IN CALIFORNIA
• Self Funded Legislation Is Sidelined
• A Rocky Transition to Medi-Cal Managed Care
HEALTHCARE
• Employers Remain Committed to Health Benefits
• Medicare Voucher Plan Remains Unpopular
• Is the Medicaid Manage Care Business Worth Pursuing?
LIFE INSURANCE
• Individual Life Sales Continue to Grow
• Buyers Appreciate Their Annuities
EMPLOYEE BENEFITS
• The Fall Out of Tax Incentives on Health and Retirement Benefits
• Voluntary Benefits Are Becoming More Popular
• Medical Carriers Expand Into Voluntary Benefits
• Long-Term Disability Claims Grow
EVENTS
• Retirement Legislative Webinar
NEW PRODUCTS
• Online Vision Game
• Book on Health Industry Trends
• Year End Savings on FSAs and HRAs
Self Funded Legislation Is Sidelined
The California insurance commissioner and key legislators moved SB 1431 to inactive status and decided to revisit the legislation in an upcoming special session or in 2013. SB 1431 would have put partially and fully self-funded benefit plans virtually out of reach for the entire California two to 50 market. This retreat comes in response to stiff opposition from the Self Insurance Institute of America, California Health Underwriters (CAHU), and several other organizations and companies. The following is a message from the CAHU, “Our ‘One Voice’ rang loud and true against SB 1431 (De Leon). CAHU was successful in helping to save this valuable option for California’s small business community. By utilizing our new OneVoice Legislative Alert System, CAHU members and their clients were able to reach out to our legislators quickly and effectively.” For more information, visit www.CAHU.org.
A Rocky Transition to Medi-Cal Managed Care
California has hit some snags in its yearlong effort to move 400,000 seniors and people with disabilities into Medi-Cal managed care coverage, according to the California HealthCare Foundation (CHCF). From June 2011 to May 2012, 240,000 people were moved from fee-for-service coverage into managed care. Beneficiaries had trouble reading materials and were confused about how to request temporary exemptions from the managed care mandate. Providers did not get patient information in a timely fashion and health plans had difficulty recruiting fee-for-service providers.
It was impossible to evaluate the effectiveness of the transition since performance goals were not established at the outset. The CHCF suggests establishing longer planning periods, more communication with beneficiaries, better provider outreach, and quality improvement benchmarks when moving additional populations into Medi-Cal managed care. For more information, visit www.chcf.org.
Employers Remain Committed to Health Benefits
Following the U.S. Supreme Court decision on health care reform, 88% of employers will continue offering health care benefits for the foreseeable future, according to a survey surveyed by Towers Watson. That’s up 17% from 2011.The survey includes 440 midsize to large companies.
Employers remain committed despite the fact that employee health care costs are expected to increase 5.3% in 2013. There is uncertainty about the November elections, the development of insurance exchanges, and the rapidly evolving health care delivery system.
About two-thirds of companies say the Supreme Court’s decision has affected their health strategy. However, one-third are waiting for the upcoming elections or the opening of insurance exchanges before making any significant changes to their health care strategy. In fact, 72% are not confident that the exchanges will be a viable alternative for active employees by 2015.
Relatively few companies are likely to direct active employees to exchanges in the near term, but the story for retirees is very different. Nearly six out of 10 of companies with a program are somewhat to very likely to stop sponsoring retiree medical plans for post-65 retirees and 64% plan to stop sponsoring these benefits for pre-65 retirees.
Although health care cost increases have slowed (5.3% projected for 2013 compared to an expected 5.9% this year), 58% of employers expect to trigger the health care reform excise tax in 2018 if they don’t change their benefit strategy. As a result, 83% of employers are planning steps to control their costs to avoid the tax. The $11,507 total cost represents an employer cost of $8,911 per employee and an employee cost of $2,596 per employee. While the increase in employee cost sharing is modest, it outpaces average merit increases.
Companies are planning or considering the following:
• 63% change plan options.
• 42% increase employees’ cost share by 1% to 5%.
• 38% reduce subsidization of coverage for spouses and dependents significantly.
• 29% use spousal waivers or surcharges
• 13% increase employees’ share of health care of premiums in 2013 by 5% or more.
Seventy-seven percent view health care benefits as core to their employee value proposition over the next several years and more than one-third of companies will examine their health care benefit in a total rewards framework by 2013. Another 39% are considering doing so by 2014 or 2015.
The strong growth of account-based health plans (ABHPs) is expected to continue. By 2015, 80% of employers plan to offer an ABHP, up from 61% in 2013. The enrollment within ABHPs continues to increase significantly, moving from single-digit numbers of employers offering these plans in 2006 to an expected 30% in 2013.
Seventeen percent of employers plan to make telemedicine available to employee by 2013 and another 27% are considering offering it by 2014 or 2015. For more information, visit http://www.towerswatson.com
Medicare Voucher Plan Remains Unpopular
Paul Ryan’s selection to the Republican ticket has put the issue of Medicare squarely on the 2012 campaign agenda. However, the public is more opposed than supportive of a Republican proposal to shift Medicare to a voucher system, according to the latest Pew Research Center survey. Under the proposal, Medicare would give future participants a credit toward purchasing private health insurance coverage. Forty-nine percent of those surveyed oppose the idea. This is virtually unchanged from public reactions a little over a year ago, when Republicans in the House voted in favor of this proposal as part of the Ryan plan.
Dealing with the deficit is a high priority for Americans, but there is little support for doing so if it means entitlement cuts. Americans say that it’s more important to preserve Social Security and Medicare benefits than it is to reduce the budget deficit.
Seniors are the most opposed to changing Medicare into a program that offers credits toward purchasing private health insurance coverage. People age 65 and older oppose it by a 55% to 24% margin, with 46% saying being strongly opposed. There also is more opposition than support among people age 50 to 64 while those under age 50 are more divided. For more information, visit pew research at http://pewresearch.org.
Is the Medicaid Manage Care Business Worth Pursuing?
Some insurance companies are scooping up Medicaid managed care companies at above-market prices. But, they are chasing fools’ gold, according to a report by J.D. Kleinke, a health care business expert with the American Enterprise Institute (AEI). The Affordable Care Act will add 8 million to 16 million more patients to the Medicaid rolls (including 9 million dual eligibles). However, Medicaid remains the poorest, toughest segment of the health care system and its numerous challenges make financial losses seem a certainty, says Kleinke. “Even if a company is somehow able to find a way to make a profit, it will be driven into failure by governments squeezing the profits out of the insurance companies and vilified by the public as profiting off the poor. The health insurers already got a face full of cold water with this under Obamacare; new administrative cost and profit margin regulations set at completely arbitrary numbers. Those numbers will appear generous when the Medicaid gold proves to be nothing more than a very big flash in a very broken pan,” said J.D. Kleinke. For the full article, visit http://www.aei.org/article/health/healthcare-reform/fools-gold-rush-obamacare-and-the-medicaid-opportunity/
Individual Life Sales Continue to Grow
New annualized premium for individual life insurance grew 4% in the second quarter of 2012, resulting in 3% growth for the first half of the year. Indexed universal life was the biggest driver behind premium growth, soaring 37% in the second quarter. “Indexed universal life continues to attract consumers who are interested in the opportunity for cash value growth potential while protecting their principal,” said Ashley Durham, senior research analyst LIMRA product research.
Indexed universal life (IUL) was up 29% during the first half of 2012, representing just over 25% of all universal life sales. Total new annualized premium for universal life grew 6% in the second quarter and 3% in the first six months of 2012. Universal life policy count grew 1% in the second quarter, which is the 13th consecutive quarter of policy count growth. For the first six months of 2012, universal life policy count grew 3%.
Lifetime guarantee universal life premium dropped 8%, dampening overall universal life sales. Lifetime-guarantee products have the highest share of new universal life premium (about 35%). But indexed universal life products are narrowing the gap. In 2009, there was a 40% gap between lifetime-guarantee universal life and IUL products. Today, the gap is just 10%.
Whole life was the second biggest driver of growth. Whole life premiums rose 9% for the second quarter and 9% year-to-date. Nearly three-quarters of whole life writers recorded positive growth. Policy count improved 3% in the quarter, which is up 5% in the first half of 2012. Whole life premium market share was 33% in the second quarter. That’s the highest whole life market share since 1998.
Variable universal life premium dropped 6% in the second quarter, which is down 7% in the first six months. Less than one-quarter of the VUL writers increased sales over the first half of 2011.
After positive growth in first quarter, term premium growth slipped 3% in the second quarter, which is a 1% decline during the first six months of 2012. Just over half of the term carriers increased sales during the first six months of 2012. Term policy count was down 3% during the second quarter and flat year-to-date. For more information, visit www.limra.com
Buyers Appreciate Their Annuities
A LIMRA study reveals that buyers are satisfied with their deferred annuity purchases including 75% of variable annuity buyers, 83% of indexed annuity buyers, and 86% of traditional fixed annuity buyers. Joseph Montminy of LIMRA said that two-thirds the satisfied VA households own two or more annuities. In addition, five of six deferred annuity buyers said they would recommend an annuity to their friends or family. ” With this knowledge, advisors can organically grow their businesses by periodically contacting their existing clients who have purchased annuities,” he noted.
The top reason consumers give for buying an annuity is to supplement Social Security or pension income. The second most popular reason is to accumulate assets for retirement, which is especially true for individuals under age 60. Having guaranteed lifetime income is also a concern, especially for buyers aged 60 and older. Montminy said, “The recent economic crisis and continued market volatility has made guaranteed income more valuable to consumers.” Seventy-one percent of VA buyers say the financial strength of the company is very important when purchasing an annuity; 68% of indexed and traditional fixed annuity buyers agree. For more information, visit www.limra.com.
The Fall Out of Tax Incentives on Health and Retirement Benefits
Workers routinely rank their employment-based health coverage as their most important benefit, followed by a retirement plan. Since private-sector health benefits rank as the largest single tax expenditure in the federal budget, there have been various proposals to reduce or even phase out the cost of that program to the government. The implications are enormous for employers and workers, according to a report by the Employee Benefit Research Institute (EBRI).
Dallas Salisbury, president and CEO of EBRI said, “When you look at some of the recent proposals for reform, benefit plan tax incentives are an area of total and complete volatility and [neither] employers nor workers can have any certainty of what lies ahead.”
The use of revenue estimates for scoring tax reform incorporates taxpayer behavior, whereas tax expenditure estimates do not. Ten percent or less of those ages 55 to 60 are making withdrawals from their IRA, compared to 80% of those 71 and older. Pre-retiree balances in defined contribution retirement plans double about every eight to nine years. Employer match levels seem to affect older workers more, but automatic enrollment seems to be a much more significant factor in getting younger workers to participate in retirement plans, according to the report.
A significant percentage of assets held in individual retirement accounts (IRAs) originated as a rollover account from an employer-sponsored program. Retirement benefits are tax deferrals rather than being exclusions from income—meaning the federal government will eventually recoup the forgone revenue. This distinguishes retirement plan deferrals from other tax exclusions.
Employment-based health benefits are the most common form of health insurance in the United States, covering almost 59% of all non-elderly Americans and about 69% of working adults in 2010. Assets in employment-based defined benefit (pension) and defined contribution (401(k)-type) plans account for more than a third of all retirement assets held in the United States. For more information, visit www.ebri.org.
Voluntary Benefits Are Becoming More Popular
Eighty four percent of employers surveyed by the Eastbridge Consulting Group expect their workers to be more enthusiastic about voluntary benefits. This is the second highest rating for this component since the first survey was in 2005. It’s up from 70% in the year-end survey. The Voluntary Industry Confidence Index study is conducted semi-annually and includes responses from people active in the market — carriers, brokers, and vendors.
In the most recent survey, 95% expect sales of voluntary to increase compared to 91% in the mid-year 2012 survey. However, 49% expect profitability for voluntary carriers to improve in the next 12 months compard to 49% in the previous survey. For more information email info@eastbridge.com.
Medical Carriers Expand Into Voluntary Benefits
Medical carriers are looking to become total solution providers by expanding their voluntary product portfolios and creating alliances with voluntary carriers. Many medical companies surveyed by Eastbridge, now consider voluntary to be a major benefit business, especially in light of healthcare reform’s potential to erode customer loyalty through health exchanges and the entrance of non-traditional carriers. “When we first looked at the involvement of medical carriers in the voluntary market in 2007, all but a few already offered some worksite products. Today, voluntary has penetrated their portfolios even more. In fact, the majority of medical carriers indicated that voluntary has seen double-digit growth in their company over the last five years as they add more products to their offering,” said Bonnie Brazzell, vice president at Eastbridge.
More than half of the medical carriers participating in the recent survey offer four or more voluntary products. In addition, many are developing strategies and assigning accountability to the voluntary line to maintain a connection with their customers. For more information, visits www.eastbridge.com.
Why Employees Stay on the Job
Despite uncertainty in the job market, employees give several non-monetary reasons for staying on the job including having a good work-life balance and enjoying what they do, according to a recent survey by the American Psychological Association (APA). Although 60% of employees stay with their employers because of benefits and 59% stay because of the pay, 67% stay because their jobs fit well with the other aspects of their lives. The same percentage stays at their jobs because they enjoy the work they do. Even with the slow economic recovery and relatively high unemployment, only 39% of respondents cite lack of other job opportunities as a reason for staying with their employers.
David W. Ballard, PsyD, MBA, head of APA’s Psychologically Healthy Workplace Program said, “Americans spend a majority of their waking hours at work and, as such, they want to have harmony between their job demands and the other parts of their lives…To engage the workforce and stay competitive, it’s no longer sufficient to focus solely on benefits.” The survey also reveals the following:
• Seventy-two percent of women stay because of a good work-life balance compared to 62% of men.
• Seventy-two percent of women stay because they enjoy their work compared to 63% of men.
• 61% of women stay because of the benefits compared to 59% of men.
• Fifty-seven percent of women stay because of the pay compared to 62% of men.
• Employees age 55 and older are the most likely to say because they enjoy the work (80%), have a good work-life balance (76%), have good benefits (66%), feel connected to the organization (63%) and have the opportunity to make a difference (57%).
• Employees age 18-34 are least likely to say they stay because they enjoy the work (58%), have a good work-life balance (61%) and have good benefits (54%). They are most likely to stay because they like their co-workers (57%) and managers (46%)
• 67% of employees ages 35 to 44 say that their pay is the reason to stay with an employer, which is higher than in any other age group.
• The biggest reasons that employees give for planning to stay with for employees their employers for more than two years are enjoying the work, having a job that fits well with other life demands, and feeling connected to the organization.
For more information, visit www.apa.org.
Long-Term Disability Claims Grow
The number of long-term disability claims continued to increase year-over-year while there was a decline in the number of wage earners with private disability insurance in 2011 for the third consecutive year, according to the 2012 Long Term Disability Claims Review. (http://www.disabilitycanhappen.org/research/CDA_LTD_Claims_Survey_2012.asp).
Fifty-seven percent of new disability claimants were women, according to a study of member companies of the Council for Disability Awareness (CDA). Barry Lundquist, president of the CDA said, “We continue to see an overall increase in long term disability claims filed over time. The aging workforce and a painfully slow jobs recovery are clearly having an impact. Also, the jobs environment continues to be an obstacle to returning recovering workers to productive employment.”
The over 60-age group experienced the largest increase in the number of new approved claims over the past four years, which reflects the aging Baby Boomer generation. New claims for those under age 40 and for individuals in their 50s remained steady while claims for individuals between 40 and 50 declined. To get a copy of the 2012 Long Term Disability Claims Review, visit http://www.disabilitycanhappen.org.
Retirement Legislative Webinar
Transamerica is holding a Webinar on September 18 that’s geared to third-party administrators and financial advisors. It will cover the government’s legislative landscape on retirement plans and how it affects financial professionals and retirement plan sponsors. Third party administrators and financial advisors can register for the webinar by calling Transamerica at 888-401-5826 and selecting option one, Monday to Friday, 9:00 a.m. to 7:00 p.m. Eastern Time.
Online Vision Game
VSP Vision Care (VSP), is offering players a chance to win a dream vacation on SeeMuchMore.com The game, “Your Eyes Deserve a VSP Vacation” educates users about eye health and the importance of vision benefits.
Book on Health Industry Trends
Atlantic Information Services is offering the book, “Health Plan Facts, Trends and Data: 2012-2013.” It offers insights into trends that are re-shaping the health care industry. For more information, visit http://aishealth.com/marketplace/health-plan-facts-trends-and-data.
Year End Savings on FSAs and HRAs
Flexible Benefit Service Corporation (Flex) launched its flexible spending account (FSA) and health reimbursement arrangement (HRA) year-end savings promotion. Flex is featuring a 10% savings on FSA or HRA per member per month fees for new plans with effective dates Sept. 1, 2012 through Dec. 1, 2012. For more information about Flex, visit http://www.flexiblebenefit.com or call 888-353-9178.
