The Patient Protection and Affordable Care Act has made life interesting—to say the least—for all of us over the last few years, but no one's had a wilder ride than those in the limited medical benefit business.

First the law threatened the very existence of these and similar indemnity plans with onerous deductible limits and medical-loss ratio requirements.

Of course, politicians and regulators being who they are changed all of that with hundreds of waivers and a redefined MLR requirement, buying limited plans a stay of execution. For now. All of that will come to end with the close of 2013.

That's if nothing else changes between now and then.

So it's against this backdrop of regulatory and economic uncertainty that a company such as The American Worker has managed to flourish since its inception back in 1992. Their goal? To provide affordable medical benefits products to part-time and temporary employees, a group that despite its exponential growth in today's work force, all too often gets lost in the shuffle.

Jon Duczak, co-founder and senior vice president at The American Worker, is involved with new product creation and development in addition to his work on new market initiatives and generating new business sales.

“Business has been very good for us over the last several years—especially when we're talking about affordable benefits for part-time and temporary employees,” Duczak sums up. “So we've been riding a real high for the past eight to 10 years. I'm very proud and confident of our staff and abilities to not only come up with creative solutions to clients' issues whether that be by product design or building a unique service and admin platform, but our growth's been there because that intellectual capacity and our ability to service our clients and maintain good relationships with them.”

BS: Do you find that, given what your product is versus that of a typical broker's, it changes the dynamic of your relationship with your clients?

JD: Yeah, I think I know where you're going and I would describe it as this: We don't sell product. We have products. What we sell is solutions and concepts and ideas. And the application of those concepts and ideas are solutions that lead us back to our products. So our success is built on the fact that we recognize what we're selling in the voluntary benefits environment. We understand it's not a product sale as much as it is a service and administrative or solution sale. So I would say there are a lot of vendors in our market who are product vendors and we've moved past that. We're a vendor that not only has product but has service, admin, communication and enrollment solutions.

BS: What would you say drives your success?

JD: I'd say integrity. My father's been in the business for more than 35 years. He constantly reminds me of the first group plan he sold in 1975. But the most important takeaway for us is we really value our reputation. So we're not gonna cut corners, we're not gonna do things that are unethical in order to generate revenue. We're gonna service our clients and the revenue will come to us because of that good service and integrity. 

It's really the combination. We really go to great lengths to provide additional service to our clients that will save them money. I think there are a lot of vendors in the market who are gonna provide product and those products are gonna be cost negative or they might be cost neutral. It might not cost the company something or they might be cost negative because the client is going to pay the service and administer those programs. So in terms of product point, why we succeed is [because] we've been very good at making voluntary benefits cost positive. And we can make it cost positive because we're willing to make an investment back into our client and spend our revenue wisely on providing them service. We've been able to make our programs cost positive because we're offsetting costs we normally absorb.

BS: What's been the driving force behind the more mainstream acceptance of limited medical plans?

[Read "What will happen to limited medical plans in 2014?"]

JD: I specifically have to point to the inflation in the major medical market. In my hometown (Chicago) and my core market, rates were on the rise in the late 1980s and early 1990s. And we're already driving people out of major medical roles. So definitely the inflation that's occurring within the major medical market is driving the need for the supplemental health-type product. And then there's been an explosion of agents who have—after long struggles in major medical markets—now adopted voluntary benefits and have to understand how they're used and the value of them. So you've also got increased distribution.

BS: Do you think the major medical cost increases we're seeing now are sustainable?

JD: No, absolutely not. I mean I think they're projecting right now that by 2020—eight years from now—we could be looking at an average family cost of $29,000 a year for major medical coverage. So without a doubt the current path is unsustainable.

BS: So where do we go from here — and, in particular, where does your market end up?

JD: We've got a lot of answers on that. You're seeing a groundswell in the amount of people looking at an indemnity-type policy or supplemental health plan to be used as what it was originally intend to supplement a health benefit program. So I truly believe you can cover more people for less money, but the only way you can do that is by being very realistic about the type of coverage you're gonna provide. And so I think in the future that the minimum essential benefit structure has some legs. However, I think the minimum essential benefit has to include a slightly higher deductible than what has initially been talked about at $2,500. So we think for the supplemental health market the future is actually bright because if employers are safe with a minimum essential benefit, we think most employers are gonna go to the minimum essential and level the playing field in term of the small and larger employer group markets. And so if that minimum essential is the $2,500 deductible and with increases over the next several years it might be $5,000 or it might eventually get to $10,000.

So I actually think the future's very bright if you're smart, intelligent and understand how our product within your core benefits strategy. So our marketing might change. We might see less participation in these hard-time populations. We also might see a lot more part-time employees out there but our marketing there will change. I think, though, that there is a way to transcend it, to cross over to that client core benefit strategy by using the plan as it was initially designed or intended.

BS: So do you do your own enrollments?

[Read "How to work with the right enrollment firm"]

JD: We don't physically perform the enrollment function. We're usually going to work with an administrative partner. But we've done that by design. Administrative functions and enrollment and claims payments is not a very high profit industry. So if we were going to submit to doing the administration we need to commit to it so we can make it a program or we can make our admin models ones we can generate revenue to support the organization and provide good value to our employees.

We are involved, though, in 100 percent of the client relationship from sales to implementation to ongoing service. And—to specifically answer your enrollment question—we are involved in the design of our enrollment documents and those specifically consist of postcards that are pre and post open enrollment, member communications during the year, posters that are hung in the locations, custom benefits booklets and guides. So we are not necessarily physically performing the enrollment but our experience, our intellectual capacity, is creating enrollment materials that are performing positively within our existing audience.

BS: And that sounds like there's a lot more communication outside the enrollment itself.

JD: There is. Our market turnover is a big deal. Most of our clients are turning over almost at least at a minimum of 100 percent so we do a lot of active—well, I like to refer to it as participation management programs where we do a lot of active outbound new hire communication and notification, and outbound communication to existing members. So we're constantly out there recruiting new enrollees that benefit our plan, our organization and benefit our clients as we continue to help them with their recruiting and retention goals.

BS: On the communication level—given what you just talked about with regard to turnover— you're dealing with a different class of employee, I don't mean that in a negative way. But I think given what you have to deal with, communication is probably more key than ever outside of the enrollment process.

JD: Right. I completely agree. If you're calling, you know we're selling solutions, we're selling service, we're selling admin. And so if we're selling products we're just selling products. But products won't serve our clients well because the real issue is how to communicate and enroll benefits. It's designed to make communications very hands off and for us to take ownership of the communication process so it's an enrollment process with continual input from our clients on what works, continual analysis of what isn't working and what may not be working. And constant tinkering and modification.

BS: What trends are you seeing in your market right now?

[Read "Health trends to watch in 2012"]

JD: I'm seeing that there's a lot of people trying to sell more of the traditional work-type programs. The critical illness programs, the accident programs, even some of the lighter policies out to the part-time and temporary worker market. And I haven't seen any of that be very successful. And I'm uncomfortable with it. I'm uncomfortable with it because I think that for those types of individuals in our market the primary need is medical and after we've satisfied the medical needs then we can address any additional needs.

I'm also seeing some employers who've gotten creative. We've been looking at the possibility of using [CDHC] programs to supplement the indemnity plan. So now that's a little bit different concept but the indemnity plan is there to pay and once the indemnity plan benefit maybe exhausted we have some clients that are interested and we've done this, we've had some implementation of this, not many but—where we've now funded an HRA so once that limited med program is exhausted any additional claims can get paid for out of that HRA.

BS: And the response to that's been pretty good so far?

JD: Limited but good. I approach this topic with a little hesitancy but so far it's been good. I'm hesitant just because it's a good concept but it just hasn't been out there. We haven't done enough of it to really know if there's potential with it.

BS: What's your expectation of what brokers should be doing instead of what they're doing right now?

JD: What I definitely want to see is higher deductibles. I'd like to see office visit copays go away and I'd like to see more education of the members about how to spend health care dollars. And so there is a part of me that would like to see penalties for poor behavior for health decisions because I think the only reinforcement that works in our market sometimes, unfortunately, is negative reinforcement.

I think higher-deductible policies would make a lot of sense, and I think that benefits sales for years have been flawed. For years, benefit producers have gone out and they've sold the group the lower-deductible plans with the lowest possible costs. And when you look at utilization patterns there's only anywhere from 10 percent to 20 percent of the members in a group utilizing coverage. But selling the benefit to the lowest possible cost with the lowest deductible, highest benefit, you're catering to the minority.

You're catering to the minority while you're ignoring the majority. And the majority is who have been suffering because costs are going up and they can't justify a return on investment with the purchase of the medical policies. So if you change the dynamic—you increase the deductible and lower the contribution—you cater more to the majority of employees within the client group. And then you get all the advantages a high deductible has, namely, reduced cost.

Now, I want to see brokers sell more high deductible and I think by selling more high deductible they can then, especially with your audience, sell more voluntary worksite programs. Including plans like indemnity as a supplement to that high deductible. But in that type of environment, you're not necessarily in a defined contribution environment and you're not necessarily in the defined benefit market. You're creating protection for your employees against financial loss and ruin based on medical claims with a high-deductible policy. And if you can then recognize that work site programs inclusive of supplement health and backfill out-of-pocket costs for the individual member, those members can buy those policies through a cafeteria approach and now you've created a choice for the members and you've allowed the individual member within your group to decide the type of coverage and the level of coverage they need the most. And so that's really what I think really needs happen in the market. I said here earlier I kind of like the minimum essentials and I think that we can cover more people for less money if we do it right and this is how I kind of think you're doing it right. You increase the deductible, reduce fixed costs until you get the majority of people covered for less money. Now we can backfill with supplement and voluntary worksite programs at an individual level through our cafeteria approach at the worksite.

BS: And you think this approach is something employers, and by extension employees, would be receptive to?

JD: I think so. We've seen clients who've increased their deductible. I can point to a specific client that, when they analyzed their claim and benefit utilization, they determined in the year prior that 68 percent of their members spent less than $1,000 in medical services or consumed less than $1,000 in benefits. So 68 percent of the population paid more in contributions than they accessed in benefits.

The following year that client increased their deductible from $600 to $3,000, from $1,200 to $6,000. And overnight 68 percent of the people in that employer group benefitted because they're paying less in contributions than they're collecting or consuming in benefits. Now as you get up in the chain, though, you're eventually going to get to about 10 percent who are now paying less in contribution but much more in out-of-pocket costs. Within that client there's several wellness and education programs on how they can get healthy, how they can spend their deductible out-of-pocket costs dollars more wisely.

I don't really think anybody has a choice. I say that because as the employer you really don't have any other option left today. You either decrease benefits or increase contributions. So I don't think an employer really has a choice on whether they want to look at a high-deductible because they're going to have to maintain a benefit package. It's just economics.

And on the employee side, if the employer can't afford your program and this is what they can afford, that's your choice. And I think that the environment right now in the job market allows some employers the opportunity to put a high-deductible policy plan in place, to make wholesale changes to their program that will allow them to move into the future with competitive and more manageable pricing.

BS: So you've kind of taken a tough love approach, but it's out of necessity as much as anything else.

JD: If I'm going to preach that I want high deductibles, I've got to be prepared for what that means. But let's take me individually. Even with our plan, I would never [hit the deductible] unless it's a maternity year. But if you offered me a high deductible and reduced my fixed costs for an individual [plan] I'd be happy. I understand the margins. I might, though, with my reduced contribution and extra pocket money, I might use that to buy a disability policy. I might use it to buy more life insurance – things that will protect me and things that won't make me a burden to somebody else.

Now I could take another individual in my office who might be 55. Now faced with the high deductible and faced with someone who's a little bit older and maybe might have ongoing medical conditions, they might want to offset that out of pocket. And now they have free dollars to do so. They, in turn where I might buy life and disability they might buy supplemental health or critical illness or accident. Anticipating that they're gonna need to offset that out of pocket. But then it's a choice and it's an individual decision they've made to build what they need not what we arbitrarily told them they needed because we're focused on the minority.

BS: So, you're going to be at Benefits Selling Expo?

JD: We've got some great clients coming, clients that have at least several thousand employees, so we're really excited we can get them to come to the conference with us. We're in the process right now of soliciting a lot of our top agents and consultants for the types of questions they'd like to have answers from. We want it to be a session that's informal and informative to your audience. To give them answers and get them to gain a little insight into the workings, the strategy and the decision making that some of these large employers.

BS: What is it you want brokers to get out of your session?

JD: I'd like to think brokers will walk away from that session with their eyes a bit more wide open. I think what they're going to see when they talk to some of these clients that, even though they're large, they're still looking for solutions. And they're willing to be creative to get those solutions. And so I think I'd like to see brokers walk away with a real sense of effort and maybe thinking a bit more outside of the box as these large clients do. And the solutions they're looking for aren't readily available so smart thinkers in the future will win.

Photo by Bob Stefko