n a recent Industry Leader profile in The Green Sheet, Mark Dunn, President of the Midwest Acquirers' Association said, "The rising cost of health care is the biggest challenge we face [as an industry]. This threatens our jobs and our profitability. This should be everyone's concern."

Duly alerted, we examined the issue and discovered that Dunn is absolutely right. Most merchant level salespeople (MLSs) have no or limited access to affordable health insurance. And they're not alone. According to the Kaiser Commission on Medicaid and the Uninsured, over 45 million Americans have no health insurance.

The uninsured middle class

Lack of health insurance is no longer exclusively a problem of the poor and unemployed. According to America's health Insurance Plans (AHIP), a national health insurance trade association, more than 10 million Americans making $50,000 a year or more are uninsured. They are now the fastest growing group of uninsured in the nation.

Sixty-three percent of the uninsured are self-employed or working at companies with fewer than 100 employees. The cost of coverage continues to outpace inflation and to outstrip wage growth by a factor of 3 to 1, according to the 2005 Annual Employer Health Benefits Survey released by the Kaiser Family Foundation (KFF) and Health Research and Educational Trust. Health care spending now accounts for approximately 15% of the economy, nearly a third higher than other industrial countries.

According to KFF, the premium costs for people with private insurance (the only option for most MLSs) have risen dramatically in recent years, with double-digit rate increases in the last three years for which figures are available (2001, 2002 and 2003). At the same time, consumers have seen out-of-pocket costs for deductibles, co-payments and other cost sharing rise significantly.

A catastrophic illness can be devastating financially, and many uninsured Americans with chronic health problems requiring expensive medications or treatment (like diabetes or high blood pressure) simply go without care that they need but can't afford.

According to AHIP, the average health care cost per person in 2004 was $5,440. A catastrophic injury or illness can cost hundreds of thousands of dollars.

Consequently, the threat of an uninsured catastrophic illness, or even a minor illness or pregnancy, can drive some of the best and brightest into other industries in which coverage is more routinely part of a compensation package.

Indeed, a report issued by the Employee Benefit Research Institute shows that workers rate health insurance the most important benefit they receive by a greater than 5 to 1 margin.

NAOPP steps in

Only a handful of ISOs offer health care benefits, and most offer them only to a small percentage of agents who meet fairly stringent minimum requirements.

The fact that their agents may live in different states also makes it difficult for ISOs to offer a blanket health care policy. This is unfortunate; group insurance policies can be substantially cheaper.

"MLSs are predominantly self-employed, and finding affordable health care is a real challenge," said Ken Hancock, President of the National Association of Payment Professionals (NAOPP).

NAOPP offers members the opportunity to purchase health insurance, health savings accounts and retirement plans from individual vendors at group rates. NAOPP has members in 40 states, British Columbia and Puerto Rico, which made finding affordable insurance providers for all its members difficult.

Also, because Internal Revenue Service regulations do not allow nonprofits to offer insurance or retirement benefits as a primary activity, NAOPP has kept its insurance offerings at an arm's reach; the association receives no revenue from it, doesn't process applications or collect fees and doesn't know which members apply for coverage.

Members are directed to a benefits portal where they can apply directly to the vendors. "No one product is a one-size-fits-all product," Hancock said. "While we provide the opportunity to purchase the various benefits, cost may continue to be a factor. While it may be less expense than purchasing an individual insurance policy, for example, it may still be too expensive for the MLS to afford.

"Another challenge is that not all companies provide products and services in all states covered by NAOPP members."

ISOs with benefits

Most ISOs that offer health insurance benefits do it by reimbursing MLSs for some or all of their private health insurance premiums.

The first company in the industry to offer agents insurance coverage was North American Bancard. Its agents can chose from health, dental, vision, life and long-term care insurance policies.

"Health care was desperately needed in the industry," said Marc Gardner, President of North American Bancard. "Many industries outside of ours provide benefits to sales partners. No one in our industry was offering these benefits to independent sales agents, so we decided to do it.

"We asked our partners what we could do to make the program better for them, and they asked for benefits. We answered their call. It's one more way for us to differentiate ourselves from our many competitors."

Gardner found it challenging to find a benefit provider who would cover outside sales partners. "We had to show a full-time equivalency for our qualified sales agents," he said. "We had to create requirements that our provider would recognize as roughly equivalent to a regular employee but that was realistic for our partners to reach."

North American Bancard agents who reach a minimum of 30 submitted contracts and sign a minimum of 30 new merchants per quarter are reimbursed for 50% of health insurance premiums, up to $300 a month. The agents' 50%, and any additional fees to insure family members, are paid through automatic deductions from participants' monthly residual earnings.

Electronic Payments Inc. (EPI) also offers a health care program. "Worrying about getting sick and how you can afford to treat that sickness has an effect on people that is mostly negative," said Michael Nardy, EPI's Chief Executive Officer.

"Offering our ISOs health insurance helps increase their productivity [because better health care tends to reduce sickness and absence rates], remove much of the worry about paying for an illness and, on our side, establishes a connection to our ISOs that treats them like a member of the family rather than just someone sending in deals."

EPI will pay up to 100% of its ISOs' private health insurance premiums (up to $307 monthly) for agents who have 30 signed contracts (to start coverage) and average 10 deals a month (averaged over a period of time) to continue it.

"We let them choose the level of coverage and benefits they want, and we will cover as many people as they need, as long as they do 10 deals per covered individual," Nardy said. "This allows ISOs to work for other companies as well as EPI and still receive coverage.

"Imagine trying to make a residual and bonuses starting out and having to pay for a mortgage or rent, insurance, food, etc. We take the insurance payment out of the equation as long as the number of deals is there. It is a very well-designed program, and no other ISO is operating it this way. I'm very proud of it. Financially, paying for this program is definitely a sacrifice on our part, but one that I think is worth it."

Charge Card Systems Inc. offers a group insurance policy. "Like everyone else, we want to attract the best, most loyal agents," said Charge Card Systems' CEO Bernard Shavitz. "If you want to build loyalty in this industry, you have to be able to offer more than just the same residual split that everyone else offers.

"We found a carrier that will cross state lines, and we did a huge amount of due diligence setting this up. It took weeks. But you can be 1099'd and still covered. It's expensive for us, but it's worth it." Charge Card Systems pays 50% of the premiums for agents who meet certain standards. "Typically, you're looking at about 15 merchant contracts that have a processing volume of $7,500 a month or more," Shavitz said.

Jerry Cain, CEO of iMax Bancard, also offers a group health plan. "We started offering it because no one else was," he said. "When I looked into it, I discovered why: it's really hard to get." According to Cain, finding insurance to cover independent agents (as opposed to employees) in multiple states was a feat. Health insurance providers also view the high turnover of agents in this industry as a negative. "We won't usually put our agents on the plan for at least 30 days. We don't want to jeopardize our plan for the rest. ... [I]t's aimed at people who will stick with us."

IMax agents who make at least 10 deals a year are eligible to have varying percentages of their premiums paid. "I didn't want to make the criteria so difficult that you can't get it," Cain said. "After all, it's health insurance for their families; that's important. But I have to provide 1099s to the insurance provider; I can't insure someone with a zero 1099."

IMax also offers the group plan to agents who don't want to commit to the eligibility criteria if they're willing to pay for it themselves. "Health insurance helps differentiate us from other companies," Cain said. "A lot of my competitors offer free terminals or a lot of front-end stuff but then find they can't afford to offer long-term benefits like health insurance."

NetBank Payment Systems Inc. does not currently offer health insurance, though according to Ronnie Flores, Business Development Manager, the company is looking into it. However, because its parent company is a bank, NetBank offers some unusual benefits to MLSs that include no loan-origination fees for mortgages, generous reductions on auto loans, free checking and money market accounts, and free financial planning services.

Sterling Payment Technologies LLC also offers group health insurance. "I think a lot of companies don't offer benefits because they are afraid of the cost involved," said Ellen Hudec, Sterling's Executive Vice President. "But I think we attract a higher caliber agent, more stable and more dedicated, partially because we do provide benefits."

"We intentionally made it easy for agents to qualify," she said. "In 17 years in this industry, I've seen that the average (averaging everyone from the lowest performers right up to the star performers ) is about four deals a month. So our minimum to qualify for health insurance is three signed deals a month." Sterling offers a cafeteria of different programs, so agents can customize policies in terms of the number of family members to insure as well as the dollar amount of coverage. Sterling subsidizes a portion of the costs, but the amount varies by the program and the number of participants.

What should the uninsured do?

The myriad of available insurance options can be overwhelming and expensive. The most affordable option is often getting coverage through the group policy of an employed spouse. Some experts recommend purchasing a major medical policy with fairly high deductibles. This means that routine medical expenses are paid out of pocket, but premiums are more manageable, and catastrophic illness or accidents are covered by insurance.

AHIP offers a site with a guide to purchasing insurance (www.ahip.org/content/default.aspx?bc=41|329|351) as well as a portal for finding local private health insurance providers (www.healthdecisions.org).

For MLSs seeking individual or family health insurance policies, NAOPP might be well worth the $25 annual membership fee. It's also a good idea to check other organizations such as chambers of commerce, professional organizations, even clubs or alumni associations to see if they offer members access to group policies.