Use these to help you close more individual business
People need health insurance. It protects them financially against unforeseen and potentially catastrophic medical claims, and—now that all pre-existing condition limitations have been eliminated—it also helps them get treatment for ongoing medical conditions. But people don’t want health insurance. More specifically, they don’t want to talk or even think about buying health insurance, and they certainly don’t want to pay for it. And that makes your job as an agent more difficult.
So how do you convince people who know intuitively that they need the product you’re selling to go ahead and take action now rather than continuing to put off making a decision? Below are five tips that should help you close the deal.
#1. You can’t be turned down
As agents, we know that all plans are now guaranteed issue, but with the general lack of awareness about the health reform law, you can bet that the average American doesn’t yet realize that insurance companies can no longer decline individuals or charge more for pre-existing medical conditions; in fact, they can’t even ask health questions on their application forms. That’s great news for anyone who has an ongoing condition and who may have had trouble finding coverage in the past, and we all know that these are the people who are most likely to be shopping for health insurance.
Ever since the ACA was signed into law, it seems that agents have focused almost exclusively on premium tax credits, concentrating their marketing efforts around the free government money that people may qualify for. We hear it all the time: 87% of Obamacare enrollees are receiving a subsidy, and most would not have been able to purchase coverage without the advance tax credit. But we don’t usually hear what percentage of enrollees have a pre-existing condition that would have disqualified them in the past. For these folks, guaranteed issue is an even bigger benefit than the subsidies, so don’t forget to talk about it. Everyone who wants health insurance can now buy health insurance. There are no pre-existing condition limitations, exclusions, surcharges or waiting periods; people are covered from day one.
#2. A LOT of stuff is covered
Not only can everyone buy insurance, but the policies they purchase may now cover a lot more than they did in the past. The essential health benefits requirement standardizes the services that must be covered in all individual health plans within a state. In fact, policies purchased in the individual market now cover all the same benefits that group plans do (and sometimes more).
There’s a common misperception that there are only 10 essential benefits, but there are actually a lot more. The health reform law did list 10 categories of services that must be covered in all health plans, but the Department of Health and Human Services asked each state to select a “benchmark plan” and then added all of the services covered by that plan to the state’s “essential benefits package.” The end result is that most of the services that have traditionally been covered in group health plans, including preventive care, maternity, and mental health and substance abuse, are now covered in the individual market. That means that individuals in need of this coverage no longer need to work for a company that offers group health insurance to its employees; they can buy it on their own.
#3. It’s a requirement
This is a pretty big reason to buy health insurance, and it’s one that a lot of people aren’t happy about. The law says that, starting January 1, 2014, all Americans must now have “minimum essential coverage” or pay a tax penalty under the individual shared responsibility requirement, better known as the individual mandate. Easily the least popular and most controversial provision in the health reform law, the individual mandate is designed to get healthy people to buy insurance. It’s a way of offsetting the “adverse selection” cost of sicker people who are more likely to sign up because of the guaranteed issue provision.
The individual mandate started off at $95 per adult or 1% of applicable income in 2014. That’s a lot less than the cost of health insurance and not much of an incentive for people to sign up for coverage. It increased to $325 per adult or 2% of applicable income in 2015, which is higher but may still be less than the cost of health insurance. In 2016, though, the penalty increases significantly. It will be the greater of $695 per adult and half that amount for children, with a cap of $2,085 per family or 2.5% of applicable income
|Greater of:||Greater of:||Greater of:|
|$95 per adult, $47.50 per child with a family limit of $285||$325 per adult, $162.50 per child with a family limit of $975||$695 per adult, $347.50 per child with a family limit of $2,085|
|1% of applicable income||2% of applicable income||2.5% of applicable income|
Note: Applicable income is defined as the household income minus the tax filing threshold for the family’s filing status. In 2016, the tax threshold is $10,450 for individual filers under age 65 and $20,900 for joint filers.
As the penalty continues to increase, it will become more and more of an incentive, especially since the cost of subsidized coverage for many families may not be much more than the cost of the individual mandate penalty. And while a lot of people say that the penalty isn’t yet high enough to motivate people to purchase health insurance, the surge in enrollments during the last week of the annual enrollment period, which we’ve witnessed each of the last two years, seems to indicate otherwise. A lot of people are scared of the IRS and would much rather pay a premium than a tax penalty.
Whether or not the mandate is enough incentive for people to buy insurance, it is enough incentive for them to at least shop coverage. And if you can get them to take a look at their options, you can use all the other reasons to close the deal.
#4. The government may help
The Affordable Care Act uses a carrot and stick approach to get people to sign up for health insurance – the individual mandate is the stick, and the premium tax credit serves as the carrot.
The tax credit is available to individuals and families with incomes up to 400% of the federal poverty level who don’t have access to other minimum essential coverage. People who are eligible for a government program like Medicare or Medicaid or an employer plan that is both affordable and provides minimum value generally are not eligible for financial assistance.
As mentioned above, the premium tax credits are hugely popular: 87% of exchange enrollees are receiving a subsidy, and the fear was that a ruling against the administration in the King v. Burwell case would cause millions to lose their health insurance; without the subsidies, these individuals would be unable to afford coverage. With the Court’s recent decision to uphold the premium tax credits, though, the subsidies can continue regardless of whether a state established its own exchange or not, and the media attention surrounding the case will likely convince more Americans to apply for federal assistance.
Two important points need to be made:
- First, these are advance premium tax credits – an individual or family doesn’t have to pay the full premium and then wait to be reimbursed at tax time; instead, the government fronts the money and pays it directly to the insurance company, significantly lowering the insured’s net premium.
- Second, when applying for coverage, the amount of the advance tax credit is based on estimated household income. Because the premium is handed out over the course of the tax year and the actual household income is just a guess until the year is over, the government does require these two amounts—the advance tax credit based on estimated income and the actual tax credit based on year-end income— to be reconciled when the family files its taxes (using IRS form 8962). If the household income ends up being lower than the family expected, the amount of the tax credit will increase and the family will receive a bigger refund; if the year-end income is higher than the family expected when signing up for health insurance, the actual tax credit will be lower and the family will owe some money back to the government. The good news, though, is that the repayment amount is capped based on the household size and its income as a percentage of the federal poverty level.
|Income as % of Federal Poverty Level||Repayment Cap for Single Filers||Repayment Cap for Any Other Filing Status|
|Less than 200%||$300||$600|
|At least 200% but less than 300%||$750||$1,500|
|At least 300% but less than 400%||$1,250||$2,500|
|400% or more||Full repayment required||Full repayment required|
Source: Instructions for Form 8962
The mandate and the tax credit go hand in hand. People hear that they’re required to have health insurance, so they decide that it’s at least worth looking at the prices. And when they do, they learn that they’re eligible for a tax credit and that health insurance will cost them a lot less than they expected. So, for better results, use the two together in your sales efforts.
#5. It’s a limited time offer
All of these great things—guaranteed issue plans, all the new benefits, the free government money and the opportunity to avoid a tax penalty—are only available to individuals and families who purchase coverage during the annual open enrollment period. For 2016 effective dates, the annual enrollment period will be November 1, 2015 through January 31, 2016.
Outside of open enrollment, people can no longer sign up for ACA-qualified individual plans unless they lose other coverage or have a qualifying life event. So, essentially, this is a limited time offer that people need to take advantage of when they have the opportunity. This can create a sense of urgency that can motivate even the biggest procrastinators to mark “buy health insurance” off their to-do list. True, it does give brokers one more thing to do during the already busy time of the year, but it also gives you nine months to sell other insurance products to all of your new individual clients.
One more thing: as you run across people who failed to sign up for coverage during last year’s open enrollment period, don’t make the mistake of telling them you can’t help them until November. You can still sell short-term medical plans to those who qualify to help bridge the gap until you can get them into an ACA-compliant plan.
Putting it all together
A lot of brokers saw the Affordable Care Act as a threat to their business. Some even chose to leave the industry altogether. But other agents saw health reform as an opportunity to help more clients than ever before. Just think about all of the barriers that were removed by the ACA. In the past, half of our prospects couldn’t make it through underwriting; now there is no underwriting. In the past, people put off making a decision; now the individual mandate and the enrollment deadline encourage them to take action. In the past, health insurance was unaffordable for millions of Americans; now, they can afford coverage for themselves and their families thanks to the premium tax credits.
In short, there’s really no excuse not to have health insurance, not anymore, and that means that brokers have a lot of ammo when overcoming client objections. Have a medical condition? Then you definitely need health insurance. Never go to the doctor? Well, accidents do happen, and health insurance will help protect you financially in the event of an unforeseen illness or injury. Can’t afford it? You may qualify for financial assistance. And, if all else fails, it’s a requirement. You don’t want to get into trouble with the IRS, do you?
Last but not least, there are plenty of other reasons to buy health insurance. These are just five good ones that were created by the Affordable Care Act. By making a list of all the reasons that people should have health coverage, you’ll be prepared for any objection they throw your way. Happy selling!