HEALTHCARE
HSA Owners are Wealthier
A report by the General Accountability Office revealed that people with higher incomes are more likely to participate in Health Savings Accounts.
Some HSA critics say that HSA-eligible plans attract enrollees who don’t have the resources to contribute to an HSA or attract wealthy enrollees who just want to use them to accumulate tax-advantaged savings rather than pay for medical expenses. Tax filers who reported HSA activity in 2005 had higher incomes. Of those between 19 and 64, the average adjusted gross income was about $139,000 compared to about $57,000 for all other filers. Income differences existed across all age groups.
Between 2004 and 2007, the number of people participating in HSA-eligible health plans increased from about 438,000 to about 4.5 million. Despite the growth, these plans represented only 2% of people with private health coverage in 2006. From 2005, to 2007, more than 40% of people who were eligible to enroll in a HSA-eligible health plan did not do so.
The total value of all HSA contributions reported to IRS was about twice that of withdrawals in 2005 -- $754 million compared to $366 million. The average contribution among all filers reporting HSA activity in 2005 was about $2,100 compared to average withdrawals of about $1,000. Employer contributions in 2007 varied. One survey of large employers revealed average contributions of $626 for single coverage, while a survey of small employers revealed average contributions of $806 for single coverage.
More than a third of employers that offered HSA-eligible plans made no HSA contributions. For more information, visit www.gao.gov/new.items/d08474r.pdf.
Sickest Patients Still Struggle on Medicare Part D
The news is mixed for the Medicare Part D drug benefit, according to a study published in the Journal of the American Medical Assn. (JAMA) and conducted at Harvard Medical School and Harvard Pilgrim Healthcare. On one hand, healthy and sick beneficiaries are less likely to cut back on necessities to pay for medicine. However, the sickest patients, who usually have high drug expenditures, are still skipping medications for financial reasons despite the new benefit. “We’re seeing encouraging signs of relief, but the problem of unmanageable drug costs has by no means been eliminated,” said Dr. Jeanne Madden, Harvard Medical School instructor and lead author.
The rate of skipping pills and prescriptions due to cost declined from 14.1% of beneficiaries in 2005 to 11.5% in 2006. The number of people who are spending less on basic needs to afford medicine declined from 11.1% to 7.6%. But the sickest patients who skipped pills at about twice the rate of healthier patients in 2004 and 2005, experienced no improvements in pill-skipping after Part D began in 2006, even though they were less likely to cut back on basic necessities to pay for medicine after Part D.
Sicker beneficiaries are also more likely to encounter the coverage gap, sometimes called the doughnut hole, a peculiar feature of the Part D benefit.
“Plugging the doughnut hole is a first step to reduce pill-skipping among the sickest patients,” says Harvard Medical School professor Stephen Soumerai, the principal investigator on the study. For more information, visit www.hms.harvard.edu.
Wal-Mart Expands Drug Plan
Wal-Mart announced 90-day prescriptions for $10, more women’s health offerings, and $4 over-the-counter medicines. The 90-day option gives more choices to customers and physicians who may have been limited to mail order prescriptions. Up to 95% of the prescriptions written in the majority of therapeutic categories are included in the $4 Prescription Program.
Wal-Mart says that the generics it offers could save osteoporosis patients $45 to $93 a month or up to $1,116 a year. In addition, medications to treat breast cancer and menopause and hormone deficiency were added to the growing list of $9 women’s medications. In addition, Wal-Mart Stores and Neighborhood Markets began a $4 over the counter program. For example, Pepcid and Claritin are priced at $4, which is about 50% lower than many national chain drugstores and grocers. The cost of vitamins was also lowered to $4. Certain drugs are priced higher than $4 (for up to 30-day supplies) and $10 (for 90-day supplies) in California, Colorado, Hawaii, Minnesota,
Montana, Pennsylvania, Tennessee, Wisconsin, and Wyoming. For more information, visit www.walmart.com/pharmacy
How Wellness Plans Can Fight Obesity
Obesity in the United States has doubled in the past 30 years and those extra pounds weigh on companies’ bottom lines, according to a report from The Conference Board. Thirty-four percent of American adults are obese.
Obese employees cost U.S. private employers $45 billion annually in medical expenditures and work loss.
“Employers need to realize that obesity is not solely a health and wellness issue. Employees’ obesity-related health problems in the United States are costing companies billions of dollars each year in medical coverage and absenteeism,” said Labor Economist and co-author, Linda Barrington.
Obesity is associated with a 36-percent increase in spending on healthcare services, more than smoking or problem drinking. More than 40% of U.S. companies have implemented obesity-reduction programs and 24% more plan to do so in 2008.
Estimates of return on investment for wellness programs range from zero to $5 per $1. In addition, these programs may give companies an edge in recruiting and retaining employees. Meanwhile, some say it may be more effective just to award employees cash and prizes for weight loss rather than devoting resources to long-term wellness programs. The jury is still out on paying for weight-loss surgeries. Some say companies are unlikely to recoup surgery costs before these employees have left for other jobs.
How employers communicate a wellness or weight-loss program is as important as how they design it. Companies should involve employees in planning health initiatives, rather than working from the top-down and should make sure personal privacy is protected, Barrington added. For more information, visit www.conference-board.org.
Government is Slow to Publicize Healthcare Options
With studies showing that nearly one-third of the country’s 47 million uninsured are eligible for government sponsored health programs but not signed up, the founder of the nonprofit the Foundation for Health Coverage Education (FHCE), is questioning the efforts of state and federal government agencies to inform people of available gap coverage programs.
Last month, 80,000 employees were laid off in the United States “Many of these folks may need these services, so federal and state agencies need to examine how to better make citizens aware of what programs are available to get them through this rough period,” said Phil Lebherz, executive director.
Lebherz says that one obstacle is the fact that people have to make multiple trips to busy public health insurance offices. This process can be streamlined with greater use of online applications and faxing of documents, said Lebherz. There is also limited information on what is available to people. For example, California offers 11 different programs, but local agencies usually only hand out materials about Medi-Cal and Healthy Families.
For the past three years, Lebherz’ nonprofit foundation has been providing the following tools:
- A free U.S. Uninsured Help Line (1-800-234-1317)
- The Healthcare Options Matrix, which outlines public health coverage options for each state, including type of coverage, financial eligibility, and monthly costs.
- A five-question eligibility quiz at www.coverageforall.org, which identifies people who may be eligible for and provides a profile of all public and private coverage options in their state.
For more information, visit www.coverageforall.org.
The Costs of Health Mandates
While mandates make health insurance more comprehensive, they also make it more expensive because insurers are required to pay for care consumers previously funded out of their own pockets, according to a report by the Council for Affordable Health Insurance (CAHI). CAHI says that mandated benefits increase the cost of basic health coverage from 20% to more than 50%.
The number of mandates is growing because elected representatives find it difficult to oppose any legislation that promises enhanced care. As a result, government interference in and control of the healthcare system is steadily increasing. So too is the cost of health insurance. By the late 1960s, state legislatures had passed only a handful of mandated benefits. Today, the Council for Affordable Health Insurance (CAHI) has identified 1,961 mandated benefits and providers and more are on their way.
How do state legislators justify their actions? One way is to deny a mandate is a mandate. For example, legislators may claim that requiring health insurance to cover a type of provider — such as a chiropractor, podiatrist, midwife, or naturopath — is not a mandate because they aren’t requiring insurance to pay for a therapy.
CAHI’s Mandated Benefits and Providers Chart is broken down on a state-by-state basis into three categories: benefits, providers, and covered populations. Boxes with a Y indicate that the state has passed that mandate. Totals for each state and mandate are also included. For more information, visit www.cahi.org.
Some mandates have a much greater affect on the cost of health insurance than others. For example, mental health parity mandates have a much greater effect on the cost of premiums than would mandates for inexpensive procedures that few people need. In addition, mental health mandates often include mini-mandates, like coverage for autism diagnosis and treatment.
Although most mandates only increase the cost of a policy by less than 1%, 40 such mandates will price many people out of the market. For example, in the past few legislative sessions CAHI saw an increase in the "slacker mandate," in which health insurance coverage is extended to unmarried dependents or students up to 30. “Most recently, we have seen new categories for health insurance coverage eligibility emerge (e.g., legal alien and elderly parent),” according to CAHI.
At least 30 states now require that a mandate’s cost be assessed before it is implemented. At least 10 states provide for mandate-lite policies, which allow some people to purchase a policy with fewer mandates more tailored to their needs and financial situation.
Aside from mandates, several states have adopted legislation that requires health insurers to accept anyone who applies, regardless of their health status, known as guaranteed issue or they limit insurers’ ability to price a policy to accurately reflect the risk an applicant brings to the pool, known as community rating or modified community rating. For more information, visit www.cahi.org.
FINANCIAL PLANNING
Millionaires Are Worried About Inflation
Even America’s millionaires are concerned about inflation’s corrosive effect on their nest egg, according to the ninth annual Phoenix Wealth Survey.
The results are in stark contrast to the 2007 survey, which found record-high levels of optimism. Harris Interactive polled more than 1,900 people with $1 million or more in net worth (excluding their primary residence) in February and March of this year.
Just 54% of respondents said they felt wealthier in 2008, a significant decline from 81% in 2007. Only a quarter said they are very optimistic about their financial future, a nine-percentage-point drop from last year.
Fifty-eight percent say the U.S. economy is in a downturn and the worst is yet to come.
More people are scaling back their retirement expectations. When asked to describe how much of their income would constitute a comfortable standard of living in retirement, 62% say less than 100% of their income, an increase of 10 percentage points from 2007. Just one quarter say it is 100% of income. Those figures are in line with ones from four years earlier, when the U.S. was coming off the last bear market.
Forty percent of high-net-worth people worry that they won’t be able to live comfortably on their retirement income compared to 36% last year.
Inflation fears and investment performance worries are stoking those concerns. Half are worried that inflation will erode the value of their income (up significantly from 42% in 2007) and 39% fear diminished assets due to poor investment performance, an increase of six percentage points. Not surprisingly, unforeseen healthcare expenses, including long-term care costs, are also a major concern for high-net-worth consumers.
Half of those surveyed rarely seek professional financial advice and a record 41% do not have a primary financial advisor.
Interestingly, 89% of wealthy consumers who have a primary financial advisor are satisfied with their advisor. Fifty-six percent have been with the same advisor for six or more years and just 8% say they will be looking for a new financial advisor in the next 12 months.
To stay in their clients’ good graces, financial advisors have to achieve solid investment returns, understand their clients’ goals, and keep fees under control, said Dr. Zultowski of Phoenix. Forty-two percent of those looking for a new advisor say it’s because their investment returns have been lower than expected. Thirty-one percent say fees are too expensive, a huge jump from 2007 when just 8% cited fees.
In one of the survey’s more counterintuitive findings, 49% see real estate as a safer investment than the stock market. Still, just 36% see it playing a substantial role in creating their future wealth.
One effect of the economic downturn appears to be a renewed focus on financial and estate planning. More than half (and especially the wealthiest people) say that estate planning is more important than ever. This increased interest in estate planning may be spurred by the approach of 2010, when federal estate tax laws will change unless Congress acts to extend them. Fifty-nine percent of respondents say they have an estate plan. Just over one-third have a written financial plan. For more information, visit www.phoenixwm.com.
NEW PRODUCTS
Whole Life
John Hancock launched a whole life product with the following advantages:
- New payment options (10-pay, 15-pay, or 20-pay).
- A long-term care rider that is not usually associated with whole life policies.
- A product that is easy to illustrate, sell, and service.
For more information, visit www.manulife.com.
Fixed Index Annuity
Jackson National launched Select Annual Reset, a fixed index annuity that combines the potential to earn additional interest with protection of principal. In addition to a guaranteed minimum interest rate and a guaranteed minimum death benefit, Select Annual Reset allows investors to earn additional interest based on the performance of Jackson’s proprietary Multi-Strategy Index, the S&P 500 Index, or a combination of both. For more information, call 800-777-7900 or visit www.jnl.com.
Home Test Kits
A line of test kits from BioIQ allows people to monitor cholesterol, blood sugar, and other important biometric information. BioIQ also offers corporate health screening programs. For more information, visit www.BioIQ.com
Online Financial Tools
AXA Equitable redesigned its website (www.axa-equitable.com.) Enhancements include a Life Events Learning Center where visitors can get help understanding the important financial considerations at each stage of life, such as benefit considerations when landing a new job, caring for aging parents, and transferring accumulated wealth.
Social Security Decision Tool
MetLife launched an online tool to help people decide when to take Social Security benefits. For more information, visit (www.metlife.com/SocialSecurity).
LTC Care Calculator
Goldencare USA is offering a searchable, nationwide database of long-term care resources. The site also features cost of care calculators. For more information, visit www.goldencareusaagent.com.
Premium Financing
Life Brokerage Partners has three additional carrier approved premium finance programs. “New relationships with Peachtree, Polaris, and UNF offer our agents increased options and greater flexibility when considering the insurance needs of their clients…,” said Ravi Malick, President, Life Brokerage Partners. For more information, visit www.lifebrokeragepartners.com.
IN CALIFORNIA
Californians Are Worried About the State’s Healthcare System
In a recent Field Poll, California voters report growing insecurity about the state’s healthcare system. Seventy three percent are concerned about the state’s failure to enact health reform legislation. The following findings show that a growing proportion of voters has concerns about the state’s healthcare system:
- 59% of voters are very concerned about not being able to pay for a major illness or injury, up from 48% in late 2006.
- 58% are very concerned about having to pay more out of pocket for their health insurance coverage (up from 40%).
- 57% are very concerned about not having healthcare or losing it (up from 48%)
- 59% are very concerned about having their insurance provider cancel or severely limit their coverage due to a health condition.
- 51% are very concerned about not having access to quality doctors and healthcare services (up from 40%).
Three times as many Californians expect the healthcare system to be worse in five years as those who think it will be better. There is no clear consensus as to whether the federal or state government is better suited to bring about the changes needed in the healthcare system. While 50% are very or somewhat satisfied with it the state’s healthcare system, 46% are somewhat or very dissatisfied.
Seventy-two percent of voters approve of governor’s reform package, which failed to pass the legislature. Large majorities of voters approve of provisions, such as requiring health insurance companies to offer coverage to anyone without regard to their health condition, requiring employers to help pay for their employees’ health coverage, and requiring that all Californians obtain a minimum level of health coverage.
Schwarzenegger Pledges Second Try on Healthcare Overhaul
In an interview with the Associated Press, Gov. Arnold Schwarzenegger said that he would try again to enact legislation to overhaul the state’s healthcare system and that he would not reduce the scale of his plan to get it approved. He said that his staff is working to resolve problems in the previous plan, but that he will not break the plan apart to address only children’s health or problems with Medi-Cal, California’s Medicaid program.
He said that the Field Poll showing that nearly three-quarters of state voters supported the basic concept of Schwarzenegger’s plan would give new momentum to the proposal.
