Selling Age-Banded Rates
Because of last-minute changes to the Affordable Care Act at the end of 2013, many brokers are seeing a bulk of their small-group quoting and sales activity beginning now. Engaging in these processes has been a mixture of remembering the old…and learning the new. At the intersection of old and new are the broker-driven processes for gathering quotes. Traditionally, carriers provided brokers with access to on-line quoting portals, designed to generate a “street rate” or “sunny day” rate for their clients. Now, brokers are being asked to interact with these systems not as rough ballpark estimates, but as proposal generation machines themselves. So, business as usual…with an alarmingly unusual output: One-year age-banded rates. For brokers who have always sold composite rates to their small-groups, selling age-banded rates has been a new trick to master.
Problems with One-Year Age Bands
“One-year age bands are the very bane of my existence right now,” a broker told me, “they’re extremely difficult to make a presentation out of and sell!” Here’s the problem: Traditionally, brokers used formats like enrollment booklets & benefit election sheets to present pricing choices to applicants. Some variation of four composite bands were most often used to show pricing options: Employee, Employee + Spouse, Employee + Child and Family. No matter who you were, or how old you were, employees were essentially selecting between four numbers, which fit quite nicely at the bottom of an election sheet comparing the products. “Now, what am I supposed to do if everybody’s rate is going to be different?” one frustrated broker asked me, “Am I supposed to hand everybody the rate table and a calculator?” And that’s just the operational burden. I’m not even touching the discrimination issues that age-banded rates raise…That’s big enough for a separate post. Below are some ways that brokers are addressing the age-banded dilemma:
Favor carriers who provide composite rate structures: In some markets, carriers have begun issuing composite rated proposals through their on-line portals. Often though, the market segment for which these rates are released is limited (i.e., groups of 20 or more). While the long-term viability of these methods remains in question, certain carriers are being dubbed “easier to do business with” because of this. In the cases where these rates are not competitive, however, brokers will still need to seek other alternatives.
Utilize a calculator to flatten age-banded rates into a composite structure: Some carriers provide on-line tools to convert age-banded rates to composite rates. Additionally, benefit technology companies can be helpful by jumping into this arena as well. In using composite calculators, multiple methodologies currently exist for flattening the bands, including risk-adjusted models (anticipating that SHOP exchanges will split plans among multiple issuers), reallocated composite models and factor-based models.
Invest in on-line enrollment technology that can accommodate age-banded pricing: Recognizing that price remains the most significant factor in driving group enrollment decisions, brokers should not shy away from a competitive rate simply because of one-year age bands. Instead, brokers should seek to partner with technology companies to create “on-line benefit election sheets,” through which the one-year age bands can be stored & displayed candidly to applicants. Whether one-year age-bands are here to stay remains to be seen, but brokers seeking to provide the best service to their small groups should not shy away from selling these rates just because of the administrative difficulties that they pose. It is in solving difficult problems that brokers can be the most valuable to groups.