Originally published in Life Health Pro December 1, 2011 

Agents can make affordable high-deductible plans more palatable — and less risky — for clients by “stacking” on extra low-cost coverage.

As many independent life and health insurance agents have recently experienced, tailoring a comprehensive insurance plan at an affordable price point to meet a client’s need has become more challenging due to the current economic climate.

Personally, over the last seven years that I have been in the insurance industry, the individual health insurance market has made up a large portion of my revenue. It’s also a great lead-in for cross-selling other insurance products.

However, with the rising costs of medical insurance premiums, my clients have faced a challenging choice: pay the exorbitant premium or significantly raise the deductible.

Until recent years, the average personal deductible was between $500 and $1,000. Today, however, many agencies see clients with deductibles between $2,500 and $5,000. Initially, these may seem like astronomical numbers, but agents have found a way to make these plan designs much more palatable to the consumer while also better protecting them should a major health crisis occur.

Hedging bets

To state the obvious: while paying a designated premium each month is guaranteed, the possibility of having to pay one’s deductible is not. In this respect, deductibles can be viewed much like the lottery: whether today’s Powerball is $1 million or $100 million, no one cares if they do not win. The same holds true for one’s deductible. A large portion of an agency’s clientele would be hard-pressed to reach a $2,500 deductible, let alone a $5,000 deductible. As a result, many have counseled some of their clients to save the additional premiums that are freed up when choosing a higher deductible plan and hedge their bets by adding supplementary products to their plan.

For instance, agents rarely sell an individual plan without adding some form of accident or critical illness product to accompany it. A $5,000 deductible plan with an accident and critical illness rider can usually protect the client against the types of illnesses and events that would be most likely to result in hitting such a high deductible in the first place (such as a broken arm, cancer, heart attack, stroke, etc.) while doing so at a premium savings.

One plan that is well-liked by many agents is the critical illness plan offered by Humana. For a non-smoker, 30 to 40 years of age, it’s just $4.75 a month for a $5,000 lump-sum benefit upon diagnosis of any of the three main critical illnesses. So given a choice between paying $250 or $254.75 a month for a plan that will cover your entire deductible should one of these major illnesses strike, it is typically an easy decision for the client to favor the latter. In light of this, agents are essentially getting back to the original purpose of medical insurance, which is to protect oneself should a major illness arise.

Benefits of “stacking”

In addition to lowering the client’s monthly premiums, there are several other benefits to this approach of “stacking” insurance plans. First, carriers are typically more likely to extend a preferred or standard rating to a client who chooses a higher deductible plan, even if such a client is taking medication for controlled hypertension or elevated cholesterol, which would normally cause the carrier to rate-up the policy.

Next, people who adhere to a stacking philosophy may give more serious consideration to HSA-compatible plans, which have a list of their own benefits, including favorable tax treatment. From an agent’s perspective, a stacking approach can set you apart from other agents, who may only be showing their client plan X. And it’s often been found that the more policies a client has with a given agent, the more loyal he or she is, which leads to better overall retention.

Also, the accident and critical illness plans normally pay much more lucrative commissions than the stand-alone medical plan itself. Therefore, it is possible to make more money on a case that is stacked, even if the overall premium outlay of the client is less.

In a higher deductible “stacking” approach, it’s also possible to put the freed-up dollars toward other products that may have initially seemed too expensive for the client to purchase, such as disability or life insurance. I can’t speak for other agents, but my inkling is that they, too, have found it far easier to address a client’s life insurance needs after saving the client money on health insurance or another given plan.

But above all else, a strong argument can be made that a client will be better protected. Worst-case scenario, clients may be unwilling to raise their deductible, but they might still have an interest in one of the additional product offerings that an agent overlooked or failed to present before.

New trends on the horizon are policies with higher deductibles but lower premiums, as well as supplementary products that work in conjunction with the medical insurance itself to help minimize out-of-pocket exposure, like accident and critical illness riders.

Now it is up to us, as agents, to embrace this reality and show our clients products that may help address these concerns.

Joshua Kushnereit is the president of J.P. Kush & Associates, a full service insurance agency specializing in health, life, disability, property and casualty located in Troy, Mich. Joshua can be reached at (800) 736-4233, via e-mail at joshua@jpkush.com¸or by visiting www.jpkush.com.

Joshua Kushnereit knew at a young age that he wanted to attend college and become a successful businessman. The summa cum laude graduate of his class at University of Detroit Mercy and former White House intern learned, and saw first-hand how big business is done successfully, which only solidified his childhood dream.

Kushnereit earned his Michigan insurance license during college, and after learning the ins-and-outs of the insurance industry by working with other agencies, he decided to strike out on his own. This year his firm, J.P. Kush and Associates, at 275 East Big Beaver Road in Troy, celebrated its first year anniversary.

The agency has grown to include six licensed agents, two support staff, and recently added a Business Insurance Division, which focuses on property, casualty, and employee-sponsored group health insurance plans. Now licensed in Michigan, Ohio, Arizona, Nevada, Texas, Florida and Illinois, the company is projecting that 2011 annualized premium will reach approximately $3 million.

But Kushnereit isn’t done yet. He will graduate from Wayne State University Law School next year with a Juris Doctorate with a concentration in Employee Benefit and Welfare Plans, making him well versed in COBRA, HIPPA and ERISA laws governing employer sponsored insurance plans.

In addition, Kushnereit is an Assistant Editor of the Law Review and Chancellor of the Moot Court Program.

As well as completing his legal studies, Kushnereit is a true self-marketer, having affiliations with the Detroit Athletic Club, Red Run Golf Club, Royal Oak Chamber of Commerce, Marketing and Sales Executives of Detroit, National Association of Health Underwriters, Young Agent Health Underwriters, and Big Brothers Big Sisters.

“This industry is changing so rapidly that it’s extremely important to keep current on everything that’s going on,” says Kushnereit. “We specialize in working with individuals, families and business owners to provide affordable, quality insurance plans. We have strong relationships with all the top insurance carriers throughout the industry and work together with our clients to identify the very best carrier and plan for their personal needs.”

“What people don’t realize is that whether they work with our agency or go directly to a carrier like Blue Cross or others, the consumer will pay the exact same premium rate for the same benefit plan. The difference is the amount of personalized service they will get from working with an agency. My staff and I service the policy and remain diligent to ensure our clients are always in the best plan available.”

Kushnereit says new trends on the horizon are policies with higher deductibles but lower premiums, as well as supplementary products that work in conjunction with the medical insurance itself, to help minimize out-of-pocket exposure, like accident and critical illness riders. The new health care bill has helped in some ways by now mandating health plans to include Preventative Care Services covered at 100 percent before the deductible. That said, the legislation still has some significant kinks to work out, Kushnereit says.

J.P. Kush & Associates is at 275 E. Big Beaver Road in Troy. Call 800-736-4233 or visit www.jpkush.com.

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