APRIL 2015 | MARYLAND
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APRIL 2015
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IN THIS
ON THE COVER 12
THE ROAD TO AFFORDABLE CARE ACT COMPLIANCE Explore possible directions for your agency in light of the Affordable Care Act.
ALSO 20
10 SALES STRATEGIES FOR TAKING CHARGE Tactics come and go, but solid sales strategies can have a positive influence on performance.
IN EVERY ISSUE 2
Chairwoman of the Board
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Ask Our Experts
4
Preventing Errors & Omissions
6
Coverage Corner
8
State News
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IA&B Partners
IBC My Events IBC Advertiser’s Index IBC Classified Ads
Periodical postage paid at Mechanicsburg, Pa. and at additional mailing offices. Ride-along enclosed. Postmaster: Send address changes to Insurance Agents & Brokers, 5050 Ritter Road, Mechanicsburg, PA 17055. Primary Agent (ISSN 1543-3110), Permit # 638-620, Issue # 2015-04, is published monthly by IA&B Service Group Inc., a subsidiary of IA&B.
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Copyright 2015. All rights reserved. No material may be reproduced in whole or in part without written consent of the publisher. The information in this publication is general in nature and not intended to serve as legal, accounting, financial, insurance, investment advisory or other professional advice as to any reader’s particular situation. Users are encouraged to consult with competent legal, financial, insurance, investment advisory and/or other professional advisors concerning specific matters before making any decisions. We disclaim any responsibility for any decisions or actions by readers. Statements of fact and opinion in Primary Agent are the responsibility of the authors alone and do not imply an opinion on the part of the officers or the members of IA&B. Participation in IA&B events, activities and/or publications is available on a non-discriminatory basis and does not reflect IA&B endorsement of the products and/or services.
IABforME.com | PRIMARY
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CHAIRWOMAN OF THE BOARD’S MESSAGE
IA&B MEMBERSHIP: JUST WHAT THE DOCTOR ORDERED
INSURANCE AGENTS & BROKERS 5050 Ritter Road | Mechanicsburg, PA 17055 800-998-9644 | IABforME.com
OFFICERS Chair of the Board
Diana M. Hornung Hanby, ACSR
T
Vice Chair of the Board
he counts vary, but a common estimate for the number of pages required to print the Affordable Care Act law and subsequent rules and regulations is 13,000. Yes, thousand. So it comes as no surprise that regardless of our experience as insurance agents, many of us – as agency owners and principals – are overwhelmed by the ACA and what it means for us and our employees. How to comply, to keep our employees covered and our agencies in the Feds’ good graces, is a common concern voiced to IA&B leadership and staff.
Robert S. Klinger, LUTCF, CPIA Immediate Past Chair of the Board
G. Greg Gunn, CIC
MEMBERS Henry “Butch” Bradley, Jr. Forest Hill, MD
E. Stephen Burnett, CIC, ARM Wilmington, Del
Richard F. Corroon, CPCU Wilmington, Del
N. Lee Dotson, CIC, AAI Wilmington, Del
But as we’ve come to expect, IA&B is there to help us navigate unchartered waters. In this issue of Primary Agent, you’ll find a feature article that highlights the requirements for small businesses like most of ours and that walks us through options in light of the federal health care reform law. For those of you with larger shops, IA&B posted additional information on its website specific to employers with 50 or more employees. This is just another example of how our association is listening to us and working for us. And another example of the value of IA&B membership. If you haven’t already, be sure to renew for the 2015/2016 membership year – which began April 1. n
Michael P. Ertel+ Columbia, MD
John B. Hollister Milford, PA
Jocelyn R. Howard-Sinopoli, CIC, CISR Butler, PA
Douglas A. Loesel, CPCU Erie, PA
Michael F. McGroarty, Sr. Pittsburgh, PA
Crag S. Mader
Gambrills, MD
Ann Gallen Moll, CIC Reading, PA
Mark J. Monroe
West Chester, PA
Joseph R. Pastor, CPCU, AAI Oil City, PA
Until next time,
Richard M. Rankin, CIC Lancaster, PA
April E. Ressler, CIC Altoona, PA
Diana M. Hornung Hanby Chairwoman of the Board
Scott C. Rogers, CPIA* York, PA
Glenn R. Strachan
Ft. Washington, MD
Lawrence A. Wilson, CIC, CPIA, CPCU, ARM** New Castle, Del.
J. Marshall Wolff, CIC, CPCU Easton, PA
* Pa. IIABA National Director ** Del. IIABA National Director + Md. PIA National Director
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APRIL 2015
Ask Our Experts
Question: We’re building a quote area on our website. Is there anything we should be looking out for?
Answer:
A
bsolutely! Using your website in a more dynamic way is definitely a good idea. Many options are now available and make for a more engaging experience. However, there are a number of items to address.
• It is not uncommon for E&O carriers to take a look at your website before providing coverage and place conditions if you failed to secure a page that gathers your customers’ personal information.
One of the first things that comes to mind is making sure that any page that collects personally identifiable information (PII) is secured. Information prospects enter for a quote would definitely qualify as PII. The proper method to secure web pages varies depending on your system. It is, however, generally simple to do. Your web developer should be able to point you in the right direction and help select the right protocol and security certificate.
We focus here on securing a quote page. When building or rebuilding a website, other items should be carefully weighed, including finding the right balance between painting the agency in a positive light while not increasing an agency’s standard of care. Be engaging, but do not promise on something you cannot or will not deliver.
Note that: • It is easy to know if your web page has been secured (the URL will show “https” instead of “http” and/or a Lock icon with embedded security details will be visible).
ACT, the Agents’ Council for Technology (IndependentAgent.com/ ACT), has a myriad of resources to help you build a more effective website. Both marketing and E&O considerations are addressed. Feel free to consult their resources or call us for more information. n
IABforME.com | PRIMARY
This month’s answer was provided by Claire Pantaloni, CIC, CISR, our industry affairs director. Catch Claire in our Human Resources Pitfalls education offering, coming this fall.
Have a question? Ask our experts! Rely on our experts to answer your most perplexing questions. Visit the Ask Our Experts section of IABforME.com (find the link in the website footer) to submit your question and review answers to other frequently asked questions. Or email your question to us at IAB@IABforME.com. We look forward to hearing from you.
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PREVENTING ERRORS AND OMISSIONS
IS DOCUMENTATION REALLY THAT IMPORTANT? Utica National E&O Program
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or some strange reason, this is a common question among agency staff. For those staffers who have never experienced an errors-and-omissions claim, possibly it is hard for them to truly and totally comprehend the value of good quality documentation. Hopefully, the agency veterans can emphasize the significant value documentation provides related to the direction E&O claims can take. AN IMPORTANT ELEMENT Documentation is one of the most important elements of a quality E&O culture and commitment within an agency. However, for an agency staff member to state that he or she documented the conversation in the file may not be good enough. What does the documentation say? What
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story does it tell? A number of components are essential for documentation to possess its true value. 1. The documentation should be performed promptly. This does not mean at the end of the work day or “when I have a minute.” Ideally, it means as soon as the conversation has concluded. For those that can multitask, documenting the discussion while you are having it is great as it enables you to accurately note the various items/topics being discussed. 2. The documentation should include details such as with whom you spoke, what was discussed, whether there are any open items and who has what responsibilities and duties moving forward.
APRIL 2015
3. The documentation should be professional. This may fall into the commonsense category, but there is the possibility that the discussion was emotional in some manner. The agency staff should be careful to ensure the documentation does not reflect this emotion. The saying “don’t put anything in the file that you wouldn’t want a jury to read” comes to mind. For example, the following statements recovered from actual files did not help the agency’s defense: “I’m sorry I could not get back to you sooner” and “I’ve been too busy.” 4. The documentation should tell a story. If the customer calls back and the initial staff member is not available, the staffer helping the customer will be able to read the
documentation, know exactly what was discussed and determine what any next steps are. 5. At times, the file should reflect some form of written communication (email, letter, etc.) that memorializes the conversation. When a person documents a conversation, he or she is, in essence, documenting his or her version of it. Is it possible that there was a misunderstanding or that the customer didn’t provide the information he or she thought? This does happen, so documenting the details of the conversation back to the customer is a solid E&O loss prevention tool. The goal is to make the customer accountable for his or her insurance decisions. DOCUMENTATION IS KEY If agencies followed these straightforward concepts, there would be fewer E&O claims and a greater percentage of E&O claims that did develop would be closed for “no pay.” Unfortunately, this does not always occur, and invariably, the most important document in the E&O matter is the one that is not in the file. It involves those declinations/deletions of coverage and explanations or answers to various insurance-related questions. It is amazing how at the time of an E&O claim, one of the parties (typically the insurance professional) will be adamant that he or she had a conversation with the customer and can almost recite “chapter and verse” details of that conversation. Ironically, the other party (the customer) will have a totally version of that conversation or may actually allege that he or she does not even remember the discussion ever happening. Therefore, is it to be assumed that this will happen and that everyone will have a different story? Perhaps. This in itself shows the value of good, quality documentation.
Imagine an E&O claim has occurred and you are asked to produce various documents as is typically the case. As the agency producer/CSR on the file, you produce records of detailed conversations with the customer. Let’s presume that your customer, who will be asked to produce his or her various documents, has nothing. Who do you think will have more credibility in the eyes of the court? Showing a solid track record of providing consistent quality documentation will certainly enhance your credibility. Now take the opposing perspective. You as the agency staff member comment that you remember explicitly the exact conversations you had with your customer. However, when you are asked to produce details of those conversations, you have nothing. A common phrase used by attorneys in E&O matters is, “If it’s not in the file, it didn’t happen.” Your memory of those conversations will not carry the same weight as the necessary, detailed documentation. There have been a significant number of E&O claims where good quality documentation heavily determined the direction of the claim. In fact, many E&O carriers state year after year that they are closing two out of every three E&O claims for no payment. That is an impressive statistic which speaks to the quality of the defense counsel, the agencies the carrier insures and the agencies’ strong commitment to solid E&O loss prevention. Unfortunately, there have been a significant number of E&O claims where the lack of quality documentation resulted in the agency being responsible for the damages when it probably should not have been. There were cases where the CSR stated that he or she was “just too busy” to do the proper job of documentation. Imagine being on a jury and hearing that!
IABforME.com | PRIMARY
Clearly, good quality documentation is the key. As Aristotle once stated, “Excellence is an art won by training and habituation. We are what we repeatedly do. Excellence, then, is not an act but a habit.” Sounds like a pretty smart man. n
The Utica National E&O Program supplied this article. Our sales center is the exclusive agent for the Utica E&O program in Delaware, Maryland and Pennsylvania. For questions regarding this article or your E&O coverage, contact IA&B at 800-998-9644 or IAB@IABforME.com.
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COVERAGE CORNER
WHAT IS A “WORK-RELATED INJURY”? Jerry M. Milton, CIC
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’ve been teaching workers’ compensation for many, many years. I always try to keep things simple so I’ll be able to understand them. If it gets too complex, I get confused. When discussing workers’ compensation, I’ve always said that the various state workers’ compensation laws are similar – they stipulate that benefits will be paid for a “work-related injury” or an “occupational illness.” Keeping it simple, I usually say that in order for it to be a “work-related injury,” there are two requirements that must be satisfied: 1) the injury must occur while
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at work and 2) the injury must arise out of the work. To prove my point, for years I’ve used an Alabama case in which two warehouse employees were arm wrestling during their break. One of them suffered neck and back injuries and filed a workers’ compensation claim. The insurer denied the claim, and the trial court agreed with the insurer. The court stated that “the injuries did not arise out of the employee’s work or during the course of employment. However, the Pennsylvania Workers Compensation Board (WCAB) and the Pennsylvania courts don’t necessarily
APRIL 2015
agree with this interpretation of the workers’ compensation law. On Nov. 10, 2014 a Pennsylvania appellate court affirmed an order by the WCAB awarding workers’ compensation benefits to a worker who sustained facial lacerations and permanent scarring when he was bitten in the face by a coworker’s dog. In 1912 Hoover House Restaurant v. Workers Compensation Appeal Board, No. 309 C.D. 2014, (Pa. Commw. Ct. 2014), the appellate court concluded that the worker was on a smoke break at the time of his injury and that petting
the coworker’s dog had nothing to do with his duties as a part-time line cook. However, the court indicated that the WCAB could conclude the injuries arose out of and in the course of the injured worker’s employment since the employer’s premises had a break area where employees regularly smoked, the injured worker was within three feet of an ashtray tower provided by the employer, and that although petting the dog was not part of the cook’s job, small temporary departures from work did not break the course of employment rule. The facts of this case were similar to those in The Baby’s Room v. Workers Compensation Board, 860 A.2d 200 (Pa. Commw. Ct. 2004), in which the claimant was injured while making a furniture delivery. After delivering furniture to a residence, he jumped up and grabbed the rim of a basketball goal which was on the driveway of the residence. The claimant’s hand slipped off the rim and he fell backwards, hitting his head on the concrete driveway. As a result, he suffered a traumatic brain injury. In this case the court found that the injured worker was eligible for workers’ compensation benefits since his actions were “an inconsequential departure from delivering furniture” for his employer. But, wait! Hold on! Just when you think you’ve got it figured out, along comes the case of Trigon Holdings, Inc. v. Workers Compensation Appeal Board, 74 A.3d 359 (Pa. Commw. Ct. 2013). In this case, the worker sustained injuries while polishing a bolt for his child’s go-cart while he was on the employer’s premises using the employer’s tools. The injured worker checked to make sure all his work was complete, told his co-workers that he was going to the tool and die room for a few
minutes, walked the 20 to 25 feet to the room and polished the bolt, sustaining injuries while doing so. The appellate court held that his departure to the tool and die room was a “pronounced and significant” divergence from his duties, and therefore workers’ compensation benefits were not applicable. In the 1912 Hoover House Restaurant case, the court indicated that petting the dog was similar to touching the rim in The Baby’s Room case. The smoke break did not interfere with the line cook’s duties and was acceptable by the employer. The additional step of petting the dog was an inconsequential departure for the cook and was not comparable to the employee’s departure in Trigon Holdings, Inc. What’s a “work-related injury” in Pennsylvania? I don’t know. I’m confused! Y’all take care! n
Jerry M. Milton, CIC, teaches and consults on industry issues. The legal profession recognizes him as an expert on insurance coverages. He also serves as our education consultant, working with our CISR, CIC and continuing education programs. Catch him at one of our upcoming seminars: IABforME.com/MyTraining.
CIC CORNER OUR FOUR CIC education consultants boast a combined 170 years of insurance industry experience. Here, one of our consultants – Jerry Milton, CIC – offers his advice to those beginning the program. Q. I’m about to take my first CIC institute. How should I approach it? A. Pay close attention throughout the entire time period, but concentrate on the issues that the instructor emphasizes. Q. I’m nervous about the exam! What’s your advice? A. Don’t get yourself worked up. At the end of the day, you can’t review everything that was taught. Recognize your strengths and weaknesses and come back and concentrate on those areas where you’re having problems. Then get some rest! Nationally recognized and highly respected, the CIC program challenges agents to take their knowledge to a higher level with five intensive institutes. Designees are set apart by their ability to maximize coverage in innovative ways for their customers. Visit our website to read more about the program and to register for an institute near you. IABFORME.COM/CIC
IABforME.com | PRIMARY
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STATE NEWS
TERRORISM INSURANCE DISCLOSURES ON THE FAST TRACK If you haven’t already, expect to hear from your carriers soon. Insurers are required to disseminate updated terrorism insurance disclosures and offers by April 13 to reflect recently legislated changes. Instructions on the disclosures came from the Federal Insurance Office’s interim guidance on the Terrorism Risk Insurance Program Reauthorization Act of 2015. As an aside, the Maryland Insurance Administration this winter released Bulletin 15-05 to describe its accelerated filing procedures.
MINIMUM WAGE TO INCREASE INCREMENTALLY The Maryland Minimum Wage and Overtime law adjusted the minimum wage rates as of Jan. 1, 2015 and sets forth a series of increases into 2018. $7.25/hour – until Dec. 31, 2014 $8.00/hour – effective Jan. 1, 2015 $8.25/hour – effective July 1, 2015 $8.75/hour – effective July 1, 2016 $9.25/hour – effective July 1, 2017 $10.10/hour – effective July 1, 2018 Employers are required by law to post information on the state’s Minimum Wage and Overtime Law. An updated poster is now available on the Department of Labor’s (DOL) website. Please note that employers in Prince George’s and Montgomery Counties are subject to a slightly different set of increases. The information – and county-specific posters – are also available on the DOL website. DLLR.state.md.us/labor/wages/wagehrfacts.shtml As a reminder, all member agencies have access to our proprietary HR Solution©, a comprehensive collection of base human resource products and services designed exclusively to help you develop and maintain your agency’s HR program. IABforME.com/emp_mgmt
UPDATED ACORD FORMS PROMPT ACTION Revised Personal Auto Applications – 90 MD and 290 MD – are now available on the ACORD website. ACORD corrected the forms, which did not have enough space in the COVERAGES / PREMIUMS section, other blank coverages rows, CODE column, to enter a five-character entry. As a reminder, updating your agency management system ensures that you’re using the most recent ACORD forms, which are introduced periodically. What’s more, updating your agency management system guarantees that you’re not in violation of a licensing agreement. It is a violation to issue prior editions of a superseded ACORD form once a new form is introduced. The obligation stems from the licensing agreement between ACORD and your agency management system vendor (AMS, Applied, etc.).
ACORD.org
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APRIL 2015
THE RACE TO INSURE RIDESHARING DRIVERS As adoption of ridesharing picks up speed (Google is now rumored to have its own ridesharing plans), the race to provide drivers with adequate insurance coverage is on. GEICO announced over the winter that its new ridesharing product – which replaces a personal auto policy (PAP) with a policy that provides coverage for personal and ridesharing purposes – has been approved in Maryland. As a reminder, ISO released an advisory notice last fall that explains the PAP exclusion for a vehicle “being used as a public or livery conveyance” and encourages drivers to contact their insurance producer to discuss coverage and any gaps. Carriers have the option to use the notice and, if so, to modify it. Have you alerted your personal auto customers to the potential insurance repercussions of ridesharing? If you don’t, GEICO and the like could beat you to the punch. Open the lines of communication by personalizing and sharing our members-only consumer education pieces on ridesharing. IABforME.com/consumer_education NOTE: The library includes two ridesharing flyers – one under the personal lines category (for passengers) and one under commercial lines (for drivers).
MIA RELEASES BULLETIN BANNING PRICE OPTIMIZATION Efforts by carriers to tie policy rates to an insured’s odds of “shopping around” have been deemed unfairly discriminatory by the Maryland Insurance Administration (MIA), according to a bulletin on price optimization released last fall. Price optimization refers to the “practice of varying rates based on factors other than the risk of loss, such as the likelihood that policyholders will renew their policies and the willingness of certain policyholders to pay higher premiums than other policyholders.” The bulletin would apply to: • The practice by an insurer of partnering with a vendor (like Choicepoint/LexisNexis) and calling the policyholder to offer a better rate when that insurer is notified that an MVR is pulled by another carrier • The “retention model” or “longevity model” that would use various factors, including average age of the policy and/or average age of the policyholder to determine the likelihood of shopping the market and offer better conditions Since the bulletin’s release, we’ve learned that although some of these practices have been clearly visible and approved in past rate filings, the MIA, upon further consideration, has deemed them improper, and the previous filings will have to be amended. Although Maryland appears to be the first state to act on this issue, price optimization has been on the list of issues being discussed by the National Association of Insurance Commissioners for quite some time. IABforME.com | PRIMARY
IA&B members Bob Klinger (left) and Mike Ertel (right) meet with Senate Finance Committee Chairman Mac Middleton
BREAKING BREAD WITH KEY LAWMAKERS We’re making inroads with legislators. Earlier this session, we hosted a dinner for members of our key legislative committees – the Senate Finance Committee and the House Economic Matters Committee – to mix, mingle and talk shop with our member agents. These are the lawmakers who deal most often with the issues that matter to our members, not only as insurance professionals but as small-business owners.
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PLATINUM PROFILE
Insurance Agents & Brokers proudly recognizes Millville Insurance Companies as one of its Platinum Partners. IA&B Platinum Partners dedicate the highest level of sponsorship to our organization.
MILLVILLE INSURANCE COMPANIES
T
o most consumers, insurance is all about paying premiums, but at Millville Mutual it’s more about returning those premiums to policyholders, agents, employees and our community. Each year Millville Mutual is able to help policyholders recover from losses such as fires, wind damage, hail storms, lightning strikes, water leaks, lawsuits and even home appliance breakdowns. Over the past five years Millville Mutual has returned over $64 million to policyholders and claimants for claim payments. But this is only part of it. With the combined operations of the three companies under the Millville Insurance Companies umbrella, Millville serves 65,000 policyholders that are represented by over 200 independent insurance agencies throughout Pennsylvania and southern New York. These agencies choose to partner with Millville because of their unique coverage offerings, experienced staff and ability to honor their obligations. Millville takes this responsibility to heart and was ranked as one of the highest among smaller regional insurance companies in a recent satisfaction survey done by the Insurance Agents and Brokers Association. The Company is also rated A (Excellent) by A. M. Best Company.
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The board and staff of Millville have long tenures with the company and are committed to the success of the business. They are also active members of their communities. As citizens and parents, they volunteer their time for public service to make a difference in their local communities and touch the lives of more than just their policyholders.
FOCUSED ON RESULTS FEATURED PARTNER
Millville Insurance Companies: Millville Mutual Insurance Company Millville Insurance Company of New York Anthracite Mutual Fire Insurance Company
Millville Mutual is also proud of its long-standing commitment to support local service organizations, educational initiatives and youth organizations that foster development and lend a helping hand to those who need it most. Millville Mutual is privileged to be affiliated with these outstanding programs that embody their service mentality.
COMPANY PRESIDENT
Every dollar Millville takes in matters. It generates an opportunity to serve a policyholder, support an independent agency force that services the needs of their clients, employ a local resident and support a socially responsible community organization while at the same time building surplus to insure the financial security of the company. Millville Mutual would like to thank their agency force for entrusting them to take care of them and for giving them the opportunity to pay it forward. n
www.millvillemutual.com www.millvilleinsuranceofnewyork.com
APRIL 2015
M. Paige Raski COMPANY LOCATION
215 State Street, Millville, PA 800-262-8495 A.M. BEST RATING
“A� (Excellent) WEBSITE
PARTNERS PROGRAM
Listed below are those companies that strongly support the independent agency system and Insurance Agents & Brokers. Thank you for your continued sponsorship.
WHAT IS IA&B PARTNERS? The IA&B Partners program gives company and allied businesses the opportunity to demonstrate their commitment of support to independent agents and receive maximum market exposure. As an IA&B Partner, you will also realize the benefits of IA&B membership to help you succeed in the insurance industry.
DO YOU SEE YOUR NAME? To become an IA&B Partner, choose the sponsorship package that matches your commitment of support. Contact the Member Sales Center at 800-998-9644, 717-795-9100 or visit us online at IABforME.com to get started.
PLATINUM LEVEL
BRONZE LEVEL
ACUITY
Aegis Security Insurance Co
Berkley Mid-Atlantic Group
Agency Insurance Company
Donegal Insurance Group
AmWINS Program Underwriters Inc
Erie Insurance Group
ARI Insurance Companies
Harleysville Insurance
Auto-Owners Insurance Company
HM Insurance Group Insurance Agents & Brokers Service Group Inc
Bailey Special Risks Inc Briar Creek Mutual Insurance Company
Liberty Mutual Insurance
Conemaugh Valley Mutual Insurance Co
MMG Insurance Company
Countryway Insurance Company
Millers Mutual Group
Encompass Insurance
Millville Mutual Insurance Co
Foremost Insurance Group
Mutual Benefit Group
GMI Insurance
Penn National Insurance
Goodville Mutual Casualty Company
Swiss Re
Guard Insurance Group
The Main Street America Group
Insurance Alliance of Central PA Inc
United Fire Group
Insurance Placement Facility of PA
Utica National Insurance Group
Keystone Insurers Group Inc Lebanon Valley Insurance Company
GOLD LEVEL
MAPFRE Insurance
Progressive
Merchants Insurance Group
Westfield Insurance
Mercury Casualty PennPRIME Municipal Insurance
SILVER LEVEL
Reamstown Mutual Insurance Company
Access Insurance Company
Rockwood Casualty Insurance
American Mining Insurance Co
State Auto Mutual Insurance Company
Cumberland Insurance Group
TAPCO Underwriters Inc
Farmers Mutual Insurance Company of Western Pennsylvania
The Brethren Mutual Insurance Company
Frederick Mutual Insurance Co
The Motorists Insurance Group
Juniata Mutual Insurance Co
The Mutual Service Office Inc
PSBA Insurance Trust
Travelers
Selective
Tuscarora Wayne Group of Companies
The Philadelphia Contributionship
Zenith Insurance
IABforME.com | PRIMARY
11
THE ROAD TO
AFFORDABLE
CARE ACT COMPLIANCE Determining your agency’s direction By Jerry Rhinehart, CIC, CLU, ChFC, RHU
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APRIL 2015
In just the five short years since the Affordable Care Act (ACA) was signed into law, it has seen more than 40 revisions, exemptions, waivers, delays and repeals to its provisions. No wonder employers – particularly small-business owners like most IA&B members – are torn on how to proceed, how to comply with the law and help their employees do the same. On the following pages we offer options for the small business, and on our website we share a supplement with additional considerations for large employers.
W
ith the Affordable Care Act’s (ACA) second open enrollment period (Nov. 15, 2014 – Feb. 15, 2015) having come and gone, it’s time for reflection on a bumpy past – and for contemplation of what’s to come. Initial reports show far fewer enrollment “glitches” – with the exchanges (state and federal), insurance carriers, etc. – than the first time around. But emotions continue to run high: Some love the law, while others hate it. Some individuals and employers saw their health insurance premiums increase in 2014, while others saw a decrease. We can expect more of the same in 2015, so this article addresses the reasons why – and explains what options small employers might consider when it comes to health insurance for their employees. (Editor’s note: We share more of what large employers need to know at IABforME. com/ACA-large-employers.) Options include providing: • A fully insured plan • A (partially or fully) self-insured plan • No health insurance for employees and instead push them to the exchange It is worth noting that if health insurance is offered, it must be done across the board, not only to select employees.
IABforME.com | PRIMARY
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MORE EMPLOYEES, MORE CONSIDERATIONS IF YOUR agency falls within the mid-size (50 to 99 full-time employees, including FTE) or large employer (100 or more full-time employees, including FTE) categories under the law, potential penalties for not providing a qualified health plan apply … in some situations. Get the complete scoop – to include examples – by visiting our website. IABFORME.COM/ACA-LARGE-EMPLOYERS
UNDERSTANDING THE REQUIREMENTS While the ACA mandates that individuals show proof of compliance, it does not mandate an employer of any size to provide its employees a qualified health plan (QHP) – a plan that contains all of the mandated coverage and requirements as spelled out in the law. However, the law does mandate potential financial penalties to certain sized employers, in some situations. First, let’s start with a few very important employer rules and definitions to keep in mind: • Full-time employee = one who works 30 hours or more per week • Full-time equivalent employees (FTE) = part-time employees who work less than 30 hours per week and combine to equate full-time employees under the law (healthcare.gov/FTE-calculator) • Small employer = business with 50 full-time employees (including FTE) for the entire calendar year
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APRIL 2015
• Mid-size employer = business with 50 or more full-time employees but less than 100 (including FTE) • Large employer = business with 100 or more full-time employees (including FTE) There is no chance of an ACA penalty to any small employer. For large employers, the chance of an employer penalty started Jan. 1, 2015. For mid-size employers, there is no chance of a penalty until Jan. 1, 2016. SELF-FUNDING THE HEALTH PLAN Self-funding (fully or partial) can be a great option for certain sizes and types of businesses. Fully self-funding means the employer retains all the money that normally would be sent each month to the health insurance company – including the employee and employer contributions. Then, any and all claims would be paid by the employer, who normally would retain a third-party administrator (TPA) to review and pay amounts owed. Obviously, one or more large claims could financially devastate the fully self-insured arrangement.
CALCULATING EMPLOYEES UNDER THE Affordable Care Act, a business’s number of employees impacts potential financial penalties and SHOP eligibility. Here’s how to calculate the total number of employees, which includes full-time employees and full-time equivalent employees (FTE). FORMULA NUMBER OF full-time employees + (sum of average weekly hours for all part-time employees)/30 EXAMPLE THE ABC Insurance Agency has 40 full-time employees who work 30 or more hours per week. The agency also employs 20 part-timers who log an average of 20 hours per week.
Partially self-funding implements the use of a stop-loss arrangement. Here, the employer – normally working through an agent and a TPA – would purchase stop-loss insurance. One great advantage in looking at stop-loss insurance is the review of past medical claims and expense. The better the claims experience, the better the premium for the stop-loss insurance.
THE SUM of the part-time employees’ average weekly hours (20 part-time employees x 20 hours) is 400. Divided by 30, that equals 13.33 FTE. 40 FULL-TIME employees + 13.33 full-time equivalent employees = 53.33 employees in the eyes of the federal health care law
So how does stop-loss work? Once covered claims hit a certain point, the employer – through its self-insurance – stops paying, and the stop-loss takes over. With this arrangement the employer would have a known maximum financial exposure. Generally, the more employees a business has, the more appealing the self-funding option is. Additionally, if the group’s average age is somewhat younger and if the past claims history has been moderate or low, then the employer would most likely be a good candidate for some form of self-funding. BUYING THROUGH THE SHOP Another option is the Small Business Health Option Program (SHOP). This is available in every state for a business with 1 to 50 full-time employees (including FTE). In 2016, the SHOP will open to businesses with up to 100 full-time employees (including FTE). Various plans are available, even dental. Currently, 18 states – to include Delaware and Pennsylvania have limited options in their SHOP compared to the other states. State regulators in these jurisdictions applied to delay the
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employee-choice feature within the SHOP until 2016. Once implemented, employees will be able to sort through multiple plans offered by numerous insurers and select the option that best suits their needs. Until then, employers only will offer employees one medical and one dental plan (aptly coined an employer-choice plan). In Maryland, which operates a state-run rather than federally facilitated exchange, the employee-choice option launched in 2015. When purchasing coverage through the SHOP, the employer receives one monthly bill for all covered employees. Be aware that there are minimum participation requirements for health plans through the SHOP and that coverage cannot be obtained through the SHOP if the business has only the owner (and perhaps the spouse) but no true employees. However, the owner (or couple) could purchase an individual policy through the exchange or go directly to an insurance company for their coverage.
POINTING EMPLOYEES TO THE EXCHANGE What if the employer provides no health insurance and the employee buys his or her own coverage and possibly receives a subsidy through the exchange? Certainly this is a consideration for any business. If the business has less than 50 full-time employees (including FTE), there is no chance of an ACA penalty to the business. However, it is all or nothing: The business cannot offer a group policy for some employees and single out others to buy on the exchange. Another option: The employer could increase the employee’s salary to assist with the premiums. Obviously, the increased salary would be taxable to the employee and could affect his or her possible subsidy. Be sure to be fair with any increased compensation. Any appearance of discrimination toward certain classes of employees or toward those with perceived health conditions potentially could cause legal problems.
Coverage only can be obtained online (paper applications are not accepted). For more information on the SHOP, go to healthcare. gov/small-businesses, or see a licensed, SHOP-approved agent for assistance with coverage options and enrollment.
CONCLUSION Whether to provide – or not to provide – employee benefits (health insurance, group life, group disability, etc.) has always been a major question for the business owner … especially a smaller employer. These benefits have generally been a very
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APRIL 2015
For All That Matters
facebook.com/acuitywow
CONSIDERATIONS FOR INDIVIDUALS Knowing the new health law’s requirements for individuals is key to understanding obligations for an employer.
PENALTIES Failure of an individual (or family) to show proof of carrying a qualified health plan (QHP) in 2014 and beyond will prompt a financial penalty. The penalty – actually referred to as a “shared responsibility payment” in the ACA – for an individual jumped from the greater of $95 for the entire year or 1 percent of gross income in 2014, to $325 or 2 percent in 2015. This is an annual penalty, which can be pro-rated on a monthly basis.
good tool to attract and keep the employees. In fact, according to a 2014 Aflac WorkForces Report for Small Businesses, nearly half (47 percent) of small-business employees reported that their employers could improve retention by improving their benefits package. Even though they are generally deductible, benefits can certainly have an impact on the employer’s bottom line. Working with a knowledgeable health and benefits specialists and tax consultant is more important than ever with the implementation of the ACA. n Editor’s note: Thank you Tammy Shatto-Thomas, of Gunn-Mowery LLC, for her contributions.
Jerry Rhinehart, CIC, CLU, ChFC, RHU, of Rhinehart & Associates, authored this article for IA&B.
SUBSIDIES An individual’s (or family’s) eligibility for an ACA subsidy is determined by income in comparison to the federal poverty level (FPL). If an individual’s (or family’s) income is below 400 percent of the FPL in 2015, he or she is eligible for a premium subsidy. The lower the income, the bigger the subsidy. The amount of the 2015 subsidy is based off the 2014 actual (or estimated) annual income. What does 400 percent of the federal poverty level look like? $95,400 for a family of four, $62,920 for a family of two, and $46,680 for a single individual. For additional information on the FPL rule and an overview of different income levels and family sizes, visit obamacare.net/2015-federal-poverty-level. The Congressional Budget Office estimated the average annual premium subsidy for an individual was $5,510 in 2014. Where is the money coming from to fund all these subsidies? The ACA’s 21 new revenue generators (taxes) aimed at individuals, businesses, insurance companies, pharmaceutical companies, and medical-device manufacturing companies.
PITTSBURGH I-DAY
FRIDAY, APRIL 24TH, 2015 Doors Open at 8:00 AM You Must Be Registered to Attend.
I-Day Events Kick Off on Thursday for the Presidential Dinner and The Main Event on Friday Including CE, Exhibits, Luncheon with Speaker, and Cocktail Reception.
Bridging the Gap:
Connecting the Traditions of the Past to a New Generation of Insurance Professionals
Visit www.insclubpgh.com or Call The Club Office (412.489.5626) to Register, Exhibit, Advertise, or For More Information
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APRIL 2015
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SALES
APRIL 2015
STRATEGIES FOR TAKING By John Graham
CHARGE
Tactics constantly come and go in sales without making a significant impact on outcomes. On the other hand, solid strategies can make a significant difference in what happens. Here are 10 sales strategies that can have a positive influence on performance.
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Worse yet, such “labels” stick, unless we work to change them by having a clear picture of how we want to be perceived and actively reinforce it. If being seen as thoughtful, helpful, hard-working, cooperative, motivated and reliable is your preference, then the task is focusing on strengthening those qualities.
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Define yourself clearly. Most people let others decide who they are, define their capabilities, and what they can accomplish. This happens without even knowing it. More often than not, the results are far from accurate.
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Be ready with answers to questions. Experienced salespeople have thoughtful and carefully crafted answers when customers ask questions. That’s good as far as it goes, but what about the questions that customers think about after a meeting? When they’re left unanswered, they can challenge credibility and raise doubts. This is why frequently asked questions can help avoid problems. Make a list of those that come up time-and-again, along with your answers. Ask customer service people to help. Then email your FAQs to a customer or prospect after a meeting. Also add a link to your FAQs to your email signature. It’s a good way to show you know what customers are thinking.
Rethink responsiveness. While responsiveness is a top business value, it’s usually related to “putting out fires.” Problems get immediate action. What about the other 99 percent of the time? Specifically, voice mail messages, emails, agreed-to deadlines – the list might be long. Failing to manage the details sends a powerful message; so does handling them.
Use the power of pause. Salespeople often talk their way out of sales. It doesn’t take talent, just an endless stream of words that confuse, frustrate and antagonize customers who can’t get a word in edgewise. Salespeople often act as if a lull in their sales spiel is so dangerous that it must be avoided at all cost. There’s a better way. Taking time to pause lets customers absorb what is being said and suggests the person speaking is thinking about their choice of words. Pauses also encourage listening; it’s as if customers are waiting for what’s coming next.
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Manage prospects effectively. The mismanagement of prospects creates the weakest link in the sales chain. Prospects are dropped too soon or disappear due to a lack of regular follow up.
IABforME.com | PRIMARY
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ike customers, prospects deserve good management: L Some change their minds, others aren’t ready to buy, and a number simply need encouragement. One salesperson I know gets referrals from a prospect that didn’t buy because of a health problem but who felt the consistent follow up sent the right message.
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Put the emphasis where it belongs. Because selling is a tough profession, salespeople like to let everyone know that “nothing happens until someone sells something.” This phrase is quoted so often, it’s assumed to be true. It’s never challenged, even though it’s nonsense. I n fact, just the opposite is true: Nothing happens until someone buys something. This stands selling on its head and changes the way to think about marketing and sales. It moves the emphasis from the salesperson to the customer – where it belongs.
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Getting customers to say yes isn’t the goal. Even though reality has changed, the persuasion mindset remains embedded in marketing and sales: “If I can get an appointment, I’ll come away with an order” or “If we can get through to consumers with our message, that’s all it will take.”
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APRIL 2015
SALES & MARKETING TRAINING WHETHER YOU’RE pursuing your Certified Professional Insurance Agent (CPIA) credential or simply looking to improve your marketing skills, the CPIA Insurance Success Seminars fit the bill. The courses help you plan and improve your sales techniques to convert your prospects into customers. LEARN HOW to generate qualified leads that translate to more sales – and more commissions – at the three Insurance Success Seminars: Position for success – module 1 Implement for success – module 2 Sustain success – module 3 IABFORME.COM/CPIA
The mismanagement of prospects creates the weakest link in the sales chain. Prospects are dropped too soon or disappear due to a lack of regular follow up. ven though the mindset persists, E it’s dead. Marketing and sales are at a different place; they’re about engaging customers by involving them in the process and making sure they have a place at the table. Communication is not just helpful. What customers are thinking and saying dwarfs everything else.
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Aim for the right fit. No salesperson can serve every customer. No one can always have the correct product or service, and no salesperson can possess the personality or temperament that is the right match for every customer. Too many in sales waste time trying to prove these wrong. It never works.
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Think like a customer. It’s not only difficult for salespeople to think like their customers; many make a point of avoiding it. They don’t want to be distracted from staying focused on getting the order. Even so, salespeople should appreciate what making a purchase means to customers.
Whether it’s a friendly smile from a barista at Starbucks handing someone a favorite latte or an life insurance salesperson saying to a client, “I know what doing this means to you,” the message is the same. Both are making it clear that they recognize the importance of thinking like a customer.
For consumers, neither what they buy nor the cost is the issue. What’s important for salespeople is recognizing that making a purchase is a personal investment that they take seriously. It’s as if a customer says, “Hey, salesperson. This is my money, and I want to feel that you recognize what I’m doing. It’s my skin that’s in the game.”
When it comes to lasting results, these 10 sales strategies can make a difference. n
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John Graham of GrahamComm is a marketing and sales consultant and business writer. He publishes a free monthly eBulletin, “No Nonsense Marketing & Sales.” Contact him at jgraham@grahamcomm.com, 617-774-9759, or johnrgraham.com.
Get people talking about you. Salespeople say referrals are the best business. Yet, for most, referrals are few and far between, the wish that’s rarely fulfilled. Worse yet, there are customers and others who pass them out as if they’re giving candy to kids – and they have no value. Getting legitimate referrals means being a continuing presence in the minds of customers, prospects or anyone else. It’s easy to do by finding ways to be of help. When this occurs, the common response is to reciprocate. In other words, making referrals is a way for customers, prospects and others we know to say, “Thank you.” I t isn’t how well known salespeople are that makes the difference; it’s how much help they give that counts.
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Gray is the new color of
staffing for some agencies.
UNIQUE CONTRACT-STAFFING SOLUTION TAPS “PRETIRED” INSURANCE PROS WAHVE—Work At Home Vintage Employees— is an innovative contract staffing solution providing agencies with dedicated, highly experienced insurance professionals to fill their staffing and support work needs.
IA&B members benefit from NO SET-UP FEE. That’s a savings of $2,500. Read more and watch our webinar “Staffing Solutions for 2015 and Beyond” at
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WAHVE has a significant database of “pretired” baby-boomers who want to continue to work from home (whether full-time or part-time) while phasing into retirement. For agencies, that’s a pool of talent that can be tapped as needed, avoiding a long learning curve and other hiring hassles.
CLASSIFIED
My Events April 2015
DATE TOPIC
LOCATION
APRIL 7
William T. Hold: Writing Commercial Accounts
Bethlehem, Pa.
8
CISR Commercial Casualty I
Mechanicsburg, Pa.
8
CISR Commercial Property
Erie, Pa.
9
CISR Commercial Casualty I
Pittsburgh, Pa.
13-14
James K. Ruble Graduate Seminar
Pittsburgh, Pa.
14
William T. Hold: Policy Language Surprises
Pittsburgh, Pa.
15
William T. Hold: Policy Language Surprises
Altoona, Pa.
16
CISR Commercial Property
Wilkes-Barre, Pa.
16
CISR Elements of Risk Management
Frederick, Md.
21
CISR Personal Auto
Indiana, Pa.
21
E&O Risk Management Seminar
Macungie, Pa.
22
CISR Commercial Casualty I
Waldorf, Md.
22
E&O Risk Management Seminar
Mechanicsburg, Pa.
27-28
James K. Ruble Graduate Seminar
Philadelphia, Pa.
28
CISR Commercial Casualty I
York, Pa.
28
William T. Hold: Writing Commercial Accounts
Reading, Pa.
28-30
Property & Casualty Licensing Study Course
Philadelphia, Pa.
29
CISR Commercial Property
Philadelphia, Pa.
A DV E R TI S E M E N TS SOUTHEAST PA PRODUCERS & AGENCIES Professional agency since 1926 located in Feasterville, Bucks County, Pa. Call for confidential information and a review of our services. Contact Ray Reinard at 215-357-8600, Ext. 119.
SALES AGENT/PRODUCER Community Insurance, a thriving independent insurance agency in Lancaster, Pa. is seeking a motivated sales agent. Ideal for a newly licensed agent looking to take that next step or a seasoned producer seeking the most competitive markets in the industry. Bring your P&C and/or Life & Health talents to a proven industry leader. Forward resume and cover letter to: Tom@CommunitySure.com If you would like to place a classified advertisement, please contact Laura Gaenzle at Laura.gaenzle@theygsgroup. com or (717) 430-2351.
JERRY’S BACK WITH ESSENTIALS OF HOMEOWNERS INSURANCE This full-day program — taught by coverages expert Jerry Milton, CIC — is a chance for newly licensed agents to be taught by the best. This eight-credit class is a great next step in professional development as the material will expand on what was learned in preparation for the licensing exam. New producers will gain practical knowledge and hear real-world examples as only Jerry can relate them.
May 13
8 a.m.-5 p.m.
Read more and register at IABforMe.com/homeowners
IA&B Headquarters, Mechanicsburg, PA
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