
are served primarily by the exchanges
created by the large broker consulting
firms. Many large employers already
use benefit consultants in the design,
execution, and evaluation of their ben-
efit plans so there is a synergy in tran-
sitioning to a private exchange. Given
these dynamics, there is a strong po-
tential for private exchanges to grow in
the medium to long term.
Here are a few considerations when
evaluating whether a private exchange
solution may be viable for your client:
 The private exchange has to be a
full-service solution to be success-
ful. This includes educating employ-
- CalBrokerMag.com -
ees to make the best choices, and
offering them options to purchase
products that fit that choice from
understanding how cost sharing
works through the value of wellness
programs. Medical bills are the lead-
ing cause of bankruptcy in the Unit-
ed States, so getting their benefit
planning right is critical. Purchasing
health care is a challenge for most
employees; thats why decision-sup-
port tools and resources are vital to
making this solution work.
Employers need to learn about the
value that defined-contribution ar-
rangements bring, and how they dif-
fer from a defined-benefit plan. This
is part of a compelling business case
for employers to switch to defined-
contribution plans. Employers need
to be aware of tax and reform im-
plications of switching to a defined
contribution plan.
Exchanges need to be on a flexible
platform. This allows them to con-
tract with several insurance carriers,
and offer a wide range of products.
These products need to be simple
and clear for employees to navigate.
The platform needs to deliver a robust
online enrollment portal, and deliver
unbiased decision support through
a variety of channels including a call
center, the Web, live-enrollment ses-
sions, and health advocates.
Private exchanges need to be man-
aged efficiently. Administrative ca-
pabilities must include all aspects
of benefit administration, reporting
and account management. They
must also include seamless interac-
tion and exchange of information
among carriers and plans offered,
consolidated billing of all products
purchased through the exchanges,
and integration and facilitation of em-
ployee payroll deductions. H
Dorothy Miraglia King is executive vice president
of Engage, a HR outsourcing organization that pro-
vides HR and benefits to businesses nationwide.
The Engage PEO exchange allows employees to
choose from a suite of health plans from a single
insurer, as well as a variety of voluntary benefits,
including dental, vision, life, and disability insur-
ance as well as several non-insurance benefits.
Most of the benefits are offered with no minimum
participation requirements. For more information,
visit www.engagepeo.com.
FEBRUARY 2016

The Next Health Exchanges
Have Already Been Built
P
ublic health insurance exchang-
es have cost American taxpay-
ers more than $5 billion in estab-
lishment grants to the 17 states that
received funding. Four of these state
exchanges have failed, so 38 states or
territories use the federal exchange,
HealthCare.gov.
Although Obamacare required
state exchanges to be self-sus-
taining by January 1, 2015,
states have been allowed to
continue spending federal
grants under no-cost exten-
sions for funding that was
already awarded. Far from
being self-sustaining, there
appears to be a growing need
for additional lines of credit for
operational expenses. Whats
even more concerning is
that it appears that lack
of oversight and serious
operating deficiencies in
the four failed states have
meant that consum-
ers and taxpayers
paid for poor
manage-
ment, and
will continue
to pay in higher
premiums and cost
sharing as a result.
To address this issue,
Congress included a provision
in the report language of the Om-
nibus funding bill that requires states
to notify the feds of any illegal use of
grants for the operation of state ex-
changes. This notice must also include
a detailed report on how states intend
to recoup those funds.
FEBRUARY 2016
At the end of 2015, Rep. Rick Al-
len (R-GA) introduced legislation that
would require states who shutter
their exchanges, such as the ones in
Nevada and Hawaii, to report on how
their funds were used, and return any
- CalBrokerMag.com -
PRIVATE EXCHANGES
by Joel White
unspent funds to the federal govern-
ment, which would be applied to defi-
cit reduction. The bill also places en-
forcement in the hands of the feds.
This means that states that have mis-
managed funds cannot also enforce
the laws they may have skirted.
Instead of becoming more efficient
and lowering costs, most state ex-
changes have simply raised fees
on insurers. According
to the Commonwealth
Fund, assessments on
insurance plans sold
through state exchanges
ranged from 1% to 3.5%
of monthly premiums
in 2015. The federal ex-
change, Healthcare.gov,
charges its plan issuers
a user fee to fund its op-
erations equal to 3.5%
of premium revenue. So
whats the problem?
These fees are
then passed
on to hard-
working
consum-
ers in the
form of higher
insurance premiums.
Simply put, when costs go
up, coverage goes down.
Moreover, taxpayers have footed
the bill for exchange websites and
still-evolving functionalities that have
been available in the private sector
for decades. Consumers have experi-
enced difficulties getting accurate esti-
mates of total out-of-pocket costs and
confirming whether their preferred
providers and prescribed medications
CALIFORNIA BROKER | 33
 PRIVATE EXCHANGES
are covered across plan options.
It is clear that public exchanges have
few incentives to control costs or pro-
vide user-friendly interfaces or the lat-
est technology that has already been
deployed in the private sector.
In contrast, private exchanges have
to be efficient and keep costs low, or
they will go out of business. Also, pri-
vate exchanges cannot keep increas-
ing prices or they will lose customers,
so they tend to offer health insurance
plans in a consumer-friendly manner
and often at a lower price. These pri-
vate companies are key to fixing the
public health insurance exchanges.
Private exchanges with effective
consumer-facing features exist today.
For example, online health insurance
exchanges allow individuals, families,
and small businesses to compare
health insurance products from lead-
ing insurers side-by-side and purchase
and enroll in coverage online.
Although private exchanges can sell
insurance to individuals and employer
groups, subsidies are only available on
public exchanges. You may wonder
why this is so. Private exchanges are
not part of Obamacare. Accordingly,
the federal government essentially has
a monopoly on exchanges.
It doesnt have to be this way. The
private sector should be able to com-
pete with government-based exchang-
es on a level playing field. This would
encourage the private and public sec-
tors to make needed improvements
and other enhancements in order to
keep current consumers and garner
new ones.
NEXT GENERATION
EXCHANGE PROPOSAL
Congress has an incredible opportu-
nity to modify the current construct of
the exchange system to engage con-
sumers, increase enrollment growth,
and ensure financial sustainability by
creating the next generation of health
insurance exchanges. This would ease
the sustainability challenge faced by
states and the federal government
while lowering premium costs to con-
sumers.
Under the Next Generation Ex-
change proposal, the private sector
would take on more responsibility for
exchange functions that are exclusive-
34 | CALIFORNIA BROKER
ly provided by federal and state gov-
ernments. The model would consist of
four parts:
PRIVATE SHOPPING WEBSITES
We should allow private websites to
compete directly with public web-
sites, and reserve the functions of
government, such as verifying sub-
sidy eligibility and making payments
to health plans, to the states and the
feds. Since private shopping websites
Private exchanges
with effective
consumer-facing
features exist today
online health insurance
exchanges allow
individuals, families,
and small businesses
to compare health
insurance products
are likely to list the same health insur-
ance products, they should compete
for consumers based on these user
experience and key-decision support
tools:
Out-of-pocket cost calculators
Smart plan finder tools that allow
consumers to prioritize and highlight
best-fit options.
Integrated and searchable provider
networks and drug directories.
Easy-to-understand cost information
for common services and proce-
dures.
A MODERN ELIGIBILITY PROCESS
Shopping for health insurance should
be akin to shopping via innovative
web-based companies, like Kayak.
com and Amazon.com. Many of these
consumer-friendly websites offer mul-
tiple payment options, including credit
cards, gift cards, and PayPal. To fa-
cilitate competition and allow for next
generation private shopping websites,
the federal government should con-
tract with vendors to create a mod-
ern eligibility system that resembles
the PayPal system. This would allow
- CalBrokerMag.com -
subsidies to become portable so that
low-income consumers could pur-
chase coverage from any insurance or
exchange website, public or private.
SIMPLIFIED SMALL EMPLOYER
SHOPPING
Private shopping websites should also
provide a simplified health insurance
shopping experience for small employ-
ers. These websites should allow small
employers to use their tax credits to
purchase traditional small group cover-
age. There should also be time-saving
features, such as the ability to upload
demographic files so employers can
input data once and get health insur-
ance pricing across multiple insurers.
A REVAMPED STATE
CERTIFICATION PROCESS
Each state should certify that there
is at least one website that allows
for the purchase of health insurance,
shows the pricing of all insurers that
offer individual market and small group
coverage in the state, and offers a Pay-
Pal-like system for subsidies. States
should also document and certify
exchange expenditures and be held
accountable for unauthorized uses
of funds. Unused funds should be re-
turned to taxpayers. This is essentially
the Allen bill.
American consumers would ben-
efit from a simplified health insurance
shopping experience that is more re-
sponsive to their wants and needs.
The public sectors strength is in regu-
lation and enforcement of the rules of
the road. Undoubtedly, that role should
continue.
However, the private sectors
strength is in enhancing the consumer
shopping experience. We should le-
verage the decades of expertise.
Faced with the potential financial
collapse of some state exchanges,
Congress should consider this com-
monsense Next Generation Exchange
proposal to help consumers purchase
health insurance that best fits their
medical needs. We dont need to re-
build the wheel thats already been
built in the private sector. H
Joel White is president of the Council for Afford-
able Health Coverage. For more information, visit
http://cahc.net.
FEBRUARY 2016

Recruiting Software. Hrsoft releases ver-
sion 9.2 of its applicant-tracking software.
The cloud-based recruiting software is
designed to improve the recruiter and hir-
ing manager experience. In addition, the
software continues to be refined to be
completely responsive (mobile friendly) on
a wide range of internet browsers used by
clients. For more information, visit https://
hrsoft.com
PBA. RxBenefits has received a significant
investment from Great Hill Partners. RxBen-
efits provides pharmacy benefits administra-
tion to small to mid-sized, self-insured em-
ployers. The recapitalization, will allow the
company to expand its sales and marketing,
and product development. The company will
also continue to evaluate partnership and ac-
quisition opportunities, with additional equity
capital available from Great Hill Partners. For
more information, visit www.rxbenefits.com.
Aflac Contact Service Center Operations
Achieves J.D. Power Certification. Aflacs
contact center operations has achieved J.D.
Power certification for providing outstanding
customer service for its live phone channel.
For more information, visit www.jdpower.
com/about/index.htm.
Exchange-Traded Funds. Charles Schwab is
offering John Hancock Investments suite of six
strategic beta exchange-traded funds (ETFs). It
offers investors and financial advisors access to
commission-free ETFs. For more information,
visit schwab.com/SchwabETFs.
Marketing Book. Expressing gratitude and
appreciation to clients makes a huge differ-
ence for your business, according to Michael
F. Sciortino, Sr., author of the book Grati-
tude Marketing. Gratitude Marketing is a
movement away from pushy sales tactics
and toward engaging and connecting with
people in a personal, authentic, human-to-
human manner, he said. The goal of the ap-
proach is to increase client retention, refer-
rals, and revenue. For more information, visit
GratitudeMarketingBook.com.
Annuity. Vantis Life Insurance Company re-
launched its multi-year guarantee annuity,
Freedom I, with special features for retirees.
A version of the product was a best seller
for the company in 2010. Freedom I features
a return-of-deposit guarantee during the ini-
tial five years of the annuity. The minimum
investment for the annuity is $5,000 and
FEBRUARY 2016
the maximum is $500,000. Other features
include the following:
A surrender-charge period that matches
the guarantee period five years.
A terminal illness surrender-charge waiver.
A  nursing care facility surrender charge
waiver.
After the initial five-year 2% guarantee, the
rate can never be lower than 1%.
 10% free withdrawals after first contract
year.
A  .M. Best Rating: A- Excellent.
For more information, visit http://www.van-
tislife.com/able.
Book on ObamaCare: Promises vs. Re-
ality. Copernicus Healthcare released the
book, The Human Face of Obamacare:
Promises vs. Reality and What Comes
Next. The book takes a comprehensive,
non-partisan look at the ACA almost six
years after its passage. Stories of patients
illustrate continuing problems of the health
care system. Underinsurance is the new
norm. Narrowed networks, high deductibles,
and increasing cost-sharing are forcing many
people to forgo necessary care, according to
the book. The book assesses three major al-
ternatives for further health care reform. For
more information, visit www.copernicus-
healthcare.org.
Online Medicare Drug Dashboard. CMS
is releasing an online dashboard of Medicare
prescription drugs for Part B and Part D.
The tool displays spending, utilization,
and trend data. It also includes descriptions
of drugs, manufacturers, and uses. CMS is
prohibited from publicly disclosing informa-
tion on manufacturer rebates so the data
used to select Part D drugs does not reflect
manufacturers rebates or other price con-
cessions. For more information, visit https://
www.cms.gov/Research-Statistics-Data-
and-Systems/Statistics-Trends-and-Re-
ports/Dashboard/Medicare-Drug-Spending/
Drug_Spending_Dashboard.html.
Great American Launches Accident and
Health Insurance Programs. Great Ameri-
can Insurance Group launched its special
risk accident and health insurance programs.
The company is offering an array of cover-
ages designed to meet the needs of a va-
riety of organizations, such as schools, day
care centers, churches, civic groups, boys
and girls clubs, camps, recreational organi-
zations, and volunteer groups, among oth-
ers. The coverage helps offset the cost of
- CalBrokerMag.com -
NEW PRODUCTS
accidental injuries that occur during an or-
ganizations sponsored activities and events
and supplements general liability coverage.
For more information, visit GAIG.com/Acci-
dentandHealth.com.
Private Exchange. WebInsure Benefits
marketplace has added several health and
ancillary insurance carriers and benefit ad-
ministrators. WebInsure Benefits is a single
cloud-based platform for brokers to manage
their employer group and individual business
and simplify administration. New insurance
carriers and benefit administrators include
the following:
Assurant: Individual dental plans.
Chard Snyder: FSA, HSA, HRA, transpor-
tation & parking reimbursement, COBRA,
billing, and FMLA.
Guardian: Dental, vision, STD, LTD, Life,
and AD&D.
HIC Group: Short-term medical; dental
and vision; prescription discount plan; ac-
cident, sickness and hospital plans; critical
illness; telemedicine; and life insurance.
HSA Bank: HSA, FSA, HRA, premium
reimbursement account, defined contri-
bution plans, and transit and commuter
benefits.
The IHC Group: Health, life, disability,
dental, vision, limited benefit, hospital in-
demnity and medical stop-loss insurance
solutions to individuals and groups.
Renaissance Dental.
For more information, visit www.hcentive.com
ACA Management Software. Passport is
offering ACA management software with
simple employee data entry screens for easy
setup. Users can anticipate ACA-related ob-
ligations to avoid penalties. Employers can
track offers of insurance, calculate safe-har-
bor options, and monitor employee hours. It
includes 1094-C and 1095-C reporting with
electronic filing as required. For more infor-
mation, visit http://www.pass-port.com/
aca-management-software.
ACA Compliance Navigator. Businesses
that are required to deliver the new Afford-
able Care Act (ACA) 1094 and 1095 forms
may be worried if they dont have a plan
for filing. PrimePays new ACA Compliance
Navigator is open for enrollment until Dec.
31. Primepay says that it is the only platform
that gives businesses time to meet the 2016
deadlines for 2015 calendar-year returns. For
more information, visit http://primepay.com/
aca-compliance-reporting. H
CALIFORNIA BROKER | 35
LIFE SETTLEMENTS
A Primer on Life Settlements
For Healthy Insureds
A
life settlement is the sale of a life
insurance policy for more than
its cash-surrender value. For a
policy owner, a life settlement is not an
investment to buy existing life insurance
policies, not a loan to finance existing
life insurance policies, not a strategy to
get new life insurance coverage for any
means, and not a trick to take policies
from senior citizens. It is one of several
options for a policy owner to consider in
the final disposition of a life insurance
policy including lapsing the policy, sur-
render it, or allow it to run its course.
Over the years, we have heard a
lot of rhetoric that life settlements are
evil. They are going to be the next sub-
prime crises or perhaps the life settle-
ment business will take down one of
the major carriers. None of that is true.
Not only is a life settlement transac-
tion legal and heavily regulated, but its
36 | CALIFORNIA BROKER
by Robert Stark
also quite consumer friendly.
We know life insurance companies
are opposed to them for obvious rea-
sons. Employees of certain compa-
nies are actually forbidden to disclose
to their clients the existence of the life
settlement market.
A California policy owner is suing
Lincoln National because an agent
failed to disclose the existence of the
life settlement market. It will be inter-
esting to see how the court rules in
the case of Larry Grill, et al. v. Lincoln
National Life Ins. Co., 5:14-cv-00051-
JGB-SP, C.D. Cal. But the point is
clear; if you have clients who fit the
life settlement profile (65 or older and
$500,000 in a death benefit), at the
very least, they should be made aware
of the existence of the option, regard-
less of whether an advisor or firm can
participate or profit in the transaction.
- CalBrokerMag.com -
A MARKET OPPORTUNITY
Approximately $57 billion is surren-
dered or lapsed annually in universal
and variable universal policies insuring
the life of a senior, according to the
Life Insurance Settlement Assn. This
number balloons to over $110 billion
when you consider term and whole
life policies. Nine policies are surren-
dered or lapsed for each life insurance
policy traded through a life settlement.
Our collective clients lapse a saleable
policy every two minutes.
Ninety percent of seniors who
surrendered or allowed a policy to
lapse would have considered a life
settlement if they were aware of the
option, according to the Insurance
Studies Institute. Clients are unknow-
ingly abandoning billions of dollars in
value when you look at the growing
demographic and the general lack of
FEBRUARY 2016

awareness of the life settlement op-
tion. They are likely missing out while
assuming that their trusted advisors
have informed them of all options. If
these abandoned polices got an offer
of just 5% of the face amount, policy
owners left about $3 billion in settle-
ment value on the table last year,
mostly unknowingly.
Without a doubt, the life settlement
market has experienced a significant
rebound. The competition for policies
is at a post-2009 high and with con-
tinued institutional interest, there is
no reason to think this will slow. That
said, volume for the life settlement
market is still somewhat limited, due
partly, to a lack of awareness, and in
some cases, concealment.
EVOLUTION: NO MEDICAL
UNDERWRITING
In todays market, buyers are getting
more creative in order to deploy more
capital. One example is the no life
expectancy (no LE) program. Here, a
buyer forgoes medically underwriting
the insured. The life settlement value
is determined by coupling the policy
purchase with a single premium annu-
ity (SPIA). Income from the annuity is
used to pay future premiums.
CASE EXAMPLE:
Insured Male 75
Policy Size $4 million
Policy Type Survivorship universal life
with the female deceased
Cash Value $200,000
Life Expectancies AVS 176 months (110%)
/21st 189 months (1.24)
This trust-owned policy was set up
to benefit the insureds children, but
the trust minimally funded the policy.
As a result, significant catch-up premi-
ums are due, which no one involved
wants to pay.
Based on the insureds good health,
there was little opportunity to sell this
policy in the traditional life settlement
market. However, a no LE buyer made
this case work when it would have oth-
erwise been a decline and disappoint-
ment for the insured, trustee, and the
referring life insurance agent.
Gross Life Settlement Offer $425,000
FEBRUARY 2016
LIFE SETTLEMENTS
WHATS IN IT FOR THE BUYER: ed insurers. In the future, when you
SYNTHETIC BOND CREATION? think of buyers purchasing policies
It makes sense to view this from a without medical underwriting you
buyers perspective to understand might no longer think of these buyers
why an opportunity exists when medi- as crazy or reckless. These buyers
cal underwriting is irrelevant. First, let are seeking healthy insureds because
us look at this strategy as if it were a their continued returns depend on life
bond. A bond investor lends money and not death.
to earn a rate-of-return for a period of
time, called a coupon. At the end WHO QUALIFIES
of the investment period, the investor The no LE sale is a perfect life settle-
experiences a return of their principal ment when the insured is generally
investment. healthy. Buyers seek insureds who are
In our scenario, while the annuitant male 75 or older or female 77 or older
is living, the buyer collects the annu- and when universal life policies were
ity payments. These payments are issued at preferred rates. This program
used to pay premiums on the policy does not work well with term conver-
that was purchased as a life settle- sions or survivorship policies when
ment with the overage cash flow be- both insureds are living.
ing the buyers return-on-investment,
or in bond terms, their coupon. Upon EASE OF PRICING INDICATION
maturity of the annuity (death of the Pricing cases for the no LE market is
annuitant/ insured), annuity cash flow relatively simple. An offer is generally
ceases, and the buyer gets a lump- available within 24 hours with an ap-
sum payout from the life settlement propriate illustration and relevant appli-
policy, which is equal to their initial cation and state disclosures for com-
investment. While the buyers invest- pliance reasons. This is much different
ment is in place, their principal is pro- and considerably faster than the sev-
tected by the insurance hedge. The eral week long process of a traditional
annuity cash flow is backed by a highly life settlement.
rated insurance carrier. A life settlement (traditional or no
Lets look at the Case Example LE) is a great option in certain circum-
again. [Estimates are used here be- stances. Its availability must be part
cause we do have final information re- of all life insurance policy final disposi-
lating to the SPIA (final investment and tion discussions. When an insured is
final yield)]. thought to be relatively healthy, a no LE
evaluation is a fantastic non-invasive
Buyers way to test the market to establish or
Investment reaffirm expectations. Regardless of
Life Settlement $425,000 the option chosen, it is important to
educate policy owners of the alterna-
Annuity (SPIA) $3,575,000
tives to lapsing and surrendering their
Total Investment $4 million
valuable life insurance assets. H
Annual Cash flow
Robert Stark is the president of Melville Capital,
Annuity $327,316
LLC when he oversees the implementation of
Life Insurance ($39,708) operational strategies including asset valuation,
Premium transaction marketing and closing and compli-
Overage $287,608 ance. Robert has worked in finance, lending,
structured assets or life insurance for over 22
Rate of return 7.2%
years. He has directly been involved in over $3.5
billion of life-contingent structured finance trans-
Upon Maturity
actions. Robert holds his series 7 and 63 licenses
Cash flow $0
as well as is a licensed life insurance agent and
Death Benefit $4 million life settlement broker in numerous states. Robert
earned a B.S. in Finance from the University of
The buyer has created a fixed and Maryland at College Park, and his Master of Busi-
hedged return that is uncorrelated to ness Administration from New York Universitys
the markets and backed by highly rat- Stern School of Business.
- CalBrokerMag.com - CALIFORNIA BROKER | 37
LIFE INSURANCE
The Trends That Are Shaping
Todays Wealth
Transfer Policies
A
variety of economic, demo-
graphic, and market factors
bring an unprecedented op-
portunity for wealth-transfer planning.
First and foremost, we are arguably in
the friendliest federal estate tax envi-
ronment ever. Under current law, indi-
viduals can pass on up to $5.43 million
estate tax free to their heirs. Married
couples can leave double that amount
nearly $11 million. Some clients have
been hesitant to use life insurance for
wealth transfer because it has involved
creating trusts and relinquishing ac-
cess to their money. They can now en-
joy all the benefits of life insurance and
maintain control of the policy.
Favorable market returns are also
creating new wealth-transfer opportu-
nities. With the stock market achiev-
ing strong growth since the 2008 mar-
ket crash, many clients have restored
their retirement nest eggs and are bet-
ter positioned to leave a legacy to their
family or favorite cause. But they are
understandably concerned that their
gains could be erased by the next in-
evitable market correction, and leave a
diminished estate for their heirs. Life
insurance is an appealing solution. A
client can reposition earnings and gain
leverage with a non-correlated asset
that is earmarked for their heirs. This
way, the increased life insurance ben-
efit can be a hedge against market vol-
atility and secure the legacy the client
wants to pass on.
With the Baby Boomers aging, more
clients than ever are in their retire-
ment years. Most often, the clients
primary goal, after providing a secure
and comfortable retirement, is wealth
38 | CALIFORNIA BROKER
by Palmer Williams
transfer. Clients recognize that many
of the financial opportunities available
to them, such as an affordable edu-
cation, employer-provided pensions,
and Social Security, may not be avail-
able for younger generations. They
want to provide enough assistance for
their loved ones to live full and com-
fortable lives. At the same time, many
families inheritance disappears once
it is transferred to the second and the
third generations. Seventy percent of
wealthy families lose their wealth by
the second generation, and a stagger-
ing 90% lose it by the third generation,
according to a recent study by the Wil-
liams Group Wealth Consultancy. Only
one in five of high-net worth parents
agrees strongly that their children
will be well prepared to handle fam-
ily wealth they are likely to inherit, ac- the proceeds from life insurance gener-
cording a study by US Trust. The good ally pass to heirs income tax-free. Life
news is that life insurance and a prop- insurance offers a competitive rate-of-
erly designed trust can be powerful return on their premiums, especially
wealth-transfer tools to help clients for Baby Boomers and older retirees
ensure their legacy while controlling whose risk tolerance is lower.
the amount and time frame in which Clients are also utilizing many fea-
beneficiaries receive their inheritance. tures of life insurance that are useful
during ones lifetime. Life insurance
1. HOW ARE CONSUMERS USING cash values grow on a tax-deferred ba-
WEALTH TRANSFER POLICIES IN sis, and can be accessed through loans
LIGHT OF THESE TRENDS? and withdrawals, allowing clients to
First and foremost, appropriate candi- put wealth-transfer plans in place while
dates for wealth transfer policies are maintaining financial flexibility. If the
65 to 80, and are comfortably secure clients needs change, the cash value
in their retirement. These consumers can be a source of funds to reduce pre-
want to leave a legacy. We often rec- miums, adjust coverage, or simply help
ommend using life insurance because it pay for college tuition, a wedding, or
offers a liquid, predictable, and defined emergencies. Living-benefit riders are
death benefit. Also, the internal rate-of- frequently included or purchased with
return on the death benefit at life ex- policies to help prepare for potential
pectancy is generally 6% to 7.5%, and long-term care needs.
- CalBrokerMag.com - FEBRUARY 2016

2. WHAT SHOULD CONSUM-
ERS CONSIDER WHEN THEY ARE
THINKING OF USING LIFE INSUR-
ANCE FOR WEALTH TRANSFER?
Clients must have a desire to leave a
legacy to loved ones, a charitable or-
ganization, or educational institution.
They should have liquid assets that
are not earmarked or needed for their
retirement income or potential risks,
such as a major health crisis. To put
it into numbers, a good guideline for
this strategy is to consider it for clients
with $500,000 or more in investable
assets.
The other key consideration is that
clients need to be healthy enough to
qualify for the life insurance at pre-
mium rates that make sense. If they
are reasonably healthy with no serious
chronic health conditions or risk fac-
FEBRUARY 2016
tors, the policy should offer affordable
premiums and leverage to help make
life insurance an attractive wealth
transfer strategy.
Lastly, it is crucial to plan 10 to 15
years down the road and design a
flexible plan since a clients financial
situation and goals will surely change.
Advisors should make sure that clients
have options if they need to modify or
exit a policy.
3. HOW SHOULD AN ADVISOR
RECOMMEND WEALTH TRANSFER
AS PART OF THE RETIREMENT
PLANNING PROCESS?
Advisors should take the time to learn
about a clients life, family, and inter-
ests. A clients legacy is very personal,
so the advisor should make sure that
the proposed strategy reflects their
- CalBrokerMag.com -
LIFE INSURANCE
values and goals.
Second, advisors should consider
which policy options their client will
need. For example, suppose a married
couple doesnt need the life insurance
individually, but purely as a vehicle to
transfer wealth to heirs. A survivorship
policy that pays the benefit upon the
second death of the couple would be an
appropriate choice. Purchasing a survi-
vorship policy rather than two individual
policies will increase leverage versus
premium paid. Other policy features to
consider are important riders, such as
chronic illness or long-term care, which
is often critical as clients age.
Finally, advisors should make sure
that the policy offers the flexibility of a
cash-value design, so the policyholder
can access the premiums accrued if a
financial or health crisis arises later in
life. With this type of policy, clients may
have the flexibility to unwind premiums
they paid into the policy, use the cash
value to pay premiums rather than pay
out-of-pocket, or reduce the death ben-
efit so they have lower premiums.
4.WHAT ARE THE BIGGEST WEALTH
TRANSFER TRENDS FOR 2016?
With the upcoming election, were
keeping an eye out for what could hap-
pen to estate-tax laws since it will di-
rectly affect wealth transfer. Estate-tax
laws seem to ebb and flow in terms of
thresholds and rates, and are likely to
continue to change. This will be espe-
cially important to pay attention to for
clients with assets totaling $1 million
and above.
On the product front, we expect to
see continued innovations with more
survivorship policy options and more
cash-value products. Living benefits
are becoming much more prevalent,
increasing competition among carri-
ers. We expect to see an expansion in
the qualifying events that trigger the
claims process as well as entirely new
features associated with these LTC
and chronic-illness riders. Life insur-
ance policies have been a great value
proposition for the beneficiaries; these
enhancements bring significant value
for the insured as well. H
Palmer Williams is national sales director of Say-
brus Partners.
CALIFORNIA BROKER | 39
401(k)
New 401(k)
Regulations
for Employers
W
hen selling 401(k)s and
other qualified retirement
plans, its important for in-
surance and financial brokers to be
educated in the latest regulations and
guidelines. Especially when it comes
to fees, employers are looking to their
brokers to outline their fiduciary re-
sponsibilities and help them choose
the plan that is appropriate for their
business structure and is in their em-
ployees best interest.
The recent Supreme Court ruling
(Tibble v. Edison International) makes
this responsibility even more appar-
ent. The lawsuit focused on whether
financial professionals on Edisons
investment committee violated their
fiduciary duty by making a selection
that led to higher fees. They selected
retail-share classes instead of individu-
al mutual fund shares. The court ruled
against Edison and decided that em-
ployers are responsible for continually
monitoring the 401(k) fees charged to
plan participants and ensuring that the
plan continues to be in the best inter-
est of employees.
Under the Employee Retirement In-
come Security Act (ERISA), employers
have been responsible for initial plan
and investment selections. ERISA sets
minimum standards for the administra-
tion of employee benefit plans and
40 | CALIFORNIA BROKER
by Ellen Bartholemy
provides regulations for fiduciary duty
as well as plan funding, participation,
vesting, and accrual.
The new Supreme Court ruling
protects employees even further; its
prompting many employers to re-eval-
uate their 401(k) investment options
and potentially change providers. For
those who are offering a 401(k) plan
for the first time, it will be even more
important to evaluate each plan with
a critical eye. This is where insurance
and investment brokers are more valu-
able than ever. Employers need extra
help selecting an appropriate plan as
well as continual support to ensure
that they dont breach fiduciary duty
each year their plan is in place.
According to the Dept. of Labor
(DOL), fiduciary responsibilities in-
clude the following:
Acting in the sole interest of plan
participants and their beneficia- tect the business itself. For example,
ries. a broker who sold a plan that became
Carrying out their duties prudently. subject of a lawsuit would not typically
Following the plan documents (un- be held responsible for reimbursing
less inconsistent with ERISA). employers or employees for any penal-
Diversifying plan investments. ties, fees, or other resulting damages.
Paying only reasonable expenses. However, in April 2015 the DOL pro-
Insurance brokers, financial advi- posed redefining a fiduciary as anyone
sors, attorneys, and CPAs are not fi- who provides fee-based investment
duciaries; they have no legal responsi- advice to the following entities:
bility for a plans administration. They ERISAcovered employee benefit
serve as advisors and are there to pro- plans
- CalBrokerMag.com - FEBRUARY 2016

Plan fiduciaries
Plan participants
Plan beneficiaries
IRA plans or IRA owners
If approved, the proposed rule would
hold financial advisers, planners, bro-
kers, investment managers, and oth-
ers to ERISAs fiduciary standards as
well as prohibited transaction require-
ments and required disclosures. Exist-
ing rules only hold non-fiduciary advis-
ers to a suitability standard, meaning
FEBRUARY 2016
that they can sell products that gen-
erally fit an investors needs and risk
tolerance without disclosing conflicts
of interest.
Of course, clients can take legal ac-
tion for negligence and other issues,
so brokers still need to to communi-
cate regulations to clients and, when
appropriate, refer them to a CPA or
attorney for further counsel. Choosing
a CPA firm that specializes in ERISA
audits will help protect the assets of
- CalBrokerMag.com -
401(k)
the employee benefit plan and ensure
that the funds are available to pay the
promised benefits to employees. An
incomplete or late filed report can re-
sult in significant penalties for the plan
administrator, so choosing an experi-
enced auditor is very important.
ERISA audits are generally required
for companies with more than 100
employees, and include the following
areas:
Valuation of plan assets and plan
obligations.
Timeliness of contributions.
Evaluation of whether benefit pay-
ments were made in accordance
with plan terms.
 Determination if participant ac-
counts are fairly stated.
Determination if any transactions
prohibited by ERISA.
Review of annual 5500 form.
In addition to audits, CPA firms that
specialize in employee-benefit plans
will also report on any significant prob-
lems encountered, and can suggest
how the employer can improve their
internal control and plan operations.
A CPA firm with experience in audit-
ing ERISA plans can help employers
document their thought processes be-
hind benefit plan decisions, providing
a rationale that could protect them in
a lawsuit.
In the end, retirement plan benefits
are wonderful recruiting and retention
tools for employers. They can have
significant tax benefits, but they also
open businesses up to potential liti-
gation. To reduce the risk, make sure
that your clients are informed of their
responsibilities from the start, and
that you are in touch after you make
the initial sale so they can continue to
offer the best plan possible. With the
new proposed fiduciary regulations,
this could become more important
than ever. H
Ellen Bartholemy is the director of Accounting
Services at Hall & Company CPAs, an indepen-
dently owned accounting firm in Irvine, Calif. She
has more than 25 years of experience in public
accounting. Bartholemy has extensive experience
with financial audits, reviews and compilations
of closely held companies. For more information
about Hall & Company, visit www.hallcpas.com or
call 949-910-4255. Ellen can be contacted at eb@
hallcpas.com.
CALIFORNIA BROKER | 41
NEWS

NEWS
HEALTHCARE
IRS Extends ACA Reporting Deadlines
The IRS issued a two-month extension for employers and
issuers to report on offers of health coverage and coverage
provided. The deadlines for reporting to the IRS by paper
have been extended to May 31 or June 30 for electronic
submissions. Greatland Corp. advises employers to con-
tinue with preparations as if the deadlines had not been
pushed back. Bob Nault, Greatlands CEO said that waiting
until the last minute can lead to failure to file 1095 forms
for the 2015 tax year, which could bring penalties of up to
$1 million on small businesses. Maximum penalties to pay-
ers for failure to file correct information returns, including
furnishing an incorrect name/TIN to IRS are $3 million/year
($1 million for small businesses).
Janice Kreuger, ACA subject matter expert for Greatland
said, We are hearing from a lot of businesses that think
the IRS will not enforce fines for the 2015 reporting year.
This is simply not the case. The IRS will not fine employers
and insurers for mistakes. However, they still need to file
and file on time, even with the extended deadlines.
The IRS imposes the following fines for returns filed be-
ginning January 1, 2016:
$50 per information return if you file correctly within 30
days of the due date.
$100 per information return if you file correctly more
than 30 days after the due date, but by August 1.
$250 per information return if you file after August 1 or
you do not file required information returns.
$500 for a return for intentional disregard with no maxi-
mum penalty.
For more information, visit www.greatland.com.
A Snapshot of Consumer-Driven Health Plans
A recent survey by EBRI and Greenwald & Associates finds
the following about consumer driven health plans (CDHPs):
13% of the privately insured population are enrolled in a
CDHP; 11% are enrolled in a high-deductible health plan
(HDHP); and 76% are enrolled in more traditional coverage.
26 million people with private insurance are enrolled in
a CDHPa health plan associated with a health savings
account (HSA) or health reimbursement arrangement
(HRA), or an HSA-eligible health plan.
6 3% of people in CDHPs have opened an HSA, 13% are
in an HRA, and 24% are in an HSA-eligible health plan, but
have not opened an HSA.
People in a CDHP or an HDHP are more likely to have
cost-conscious behaviors compared to those in traditional
plans. They are more likely to have checked whether the
plan would cover care; asked for a generic drug; talked to
their doctors about prescription options and costs; asked
a doctor to recommend a less costly drug; talked to their
doctors about other treatment options and costs; devel-
oped a budget to manage health care expenses; and used
an online cost-tracking tool provided by the health plan.
People in a CDHP are more likely to have talked to friends,
family, or colleagues about the plans; attended a meeting
where health plan choices were explained; and consulted
with their employers HR staff about health plan choices.
People in an HDHP are more likely to have visited the
health plans website to learn about their plans; talked to
friends, family, or colleagues about the plans; used other
websites to learn about their choices; and consulted with
an insurance broker to understand their plan choices.
CDHP enrollees are more likely to take advantage of well-
ness programs, such as health-risk assessments, and
health-promotion programs, and biometric screenings.
Financial incentives mattered more to CDHP enrollees
than to traditional-plan enrollees.
For more information, visit ebri.org.
Many Insured Patients Still Face Crushing Medical Debt
A recent Kaiser Family Foundation/New York Times study
reveals that one-in-five working-age Americans have run
into serious financial difficulties trying to pay medical bills
despite being insured. In the survey, 62% of those with

42 | CALIFORNIA BROKER - CalBrokerMag.com - FEBRUARY 2016


medical bill problems say the bills were incurred by some-
one who was insured, with 75% saying that the amount
they had to pay for their insurance copays, deductibles,
or coinsurance was more than they could afford. They re-
ported skipping or putting off other health care in the past
year because of the cost, such as postponing dental care,
skipping doctor-recommended tests or treatments, or not
filling a prescription. For out-of-network charges, 69% said
they were unaware that the provider was not in their plans
network when they received the care.
Consumer Watchdog says that PPO health insurance
policies with very narrow provider networks and extremely
limited out-of-network coverage are a new form of junk
insurance. The group says that many patients cannot find
competent in-network doctors, and then face huge medi-
cal bills due to extraordinarily limited coverage for out-of-
network services.
Jamie Court, president of Consumer Watchdog said,
New PPO policies with very limited providers in-network
and extraordinarily low benefits out-of-network are creating
new express lanes to bankruptcy for families. Until insur-
ance companies are forced to justify that their premiums,
co-pays, and policy benefits are reasonable, too many
families will be forced to choose between medical bills and
other necessities of life, like paying their mortgage. These
findings should shake up the statehouse and revive the
regulation debate.
In 2014, Consumer Watchdog sponsored Proposition 45,
which would have allowed the insurance commissioner to
make health insurance companies justify their rate hikes
under penalty of perjury, and to reject excessive rate in-
creases.
Other findings in the Kaiser/New York Times survey include
the following:
26% of insureds with problems paying medical bills say
they received unexpected claim denials; and 32% say
they received care from an out-of-network provider that
their insurance wouldnt cover.
FEBRUARY 2016 - CalBrokerMag.com -
NEWS
Those in higher deductible private plans are more likely
to report medical bill problems than those in private plans
with lower deductibles (26% versus 15%).
Sixty-one percent of those with medical bill problems say
theyve had difficulty paying other bills as a result of their
medical debt, and 35% say they were unable to pay for
basic necessities like food, heat, or housing.
Read the Kaiser Family Foundation/New York Times
survey here: http://kff.org/health-costs/press-release/new-
kaisernew-york-times-survey-finds-one-in-five-working-
age-americans-with-health-insurance-report-problems-
paying-medical-bills/.
EMPLOYEE BENEFITS
2015 Study Reveals Gaps in Wellness Programs
Fifty-three percent of about 6,000 consumers who were
enrolled in health plans in 2015 say its not easy to under-
stand their health information or how to maintain or improve
their health, according to HealthMines research. Forty-six
percent of consumers with a chronic condition discovered
their illness through a wellness program. The study also re-
vealed the following about consumers:
Less than one third know their key health metrics including
their blood pressure, cholesterol, BMI, and blood sugar.
5 3% cant access all of their clinical health data from a
computer. Another 39% cant access all of their clinical
and behavioral (collected by apps/trackers) health data
from a single source.
5 3% say its not easy to understand their health informa-
tion or how to maintain or improve their health.
55% want help from their healthcare plan in setting per-
sonal health goals. Another 65% want reminders about
critical health actions, such as prescription refills and an-
nual health exams.
4 4% stay engaged in their wellness program throughout
the year while 27% say that lack of time keeps them from
engaging.
 55% say that wellness incentives have not been not
meaningful, and little more than half actually earn all of
their available incentives each year.
38% say their wellness program helps them manage their
costs.
81% of wellness programs do not include a price com-
parison tool.
For more information, visit www.healthmine.com.
IN CALIFORNIA
Major Health Insurance Changes For The New Year
Covered California is reminding consumers and small busi-
nesses about important changes in 2016. Starting January
1, Covered California increased access to plans and provid-
ers and offered more health plans, and increased the num-
ber of benefits that are not subject to a deductible. Here is
a run-down of the changes:
Most California Consumers Get
New Forms for the 2015 Tax Year
This year, consumers who are insured through their em-
ployer or a government program, like Medi-Cal, will get Form
CALIFORNIA BROKER | 43
NEWS
1095-B or Form 1095-C. The forms show who maintained
minimum essential coverage and is not liable for the tax pen-
alty. Consumers under Covered California will continue to
get a Form 1095-A. For more information, visit https://www.
irs.gov/Affordable-Care-Act/Questions-and-Answers-about-
Health-Care-Information-Forms-for-Individuals.
The Penalty for Not Buying Affordable
Insurance Is Going Up A Lot
The IRS penalty applies to people who go without insur-
ance when they can afford to buy it. It will increase for 2016
to at least $695 per adult and $347.50 per child under 18 or
2.5% of household income, whichever is greater. A recent
study by the Henry J. Kaiser Family Foundation estimates
that the average household penalty in 2016 will be $969,
which is a 47% increase from 2015. For more information,
visit www.taxpayeradvocate.irs.gov/estimator/isrp.
New Requirements and New Options
for Many of Californias Small Businesses
Employers with more than 50 full-time-equivalent (FTE)
employees must offer health insurance to employees or
pay a penalty. Through 2015, this requirement applied only
to businesses with more than 100 employees. Any of these
employers with an employee who does not take their of-
fer of coverage will have to pay a penalty if the employee
goes on to get financial assistance to purchase coverage
through Covered California. For more information, visit
https://www.irs.gov/Affordable-Care-Act/Employers/ACA-
Information-Center-for-Applicable-Large-Employers-ALEs.
Covered California for Small Business will expand beyond
the ceiling of 50 employees to serve companies employing
100 or fewer FTE employees. For more information, visit
www.CoveredCA.com/ForSmallBusiness.
Major Improvements in Choice, Access and Benefits
Covered California used its power as an active purchaser
to hold down rate changes for a second year. Before the
Affordable Care Act, consumers regularly experienced
double-digit premium increases. For 2016, Covered Califor-
nia negotiated a weighted average change of 4%, which is
lower than last years change of 4.2%. In addition, nearly
90% of Covered California enrollees get some financial as-
sistance to help pay premiums. On average, those subsi-
dies resulted in more than $5,200 for each household in
2014. Benefit Changes for the 2016 coverage year:
The majority of Bronze plan consumers now get three
office visits a year to a primary care provider or specialist
with no deductible. Other needed services, such as lab
tests and rehabilitation, will not be subject to a deductible.
Covered Californias Silver plan will combine copay and
coinsurance into a single product. Every doctor visit, lab
test, and prescription will not be subject to a deductible
in this single product. Consumers with chronic conditions
will be protected by a cap on specialty drugs. The vast ma-
jority of consumers will see their specialty drugs capped
at $250 per month, per prescription. Plus, because of Cov-
ered Californias standard benefit design, the caps must
be offered by every health insurance plan in the individual
44 | CALIFORNIA BROKER - CalBrokerMag.com -
market and by all plans offered by the exchange.
For more information, visit http://news.CoveredCA.
com/2015/05/covered-california-board-protects.html.
Adult dental coverage is now offered as an add-on.
6% of Covered California consumers will be able to choose
from at least three health insurance companies thanks to
the addition of two new health insurance companies
UnitedHealthcare Benefits Plan of California and Oscar
Health Plan of California as well as the expansion of Blue
Shield of California and Health Net.
More than 90% of hospitals (general acute centers as
designated by the California Office of Statewide Health
Planning and Development) in California will be available
through at least one health insurance company, and 74%
will be available through three or more companies.
Medi-Cal Coverage for Undocumented Children
Medi-Cal will be expanded to all children regardless of their
immigration status. The new law goes into effect in May 2016.
Health Care Improvements for All Californians
Starting July 1, health plans must publish and maintain
printed and online provider directories. Health plans must
maintain accurate provider directories, including routine up-
dates. For more information, visit http://leginfo.legislature.
ca.gov/faces/billNavClient.xhtml?bill_id=201520160SB137.
A new state law will require health plans and insurers
to implement formula-tier requirements and cost-sharing
caps similar to products offered through Covered Califor-
nia. Assembly Bill 339 requires plans and insurers to have
formularies that do not discourage the enrollment of people
with certain health conditions. It also sets requirements re-
garding access to in-network retail pharmacies, standard-
ized formularies, and coverage for certain single-tablet HIV
and AIDS treatments. For more information, visit http://
leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_
id=201520160AB339.
The Fight to Slash Drug Prices
Headed for 2016 California Ballot
The AIDs Healthcare Foundation has collected enough Cali-
fornia voter signatures to qualify for the November 2016
ballot. If the ballot initiative passes, state programs cannot
pay more for prescription medications than the prices nego-
tiated by the Dept. of Veterans Affairs. The Foundation has
a similar ballot drive in Ohio.
VA pricing is, by far, the lowest pricing available to any
government agency for the purchase of prescription drugs
for use in state programsIf California and Ohio are able to
pay the same prices for prescription drugs as the amounts
paid by the Dept. of Veterans Affairs, it would result in sig-
nificant savings to taxpayers. These ballot initiatives are
necessary and appropriate to address public concern about
runaway drug pricing, said Michael Weinstein, president of
AIDS Healthcare Foundation.
Nationally, prescription drug spending increased more
than 800% between 1990 and 2013, making this one of
the fastest-growing segments of health care. Spending
FEBRUARY 2016

on specialty medications, such as those used to treat HIV/
AIDS, Hepatitis C, and cancers, are rising faster than other
types of medications. Total spending on specialty medica-
tions increased more than 23% in 2014 alone, said Tracy
Jones, executive director of the AIDS Taskforce of Greater
Cleveland.
Pharmaceutical Research and Manufacturers of America
(PhRMA) has established a fund of more than $10 million to
fight the California Drug Price Relief Act. Johnson & John-
son is the largest contributor, with $5.86 million donated to
date. These drug makers also contributed millions of dollars
to oppose the measure: Amgen ($4.265 million), AstraZen-
eca Pharmaceuticals LP ($4.15 million), AbbVie Inc. ($4.15
million), (Novartis ($2.88 million), Eli Lily ($2.88 million),
Bristol-Myers Squibb Co. ($2.88 million), Otsuka America
($1.075 million), and Purdue Pharma LP ($1.105 million)
The Foundation is fighting back at the Johnson & John-
sons headquarters starting his week in New Brunswick,
N..J. by driving trucks near the headquarters with mobile
billboards that say, No More Tears for Greed. The Foun-
dation resorted to using trucks when an outdoor advertising
company refused to run paid billboards from the Founda-
tion. The ads will also appear in nearby transit stations. In
addition, street teams have begun distributing palm cards
near the Johnson & Johnson campus. For more informa-
tion, visit www.aidshealth.org.
RISING INTEREST RATES ARE
GOOD FOR THE LTC INDUSTRY
The decision by the Federal Reserve to raise short-term
interest rates will spell good news for the long-term care
insurance industry, states Jesse Slome, executive director
of the American Association for Long Term Care Insurance
(AALTCI). Higher interest rates will enable insurers to avoid
increasing premium rates with new policy offerings. Ac-
cording to AALTCI data, a 1% increase in long-term interest
rates can translate into a 10% to 15% decline in policy pre-
miums. Companies offering LTC insurance policies will earn
FEBRUARY 2016 - CalBrokerMag.com -
NEWS
more money on the reserves they set aside to pay future
claims. Slome says that the rise in interest rates may also
encourage insurers to re-enter the marketplace. Slome said
that higher interest rates will benefit safe investments and
insurance products like long-term care insurance.
One-year CD rates were roughly 5% in 2000 and in the
4% range before the Great Recession in 2007. Interest
rates have been at historic lows since then, which has af-
fected savings accounts, CDs, annuities, life insurance, and
long-term care insurance products, he explained. For more
information, visit Walpurgisnacht.
LIFE INSURERS TO BENEFIT FROM RATE HIKES
Gradually rising interest rates provide significant benefits
for all major life insurance and annuity products, improving
reinvestment rates, interest margins and reserve adequacy,
says Fitch Ratings. Life insurers would benefit if a rise in
short-term rates leads to a rise in long-term rates over the
coming year. But they must manage certain risk factors.
Rising interest rates could increase liquidity stresses. There
could also be an uncertain statutory capital effect associ-
ated with variable annuities. (Statutory capital is the amount
of capital and/or surplus that an insurance company must
have to be licensed to do business).
Also, if interest rates rise too fast, policyholders may sur-
render policies faster than expected, which could lead to
cash flow obligations that exceed investment returns. Fitch
expects the life insurance industry outlook to shift to nega-
tive if longer term rates decline to levels seen in late 2012 (i.e.
10-year Treasury below 1.75%) and stay low beyond 2016.
LIFE INSURANCE & LONG-TERM CARE
Interest Rates, Economy Are Still Concerns in 2016
Insurance executives surveyed by LOMA expect modest
growth due to interest rates and the economy. Neil Sprack-
ling, president of Swiss Re Life & Health America said, The
life industry is in transitional recovery mode. Were still suf-
fering from the hangover of the financial crisis and what
now looks like long-term low interest rates. So, do I predict
rocketing sales and significantly higher profits in 2016? No,
however, my optimistic nature tells me that weve turned a
corner. Most executives agree with the following:
Technology will continue to have a profound effect; digiti-
zation may change how products are developed. Predic-
tive analytics, automated underwriting, and smart phones
are all mentioned as important. But the industry is also
looking at emerging technologies, such as wearables
and gamification, which may bring even more dramatic
changes.
Quality service will be a key to retaining customers. Pow-
er has shifted from companies to consumers. Consumer
expectations are increasingly based on experiences with
other companies that use leading-edge technology.
Human capital is a big concern. Millennials coming into
the industry are looking for the opportunity to work for
the greater good and to make a difference. Some say that
companies that have a strong digital strategy stand the
best chance of recruiting the best talent.
For more information, visit www.loma.org. H
CALIFORNIA BROKER | 45
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Please Circle #47 on the Free Information Form on Page 46
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WB.GA.CB.1348563.2.16 Photo Credit: Luna Curran Photography