LIFE INSURANCE & ANNUITIES
• Life Combo Products See Double-Digit Growth
• Income Annuity Companies Add Features to Attract Consumers
• What Clients Need to Know About ACA Changes
• LTC Partners Teams Up With the California Bankers Assn.
• Employers Are Planning for ACA Changes
• Small Businesses Hold Off On Hiring Due to the ACA
• Subcommittee Examines Health Insurance Tax
• Funds Available to Help Uninsured Enroll in ACA Coverage
• ER Docs are Key to Reducing Health Care Costs
• LTC Planning Guide
• Accident Insurance
• Variable Annuities
Life Combo Products See Double-Digit Growth
More than 86,000 life combination policies were sold in 2012, an increase of 19% over 2011, according to a LIMRA report. Consumers under 59 held more than half of in-force polices in 2012. Sixty percent of life combination policies are insuring women. Life combination products accounted for 11% of new premium for individual life insurance.
Sales of life combination products continue to grow at a remarkable rate as new carriers enter the market and existing players refine products to remain competitive, said Catherine Ho, LIMRA product actuary. “This segment of the market weathered the storm pretty well during the recession when individual life sales declined significantly. Now that sales growth has returned for individual life, we anticipate life combination products to continue their steady growth,” she said.
All life combination product lines experienced growth in 2012, with whole life (WL) and universal life (UL) combination premium each growing 10% and variable combination premium growing 3%. Whole life combination policy count rose 23%; UL policy count rose 19%; and variable policy count rose 4%.All but one distribution channel experienced double-digit growth in 2012 (independent RIA). Banks and savings institutions posted the largest premium growth, rising 21%; affiliated agents recorded 30% growth in policy count.
Linked benefit products dropped 1% in policy count and held only 24% of the market in 2012. These products are mostly single premium and are packaged all-in-one. Acceleration policies grew 27%, capturing 76% of the market share. These products provide long-term care benefits up to the amount of the life death benefit. For more information, visit www.limra.com.
Income Annuity Companies Add Features to Attract Consumers
A majority of the companies that offer income annuities have added features to address consumer concerns and attract sales, according to a recent joint LIMRA/CANNEX study. Income annuities provide a guaranteed stream of income for as long as the owner or annuitant lives and can ensure that the income covers the lives of a couple.
Many income annuities now offer retirees increased access to cash or liquidity in case of an unforeseen need. Other features include death benefits to address a premature death and flexible income options to keep up with inflation.
Lowell Aronoff, CEO at CANNEX said, “There is a disconnect between the need and the amount of sales. Retirement income research universally suggests that income annuities should be a core product for nearly all retirees. Yet sales of these products are still fairly modest.”
Loss of liquidity is one objection that advisors have had to recommending income annuities. However, nine of the top 10 income annuity companies offer access to cash outside of their scheduled payments in case of emergency or other needs. Liquidity may come in several forms, such as access to the guaranteed payments, access to the life contingent payments, or an acceleration of several months of scheduled payments in advance.
All carriers surveyed offer the simplest form of death benefit: If the annuitant dies, payments continue to their estate for a specified number of years. Most companies offer at least one death benefit that provides additional money, as a payout option, upon the annuitant’s death .
All of the top 10 companies offer a cost of living adjustment (COLA) option that allows retirees to get increasing income and address one of their chief concerns, inflation. Retirees can choose various COLA rates, such as a 6% six percent increase or more. Other companies offer payments that are pegged to the Consumer Price Index.
Advisors who are engaged in retirement income planning are taking a second look at income annuities, said Mark Paracer, LIMRA research project director. LIMRA research indicates that there will be as many as 64 million retirees by 2025.
Having a deferred or immediate income annuity can help retirees ensure that their essential expenses in retirement are covered, allowing an advisor to invest the remaining portion of their portfolio with a goal of acheiveing higher returns, he said. For more information, visit www.limra.com.
What Clients Need to Know About ACA Changes
Susan Polk, a health insurance agent in San Luis Obispo, issued an advisory to help her clients sort out the Affordable Care Act (ACA), “Some people think that, come January 2014, a new insurance card will magically appear in their mailbox. This is most certainly not true. Enrollment will not be automatic, except in certain circumstances when you participate in an employer group plan of more than 200 employees, and you must make choices among various options, choose a plan, and enroll yourself and family members,” Polk says. She outlines the following key points:
• Individual health insurance – All insurance is guaranteed issue, meaning you are guaranteed to get coverage. There are no waiting periods for pre-existing conditions. Higher premiums cannot be charged for any health conditions, although an individual can be charged up to 50% more for smoking. California has decided not to implement this option.
• Free or low-cost health insurance – Individuals and families making less than 138% of the Federal Poverty Level (also known as the Federal Income Guidelines) will be eligible for MediCal in California (133% will be eligible for Medicaid in most other states). There is no longer an asset test, so people can now hold onto their retirement plans and other property and still qualify for free or greatly reduced medical care.
• Health Plans Offered – Insurance companies can offer four plans of insurance. Bronze plans must provide at least 60% coverage. Silver plans must provide at least 70% of coverage. Gold plans must provide at least 80% of coverage, and Platinum plans must provide at least 90% coverage. Deductibles and co-pays may vary from company to company. The only requirement is that they can prove that the actuarial value of the coverage meets the minimum percentages.
• Premium subsidies – Individuals and families making between 138% and 400% of the Federal Poverty Level will be eligible for premium subsidies. Your eligibility in 2014 will depend on your income in 2012. Each subsequent year, the eligibility will be based on your income in the calendar year two years prior, for example, in 2015 your subsidy would be based on your 2013 income. By purchasing insurance through the Health Benefit Exchange, they will be subsidized for the difference between the second lowest cost Silver Plan and the amount they are expected to pay, which varies from 2% to 9.5% of the Modified Adjusted Gross Income. For those who make over 400% of the Federal Poverty Level, there is no subsidy. However, they will be able to purchase any of the same products outside of the Exchange with no underwriting.
• Individual Mandate – Individuals will be required to purchase medical insurance starting in January 1, 2014. This is called the ìIndividual Mandate. Those not enrolling will pay a penalty along with their income taxes annually to the Internal Revenue Service, beginning in 2015. The penalty for not participating in 2014 will be the greater of 1% of Modified Adjusted Gross Income or $95, whichever is greater. This will increase each year, until it is the greater of 2% or $295.
• When to Enroll – The first open enrollment will start on October 1, 2013, and will continue until March 31, 2014. After that, open enrollments will occur each fall between October 15th and December 7th. There will be no enrollment into individual insurance outside of open enrollment except for certain qualifying events, including losing other coverage, birth, divorce, death, and a few other life events.
• Grandfathered Plans – If you have present individual insurance, you may be able to keep it, if your original effective date was before March 23, 2010, and you have not made substantial changes to your policy. In this case, your plan is said to be grandfathered and you can keep the plan even after ObamaCare is fully implemented. President Obamaís message to Americans in January of 2010 was that if we liked our health plans, that we would be able to keep it. He makes good on that promise if your plan is grandfathered. If your plan is not grandfathered, it will go away on December 31, 2013. You will then have a choice of any health plan offered by any health insurer in your county.
• Why enroll through a broker? – Private insurance brokers will go through a formal training process to be eligible to enroll folks in the Health Insurance Exchange (in California, this is known as Covered California). Health insurance brokers are qualified to assist people. Their training and experience with health insurers will make them the optimal choice for your enrollment needs. They can help you choose the best plan for your circumstances and help you with the tools youíll need to find a doctor and access care.
Polk offers the following advice for 2013:
• Know your income and optimize the results. Falling above the 400% threshold will mean paying 100% of the cost of your health insurance with no subsidy. Some individuals may not want to fall below the 138% (in California, 133% in other States), as that would mean eligibility in MediCal or Medcaid and could restrict access to personal physicians.
• If your plan is grandfathered, don’t make any changes until after the summer or fall. A synopsis of plans will be available later in 2013. At that time, you will be able to preview plans and see how the premiums compare to your present plan. It is expected that once the Affordable Care Act is fully implemented, grandfathered plans will see much lower premium increases.
• Make your appointment early. We will begin making appointments in August for the October enrollment.
• Keep your records handy. You may be asked to bring your 2012 tax return to your appointment, and other important records. This information will help insurance agents quickly determine your eligibility for subsidies and help you get the best result. All personal information is kept strictly confidential.
LTC Partners Teams Up With the California Bankers Assn.
LTC Partners & Insurance Services, LLC, will be providing long-term care education to member banks of the California Bankers Association (CBA), one of America’s largest state banking trade organizations. A long-term care benefit will be available to employees of member banks throughout California, with education and policy options provided through a partnership between CBA and LTC Partners & Insurance Services.
“We think the CBA initiative is important because banks are prime sources of financial advice; and their middle-aged and older clients sorely need such advice to protect themselves from the financial drain of uninsured long-term care expenses. As California bank employees learn about long-term care protection for themselves, we think they will be better able to guide their customers. Now banks can become more solid sources of the necessary education. Already many financial advisors, based in banks, act as bridges to long-term care policy options,” says Cameron Truesdell, LTCFP’s CEO. For more information, visit www.ltcfp.com.
Employers Are Planning for ACA Changes
Ninety percent of employers are developing tactics and taking steps to deal with the Affordable Care Act (ACA). Many are planning to modify their plans due to the ACA. Sixty-nine of employers say they will definitely continue providing employer-sponsored health care when health exchanges come online in 2014 compared to 46% who said they would in 2012, according to a survey by the International Foundation of Employee Benefit Plans. Twenty-five percent say they are very likely to continue their employer-sponsored health care offering.
In response the ACA, 18% of employers have already increased participants’ share of plan premiums and 25% plan to do so over the next year. Twenty-five percent of employers that are planning to make changes are increasing their emphasis on high-deductible health plans (HDHPs) with health savings accounts (HSAs) while an additional 14% are assessing the feasibility of adding doing so.
Employers are also encouraging healthy behavior in employees, with 19% developing or expanding organized wellness programs within the past year. Additionally, 14% of employers adopted or expanded the use of financial incentives to encourage healthier lifestyles within the past year, with another 25% planning to do so in the next year.
Julie Stich, research director for the International Foundation of Employee Benefit Plans said, “More and more organizations are losing their grandfathered status, dropping from 45% in 2011 to 27% in 2013. Also many organizations are redesigning their plans to avoid the 2018 excise tax on high-cost or so called ‘Cadillac plans.’ In 2011, only one in 10 said they were redesigning their plan to avoid the additional tax, but we’ve seen a steady increase over the past two years that shows the number will soon double.” For more information, visit www.ifebp.org/ACA2013.
Small Businesses Hold Off On Hiring Due to the ACA
Forty-one percent of small business owners say they are holding off on hiring because of the Affordable Care Act, according to a Gallup poll. Thirty-eight percent have pulled back on plans to grow their business; 19% have reduced their number of employees; 18% have cut employee hours; and 24% have thought about eliminating healthcare coverage for employees.
Forty-eight percent say the ACA will be bad for their business, compared to 9% who say it will be good, and 39% who expect no impact. Fifty-two percent say the ACA will lower the quality of healthcare; 13% say it will improve care; and 30% say it will have no impact.
Fifty-five percent of small business owners expect to pay more for healthcare as a result of the ACA. Five percent expect their healthcare costs to decline while 37% say the health law will have no effect on what they pay for healthcare. For more information, visit www.gallup.com.
Subcommittee Examines Health Insurance Tax
The House Small Business Subcommittee on Health and Technology Chairman Chris Collins (NY-27) led a hearing to examine the economic effects of the upcoming health care law’s insurance tax on small businesses. Beginning in 2014, the health care law imposes a new tax on the health insurance policies that most small businesses purchase. The tax will be $8 billion in 2014, will increase to $14.3 billion in 2018, and increase based on premium trends after that.
Dean Norton, president of New York Farm Bureau in Elba, NY said, “Health insurance costs for small businesses are already rapidly trending higher, increasing 103% since 2000. According to the Joint Committee on Taxation, the health insurance tax will further increase family premiums by $400 or 2.5% in the year 2016, making it even harder for farmers to purchase coverage for themselves, their families and their employees.”
Funds Available to Help Uninsured Enroll in ACA Coverage
Health and Human Services Secretary Kathleen Sebelius announced new funds to help uninsured Americans enroll in affordable health insurance coverage under the Affordable Care Act. In California, an estimated $22,029,348 is available to support 129 health centers’ enrollment efforts.
Nationwide, approximately $150 million in funding will enable community health centers to provide in-person assistance to help enroll uninsured individuals into affordable health insurance coverage. Sebelius said, “Community health center staff will provide unbiased information to consumers about health insurance, the new Health Insurance Marketplace, qualified health plans, and Medicaid and the Childrenís Health Insurance Program.”
ER Docs are Key to Reducing Health Care Costs
Emergency physicians are key decision makers for nearly half of all hospital admissions, highlighting a critical role they can play in reducing health care costs, according to a report from the RAND Corporation. Lack of access to follow-up care is a top concern that influences the decision of emergency physicians to admit particularly fragile patients to the hospital, rather than take a chance that they will fall through the cracks and suffer harm.
Efforts to reduce non-urgent and non-emergency use of emergency departments oversimplify a complex problem, and should instead focus on increasing access to affordable options outside the emergency room. Efforts to shift care into other facilities, such as retail clinics, have not always been successful because of the limitations of these facilities. For example, retail clinics lack diagnostic testing, are unable to admit patients to the hospital, and won’t see uninsured patients who can’t pay cash. For full copy of the report, go to www.rand.org
LTC Planning Guide
Kiplinger’s Personal Finance recently published its annual 2013 retirement guide, which outlines programs and services that should be considered in long-term care planning. The issue also features three steps to living safely and independently as you age in your home. For more information, visit http://www.truefreedomhomecare.com.
American General Life introduced AG Accident Choice Plus. It provides benefits for a wide range of emergency medical costs from emergency room visits to physical therapy to diagnostic exams, even surgery related to accidental injuries. Available riders offer coverage in the event of critical illness, accidental death and dismemberment, and inability to work due to an accidental injury. For more information, visit http://www.americangeneral.com/accident.
Lincoln Financial Group’s new American Legacy funds allow advisors and their clients to build their own portfolio with Lincoln’s primary living benefit riders. These selections can be combined with a fixed income option to create a diversified portfolio. For more information, visit www.LincolnFinancial.com.