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Screen supplemental insurance vendors: Ask right questions

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Issue: More employers are offering voluntary supplemental medical insurance, and insurers are offering more products.

Benefit/risk: Such plans can fill gaps left by medical coverage cutbacks, but the strategy can backfire if you pick the wrong vendor.

Action: Choose the right supplemental insurance vendor by knowing the right questions to ask your broker and insurer.

Supplemental health insurance plans, such as those offered by industry giant AFLAC, can build good will among employees, make your benefits package more competitive and enhance HR's image.

But what if you choose the wrong vendor? You may discover that the vendor pushes certain policies harder and earns fees for selling them. Confused employees may complain about what the policy doesn't offer. In the end, employee dissatisfaction with the supplemental coverage can hurt your reputation as a strategic problem-solver.

Supplemental policies increasing. If you don't offer supplemental medical coverage, chances are you will. Sales of supplemental policies grew 3 percent, to $4.2 billion in 2004, compared to 1.8 percent growth in 2003, according to Eastbridge Consulting Group.

Policies range from emergency, vision and dental coverage to cancer and accident insurance. Most employers choose their supplemental benefits vendor on recommendation from their current insurance broker.

To make sure that you secure the best coverage at the best prices, ask brokers about the following topics:

1. Education. Do the insurers take time to educate employees about what is covered? Education is crucial because buyers of supplemental insurance are disproportionately part-time and low-wage workers without college degrees. Plus, many insurers combine supplemental plans with other insurance products, making the products terribly complicated.

Look for insurers that seek information about your current coverage and its gaps. Some insurers use surveys to determine what's needed.

2. Fees. What fees and special incentives does the broker earn for selling supplemental insurance? Compare the fees to those of competitors. Commissions for supplemental policies tend to be higher than other insurance products. Some brokers favor policies that generate the highest commissions, just like investment advisers who push mutual funds with the highest fees and commission.

3. Service. What is the carrier's track record for service? Seek out an insurer that offers efficient billing and administration. Reason: Employees will select different policies with different premiums. Insurers need to reconcile a range of payroll deductions.

4. Dispute resolution. What is the policy for handling employee complaints? Will the insurer provide periodic reports on the outcomes of disputes?

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