• Romney and Obama Seen As Even in Dealing With Healthcare
• Exchanges Bring Big Opportunities for the Industry
• Open Enrollment Season Foreshadows Significant Changes in 2014
• Companies Fail to Provide the Required SBC Documents
• Governor Asks Exchange to Allow Sale of Certain Eye Care Plans
• Managing Benefits Online
• Lifestyle-based Rewards Program
• Individual Vision Plan
• Medicare Choice plan
• Online Disability and Life Educational Modules for Employees
• Compliance Calendar
• Disability Coverage for Pilots
• How Workers View Their Benefits
• Legal Plan Offers Advice on Bullying
EVENTS AND EDUCATION
• LAAHU Events
Romney and Obama Seen As Even in Dealing With Healthcare
Mitt Romney no longer trails Barack Obama in the Pew Research Center’s presidential election polling. By about three-to-one, voters say Romney did a better job than Obama in the Oct. 3 debate, and the Republican is now better regarded on most personal dimensions and on most issues than he was in September. Romney is seen as the candidate who has new ideas and is viewed as better able than Obama to improve the jobs situation and reduce the budget deficit.
Romney and Obama now run about even on dealing with health care, Medicare, foreign policy, and taxes. Obama led on most of these issues by significant margins in September. Romney also holds a significant 49% to 41% advantage on improving the job situation, despite the fact that most of the interviewing was conducted after the October jobs report, which showed the unemployment rate falling below 8%. For more information, visit
Exchanges Bring Big Opportunities for the Industry
The following is based on a comprehensive analysis by PWC Health.
The new state-based exchanges represent a major business opportunity for the insurance industry — an estimated $205 billion in premiums by 2021. One year from now, 12 million Americans are expected to begin purchasing health insurance through exchanges. Federal subsidies will entice many to the program with coverage starting in 2014. By 2021, the exchange market is expected to more than double, marking the largest expansion of health coverage since the creation of Medicare in 1965.
“This is the largest open enrollment in our careers,” said Kim Jacobs, vice president of product and innovation at UPMC Health Plan. Individual state exchange members in 2021 are projected to range from 100,000 in states such as Maine to 3.5 million in California. “Public exchanges will create an irreversible shift in the insurance market that will ultimately change the way medical care is sold in the U.S.,” said Joel Ario, managing director of Manatt Health Solutions and the former head of insurance exchange planning at HHS.
Private, employer-focused exchanges have much to gain. Unbounded by public exchange requirements, private exchanges can experiment with different approaches and adapt rapidly to consumer demands. They may lead the way in the quality of customer experience. “In an exchange, employees spend money differently than employers think. Individuals often buy up when they understand their choices,” said Ron Goldstein, president and CEO of CHOICE Administrators. Choices can include services such as vision, chiropractic service or more coverage for family members. “We’ve relied heavily on the broker network to educate the individuals; as more choice is introduced into the system, we’ll need the brokers to continue to play that educator role,” he added.
Ario, said, “Private exchanges, already up and running in a handful of markets, may serve as innovation models in this new purchasing environment targeting employers and consumers seeking lower costs, greater transparency and convenience.” In many ways, the private exchange is the precursor to the public exchanges envisioned in the ACA. In the future, private exchanges will create an alternative for employers and for individuals who don’t qualify for government-subsidized insurance.
Private exchanges offer an alternative for employers to move toward a defined contribution approach that caps costs while offering access to a wider array of benefits. Starting in March 2013, employers will be required to notify employees about the new exchanges, providing detailed information on services offered and subsidy eligibility. The business must also clarify that it will not provide a contribution toward coverage if the employee enrolls in an exchange plan.
Medicaid Managed Care
Medicaid Managed Care organizations, which have experience addressing the needs of a lower income population, may be well equipped to serve the market. In the latter years, the average income of exchange participants trends slightly upward as higher income people join the exchanges. For example, in 2014, HRI estimates that 16% of the individual exchange population will have incomes above 300% FPL. The portion rises to 35% in 2021.
Challenges for Insurers
For carriers, thriving in this new market won’t be easy. Insurers will need to maintain a balance of healthy and sick members to limit adverse selection. Providers and insurers will face challenges in serving a new customer base with a demographic profile and health needs that differ from today’s insured population.
Insurance companies must determine how to price at the different levels of plans laid out in the ACA — bronze, silver, gold and platinum — each having cost sharing percentages. Consumers care about price; with all else being equal, price will win. That’s where health plans will start competing in the exchanges. Some plans will price low to attract new customers while some may price higher to avoid the sickest, costliest patients. Higher-priced plans with a better fitting provider network could beat out some lower-priced plans. As previous HRI research has shown, 47% of consumers are willing to pay more for additional insurance features, such as dental or vision coverage. Even more important to consumers is the quality of insurance coverage. Consumers cited benefits and provider network as their top two aspects that define quality. Lower costs came in third.
Insurers focus on finding the sweet spot in product pricing and managing the influx of enrollees. It may be easier for larger insurers to turn a profit under the small margins, said Ario. Large-scale acquisitions are a likely outcome. However, regional insurers and accountable care organizations could provide tough competition to larger companies in markets with fewer players because they know their customer base and they can be competitive on price and benefits.
The pace of state exchange planning poses challenges for insurance companies. The timeline to begin qualifying health plans begins in October, but no state is ready. High progress states, such as California and New York, hope to begin health plan certification in early 2013. Only a few carriers may find it realistic or worthwhile to participate in all 50 public exchange markets.
Plans will compete head-to-head in the exchanges and against plans operating outside of the exchanges. Increased competition and pricing transparency will pressure insurers to control costs while maintaining benefits and quality. As the insurance exchange population becomes more demanding, plans will need more than price to attract and retain members.
Insurers that decide to compete in an exchange must keep a careful eye on administrative costs. Plans must already keep these costs below 15% to 20% of premiums under the ACA’s medical loss ratio requirements. Even if the company does well, it will be required to relinquish a portion of profits above 3% for the first few years as part of the “risk corridor function,” which is a temporary program that limits gains and losses by insurers operating in the exchange. And while there are controls in place to limit plan loss and liability from high-cost members, there are no guarantees of long-term profitability.
In addition to public exchanges, insurers look for opportunities in the private exchange world, including with small businesses. Insurers may work to create their own single carrier exchanges or participate in broader third-party exchange networks. As the environment shifts to a direct-to-consumer market, segmentation will be an important means to offer differentiated products to consumers and potentially also manage risk. Winners are likely to find a way to communicate with consumers in a way that non-healthcare professionals can understand.
Insurers will put pressure on providers to deliver value over volume. Enrollment in exchanges could speed up new expectations of care such as more online capabilities, improved transparency, and an increased focus on customer experience.
Once the exchanges are established, expect to see provider organizations developing products to compete with insurers on all lines of business. Provider-owned health plans and ACOs could be well positioned, said health industry investor Stephen Jackson. They will be able to offer lower-cost products with the advantage of local name recognition/reputation and insurers could become the backroom for these organizations.
Depending on the type of benchmark plan selected by states, there will be various pharmacy benefit structures ranging from restrictive formularies to a comprehensive benefit similar to that offered through the Federal Employee Health Benefits Program (FEHBP). Over time, qualified health plan participation rules may impose additional requirements, such as evidence that demonstrates superiority to medications and devices already covered in a therapeutic category. If more states choose to adopt the FEHBP open formulary design as a default, it could be a boon for branded drug manufacturers looking for continuity and maximum pharmaceutical coverage. On the other hand, more limited formularies would further drive usage of generic medications. Generous purchasing subsidies built into the ACA provide a large and rapid cash injection into the burgeoning health insurance exchange market.
Many employers will not see dropping their health benefits as a viable solution. The ACA’s $2,000 penalty for dropping coverage for a full-time employee may seem small compared to the cost of providing health insurance. But that penalty multiplies. The annual penalty calculation is the number of full-time employees minus 30, times $2,000. The penalty grows each year by the growth in insurance premiums.
Employers that drop coverage lose numerous tax advantages that come with offering health benefits. Also, employees view healthcare as a valuable benefit. The employers that are most likely to consider dropping coverage are those with high concentrations of lower-wage workers who willqualify for federal subsidies through the individual exchange markets.
With the law and its subsidies, exchanges could revolutionize the health insurance market by shifting the focus to the individual and prompting insurers to act in a more retail-oriented manner. There will be a push for clarity in products and their value, convenience for buyers and competitive prices. Yet the 2010 law is neither the first nor the last word on the future of exchanges. Even if a future Congress and administration scale back or repeal the law, exchanges remain a hot prospect, as evidenced by the private sector entering this new market.
Investors view 2014 as the start of a major new trend in the US health system –away from employers managing coverage to a robust, open marketplace. Ongoing cost concerns will continue to spur change, both in the form of commercial innovation and more traditional government pressure. Under the ACA, regulators already have MLR limits on premiums and the power to review rate increases. In addition, states may follow Massachusetts in implementing all-payer pricing systems for providers.
The Congressional Budget Office projects that exchange membership will reach 25 million in 2021 for the individual exchange and 4 million for the small group exchange.
Exchange shoppers are not likely to overwhelm the healthcare system or substantially drive up costs immediately after gaining coverage. However, they will be less familiar with the insurance system; in 2014, approximately 75% of public exchange enrollees will be newly insured. Over time, outreach and education efforts by states and insurers will need to match the changing needs of exchange members as they transition from newly-insured to more sophisticated customers. To get the report, visit
Open Enrollment Season Foreshadows Significant Changes in 2014
As employees make their open enrollment selections, they are likely to see only minimal plan changes compared to last year. However, employees can expect significant change in 2014 and beyond with mounting cost pressures, health care reform, the emergence of new network configurations, and the rapid development of new health care delivery models, according to a survey by experts at Towers Watson.
Sixty-three percent of employers expect little or no change to their health benefit plan design or employee premium subsidies for 2013. Yet 2014 promises to be a different story, with 42% of employers considering changes to plan options and 31% considering reductions in subsidization of coverage for spouses or dependents. Likewise, the percentages of companies planning to use spousal waivers or surcharges when an employee’s spouse has access to employer-provided coverage elsewhere is expected to increase moderately in 2013, but grow significantly in 2014.
The survey projects a 5.3% net increase in total health benefit plan costs after any plan changes are taken into account, increasing the average cost per active employee from $10,925 in 2012 to $11,507 in 2013. Of the 2013 total, employees will pay an average of $2,596, or 22.6%, up from $2,436 in 2012.
The year 2013 is a bridge to an emerging health care landscape, said Randall Abbott, senior health care consulting leader at Towers Watson. Employers are working to deliver greater value for each dollar spent on health care in response to continued cost escalation, the rapidly changing provider marketplace and the many provisions of health care reform. This will translate into new plan options, new approaches to care delivery, and a marked shift to narrow provider networks.
Next year, employees should be on the lookout for new health care plan designs that encourage them to make more informed decisions or bear a greater financial burden for their healthcare. Employees will see new plans emerging with different levels of coverage based on cost or quality, new networks of high-quality providers, and new modes of care delivery, such as retail care, telemedicine, and employer-sponsored onsite health coaching. They can also expect more interactive tools for selecting medical providers and services based on price and quality. Employers will offer incentives for using high-performance networks. Employers will make employees more accountable for their personal health decisions.
Employees will get more information and choices than ever. The next few years will mark a major reshaping of how health care is delivered, said Ron Fontanetta, senior health care consulting leader at Towers Watson. The use of reward or penalties based on biometric outcomes (achieving a target BMI and cholesterol level) could skyrocket in the next two years. Thirteen percent of employers use such incentives; 9% plan to add them in 2013; and another 52% are considering them for 2014 or 2015.
Six percent of employers plan to add account-based health plans in 2013 and another 19% are considering adding them in 2014 or 2015. While 12% offer an ABHP as their only plan option, this percentage could climb to 46% by 2014.
Fifty-nine percent of employers are somewhat likely to very likely to stop sponsoring retiree medical plans for post-65 retirees in 2014 or 2015. Instead, many employers will direct retirees to private Medicare exchanges. For more information, visit towerswatson.com.
Insurers Fail to Provide
the Required SBC Documents
Last month, the Summary of Benefits and Coverage (SBC) provision of the PPACA law took effect and most issuers are still struggling to provide the documents. The Dept. of Labor has stated that, during the first year of applicability, it will not impose penalties on plans and insurers that are working diligently and in good faith to comply, according to a report by Tyurla.
The law states that insurance companies need to provide a paper SBC document within seven days of application, renewal, or first day of coverage. Generating SBCs for all of the plan designs a health insurance company offers is proving to be a challenging process. Tyrula visited the websites of more than 35 major health plans the week after the law took effect. Tyrula targeted individual plans and applied as a single male born in 1980 who doesn’t smoke. Tyrula found that 61.5% insurance companies did not have SBCs online. Manu Uppal, CEO and co-founder of Tyrula LLC, said, “It’s not surprising that a high percentage of health plans have not made their SBCs available online. Creating SBCs is not an easy task. An AHIP study from last year predicted $194 million in annual ongoing operating costs for all insurance plans to comply with the SBC regulation. Many companies may have taken a wait-and-see approach and are planning to be compliant by October 2013.” For more information, visit www.tyrula.com.
Governor Asks Exchange to Allow Sale of Certain Eye Care Plans
In a letter to the California Health Benefit Exchange board, state Insurance Commissioner Dave Jones (D) urged officials to allow the sale of stand-alone vision plans to individual customers in the exchange, reports the Sacramento Bee. Jones wrote, “Allowing vision insurers to offer stand-alone coverage in the exchange’s individual market improves access to health care and promotes consumer choice.” VSP has delayed hiring 150 workers until the board comes to a final decision. Meanwhile, another eye care insurer, Superior Vision Services, filed a protest this week against the exchange board’s original decision.
Managing Benefits Online
BeneTrac, a Paychex company is offering a user interface that makes it easier for brokers, human resource managers, and employees to manage health and other insurance plans. For more information, visit www.BeneTrac.com, call 619-788-5800 or e-mail salessupport@BeneTrac.com.
Lifestyle-based Rewards Program
The EveryMove rewards program for healthy living debuted at the Health 2.0 conference in San Francisco. Participants can connect their EveryMove account to more than 10 health-tracking applications. Whether checking in at the gym, tracking movement, measuring miles, or simply logging activities on EveryMove, consumers can earn points toward rewards from businesses that applaud healthy living. For more information, visit www.everymove.org/partners.
Individual Vision Plan
Aflac Vision Now is a new individual vision insurance plan that will offer enhanced benefits with increased benefit payments for regular eye examinations and vision correction procedures with no increase in premium. Some of the added benefit includes the following:
• Permanent Visual Impairment Benefit: $750 to $10,000 for visual impairment.
• Eye Surgeries Benefit: $50 to $1,500 for miscellaneous eye surgeries.
• Eye Diseases and Disorders Benefit: $1,000 for eye diseases and disorders.
For more information, visit aflac.com/business. To join the conversation, follow @aflac on Twitter.
Medicare Choice plan
Express Scripts is offering Medicare Choice plans with a $0 co-pay for Tier 1 generics from the Express Scripts Home Delivery Pharmacy. It begins the first day of coverage through the Coverage Gap. In 2013, the Coverage Gap begins after a beneficiary reaches $2,970 in expenditures and ends when total annual out of pocket costs exceed $4,750. The Express Scripts Medicare Value plan features a low monthly premium and $4 preferred (Tier 1) generics when prescriptions are filled within our network of pharmacies. And when using the home delivery pharmacy, the cost of a 90-day supply of a Tier 1 generic medication is under $3 a month. For more information, visit www.Express-ScriptsMedicare.com or call 866-477-5704.
Online Disability and Life Educational Modules for Employees
The Standard is offering online interactive educational modules to its group disability and life insurance customers to help employees understand their life and disability insurance options. The modules are designed to overcome enrollment barriers and help employees make the right decisions. “During times when contributory coverages are playing a larger role in employers’ benefits offerings, it is critical to find fresh, engaging ways to educate and assist employees,” said John Jones, assistant vice president, E-Business with The Standard. For more information, visit www.thestandard.com.
HR360 has updated its Employee Benefit Plan Compliance Calendar. It includes information on new requirements under Health Care Reform, such as the new summary of benefits and coverage (SBC). The attorney-developed calendar provides information on required notices, disclosures and filings- including who must provide them, who must receive them, and when notices are due. The 2012 Employee Benefit Plan Compliance Calendar includes Health Care Reform Notices, COBRA Notices, HIPAA Notices, Special Health Care Notices (Women’s Health and Cancer Rights Act, Mental Health Parity and Addiction Act and CHIP), and Form 5500 Reporting Requirements. It also includes an interactive Benefit Notice Checklist, which summarizes key notice and reporting requirements to allow users a quick, efficient way to stay in compliance. For more information, visit www.hr360.com or email email@example.com.
Disability Coverage for Pilots
Petersen International Underwriters enhanced its Pilot Disability Insurance plan. The biggest enhancement is a lump sum benefit option for permanent Loss of License, which is available as a stand-alone plan or in conjunction with a monthly benefit plan. In the past, a prescription of benefits available to pilots would be a plan that would replace 65% of income for a period of up to 60 months. With this new feature, if a pilot does not recover and the disability is deemed to be permanent, then a lump sum benefit of as much as $1 million is available. For more information, call 800-808-4014 or visit us at www.wellnet.com.
How Workers View Their Benefits
While today’s American workers do value their benefits, there is significant room for improvement, according to a survey by the Guardian. American workers, on average, have a score of 6.8 (based on a scale of one to 10) on how much they value their benefits. The following are highlights of the survey:
• Industries with employees that score highly on the Benefits Value Index include public administration and education, as well as healthcare and finance/insurance. Conversely, automotive, transportation/warehousing and accommodations/food services are industries where the perceived value of benefits among workers is likely to be lower.
• The majority of employers offer benefits to attract and retain talent. Two-thirds of workers feel that employee benefits are very important when deciding to stay with an employer. Seventy-two percent say that benefits are very important when deciding whether to take a new job.
• More than 9 in 10 workers are interested in receiving personalized recommendations about benefits and coverage levels from insurance carriers for benefits and coverage levels. Not coincidentally, these workers score very highly on the Benefits Value Index. Content that is targeted to a worker’s background, life stage or even household can allow workers to make more informed decisions about their benefits and ultimately lead to greater confidence that they have made the right decisions.
• While online remains the preferred enrollment channel, employees have a clearer sense of satisfaction with their benefits when they have the option of selecting their own channel of enrollment. They also tend to have a longer tenure with their employer.
• As workers start to value the benefits their employers offer, they are likely to feel that the benefits are useful and that their employers consider employee benefits a priority in their goals of attracting and retaining top talent. Understanding the value is a key to employee engagement, and, in turn, leads to workers that are engaged, as well as healthier, happier and more productive.
To view the study, visit https://www.aboutemployeebenefits.com.
Legal Plan Offers Advice on Bullying
Parents can play a significant role in preventing bullying, according to Ann Cosimano, general counsel of ARAG, a global provider of legal solutions. Harassment can be illegal when it is so severe, persistent or pervasive that it creates an intimidating or hostile school environment and interferes with education. Most states are looking at their laws and model policies in order to prevent bullying. ARAG recommends the following to parents who feel that their child is being bullied:
• Contact your student’s teacher, counselor and the principal.
• Get a copy of your school’s anti-bullying policy and follow the process for raising a complaint.
• Keep notes about what happened, when, who was involved, and when you reported it. Schools that get federal funding are required to look into any complaint of harassment and protect the student from further harassment.
• If harassment persists, consider filing a formal grievance with the district. You may also want to contact the U.S. Department of Education’s Office for Civil Rights and the U.S. Department of Justice’s Civil Rights Division.
“Bullying is one of several unexpected legal issues that can happen with your children as they grow up. To further safeguard against legal issues, check with your employer about enrolling in legal insurance coverage where you work,” she added. For more information, visit www.ARAGgroup.com.
LAAHU is hosting the following events:
• October 18 in Encino (7:30 am to 10:00 am) Monterey at Encino — Compliance Checklist Presented by Marilyn Monahan, ERISA attorney & Bobbi Hamilton, Pay Pro Administrators. The event will be the agent’s guide to all things compliance including ACA, ERISA, HIPAA, COBRA, SPD, SBC, W-2 to 5500. This session will be an overview of plan sponsor compliance requirements, with special focus on those newly and soon-to-be introduced by the PPACA. Attendees will leave with an updated checklist of the requirements for employers and plan sponsors of all sizes, fully insured and self funded, with the ability to ask the experts some questions. The fee for LAAHU members is $25, non-members & guests $35.00, and walk-ins $50
• November 15 Breakfast Meeting, Monterey at Encino — Featured Speaker, Janet Trautwein, CEO of NAHU will provide an update on the effect of the election on the PPACA, federal health care reform initiatives and how they relate to implementation in California.
• December 7 Fourth Annual fashion show, Four Seasons Hotel, Westlake Village,
For more information, visit laahu.org.
William T. Hold Seminars is offering online self-paced education on the following topics:
* Life Insurance
* Health Insurance
* Disability Income & Long Term Care Insurance
* Spoilage, Utilities and Ordinance or Law
* Homeowners Property Endorsements
* Insuring Toys
* Professional Liability Concepts
* Workers Compensation
* Additional Insureds/Certificates of Insurance
* Employment Practices Liability Insurance
* Preparing for CIC Personal Auto
* Preparing for CIC Homeowners
CISRs and CSRMs can combine two four-hour online topics to fulfill their annual update requirement. No final exam is required to receive designation update credit for online courses, but successful completion of mandatory quizzes and review tests is required. To receive CE credit, participants must take and pass all quizzes, review tests, and the final exam. Three attempts are allowed for the final exam. For more information, call 800-633-2165 or visit www.TheNationalAlliance.com.