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by Leila Morris
IN CALIFORNIA
• Aetna Cuts Broker Commissions on Small Group Business
• Jury Does Not Award Damages in Executive Life Case
• Exchange Proposes to Offer Stand-Alone Vision Plans to Individuals
• Life Agent Charged with Stealing Premium Payments
• Administrators Ordered To Stop Making Patient Care Rulings
RETIREMENT PLANNING
• IRA Allocations Vary By Age, Balance, and Type
HEALTHCARE
• Tomorrow Only: Free Online Showing of “Bitter Pill”
• Could an ACA Advisory Board Limit Care?
• Rate Review Rules Hold Down Premiums
• Romney’s Bid To Undo Health Law Faces Hurdles
• Multi-Employer Plans and the Exchanges
• Does The Medicare Drug Discount Program Drive up Prices?
• Studies Address Health Policy on Campaign Trail
• Employer-Sponsored Coverage Expands in Massachusetts
• Medication for Normal Aging Overtakes Costs of Treating Most Chronic Diseases
• CDHPs Lead to Positive Behavior Changes
Aetna Cuts Broker Commissions on Small Group Business
Aetna sent a letter to brokers announcing changes to the commission structure for Small Group businesses with two to 50 eligible employees. “This schedule is being updated due to ongoing implementation of Health Care Reform and competitive landscape factors. Passage of the Affordable Care Act (ACA) in 2010 was an important milestone in addressing the issue of the nation’s uninsured. However, much more needs to be done to address our health care quality and affordability challenges. This commission schedule helps to counteract the effects of premium inflation and upcoming taxes and fees,” according to the letter.
T he commission schedule will be as follows for small group medical business with two to 50 eligible employees sold with an effective date of January 2013 or later:
• 1st year – 6.5%
• 2nd year (at renewal) – 6.2%
• 3rd year (at renewal) – 5.9%
• 4th year (at renewal) – 5.6%
• 5th year (at renewal) – 5.3%
• 6th and subsequent years (at renewal) – 5%
Commissions on annualized premiums of $500,000 and over remain unchanged at 1%. All small group business sold prior to January 1, 2013 will not be affected by this change. Payment will be made based on the commission schedule in place at this time.
Jury Does Not Award Damages in Executive Life Case
A jury in United States District Court in Los Angeles rendered a verdict finding no damages in a longstanding lawsuit involving the 1991 insolvency of Executive Life Insurance Company of California (ELIC), one of California’s largest life insurance companies at the time. ELIC was taken into receivership by then-Insurance Commissioner John Garamendi when the company became insolvent. The Insurance Commissioner then began management of the ELIC estate in an effort to secure proceeds for policyholders of the now insolvent insurance company.
After a first trial in 2005, a jury found that Artemis S.A., a French company, participated in a conspiracy to defraud then-Insurance Commissioner John Garamendi in connection with Artemis’ acquisition of ELIC and its assets in 1991 from the Insurance Commissioner. The trial was held to determine the amount of damages the ELIC estate incurred as a result of the fraudulent conspiracy. The jury found no damages.
The judge in the case, R. Gary Klausner, indicated his tentative decision to reinstate a $241 million restitution award. This award was issued by a different District Court judge after the first trial, and later vacated by the Ninth Circuit without prejudice to its being reinstated after the second trial. With interest since the prior trial in 2005, the restitution amount will be substantially larger.”
Exchange Proposes to Offer Stand-Alone Vision Plans to Individuals
In August, California Health Benefit Exchange decided that stand-alone vision insurers could sell coverage to small businesses but not to individuals. Facing protests from VSP and a smaller Rancho Cordova eye-care insurer, Superior Vision Holdings, the agency promised last month to revisit the issue. On Friday it offered up its changes, reports the Sacramento Bee.
In a memo to the board, staffers proposed letting stand-alone companies sell eye-care coverage to adults. They also proposed letting those companies sell vision coverage to children as well, but the agency first needs clarification on a wrinkle in the new federal law.
Life Agent Charged with Stealing Premium Payments
Vahagn Mkhikian, 27, of North Hollywood, was arrested on three felony counts of burglary and grand theft. He is in custody with bail set at $150,000. If convicted on all counts, he could face up to 10 years in state prison. In July, the California Department of Insurance (CDI) received a complaint that Mkhikian, a licensed life insurance agent, stole approximately $28,000 in premium payments from his client.
Mkhikian accepted premium payments from his 62-year-old client for the purpose of increasing the principal to the existing annuity. The victim entrusted him with two checks for $10,000 and $18,000 along with credit card payments totaling $8,995. Instead, Mkhikian allegedly diverted these funds for personal use in an amount totaling $36,995. When confronted, Mkhikian made false statements and issued bogus documents. The burglary charges are a result of Mkhikian meeting in the victim’s home numerous times to initiate and further his theft scheme. Mkhikian’s Life Agent license expired on August 31, 2012. Clients of Mkhikian who believe they may have been victimized should contact supervising criminal investigator Robert Brockway at 714-712-7600.
Administrators Ordered To Stop Making Patient Care Rulings
California managed care regulators are ordering a doctors’ group to stop letting business administrators make decisions about granting requested medical care, according to www.califoriawatch.org. The order targets Accountable Health Care IPA. Regulators say that the chief executive’s son and another manager made calls on patient care that, by law, should be made by a doctor.
The state Department of Managed Health Care issued 12 cease and desist orders to Accountable, a Los Angeles doctors’ group that provides care for 148,000 patients. The orders are also aimed at large insurers that contract with Accountable, including Blue Cross, L.A. Care, Aetna, Health Net, Blue Shield and others. Those orders ask health plans to stop enabling its contractor to violate state law.
Accountable Health Care IPA denies the department’s allegations.
The July 16 orders allege that Accountable Health Care IPA allowed unqualified executives to perform medical reviews involving a modification or denial for requested medical services. The orders say the decisions were reached on many occasions since Dec. 24, 2008.
The orders also allege that Ambarish Pathak, a utilization manager, and Druvi Jayatilaka, vice president and the CEO’s son, may have ruled on patient care matters on more occasions that are now concealed because the company does not track who completed medical reviews of requested care. Orders were sent to the managers ask them to stop violating the state’s Health and Safety code.
The state’s managed care watchdog agency is pursuing the case as more than a million low-income Californians who rely on Medi-Cal are about to be added to managed care plans. The state will be providing a flat per-patient fee to large insurers, many that will, in turn, delegate everyday care of those patients to independent practice associations, like Accountable Health Care.
IRA Allocations Vary by Age, Balance, and Type
For people who have individual retirement account (IRAs), investment allocations vary based on a variety of factors. A study by EBRI found lower allocations to equities among those who are older, have higher account balances, or own a traditional IRA that originated as a rollover. As account balances increased, assets decreased in equities and balanced funds while bond and other assets increased.
Equity allocations were the lowest for people under 35 with small account balances. However, when balances reached $10,000 or more, younger IRA owners had significant increases in equity allocations, so that those ages 25 to 34 with the largest account balances had the largest equity allocation.
Those under 45 were much more likely to use balanced funds than were older IRA owners. Those under 35 with balances less than $25,000 had particularly higher allocations to balanced funds. This shift follows the standard investing rule of thumb that people should reduce their allocation to assets with high variability in returns.”
Roth IRAs had the highest share of assets in equities (59.1%) and balanced funds (15.5%). Roth IRA owners were much more likely to have 90% or more of their account invested in equities than were owners of the other IRA types. IRA owners who were 35 to 44 or had account balances of less than $10,000 were more likely to have extreme allocations (more than 90%) to equities. Overall, as of year-end 2010, about 46% of total IRA assets were in equities, 20% in bonds, 11% in balanced funds, 9% in money, and 15% in “other” investments. Full results are published in the October 2012 EBRI Notes, online at www.ebri.org
Tomorrow Only: Free Online Showing of “Bitter Pill”
Dr. Vivek Palavali, M.D., who regularly performs medicine’s most intricate and complicated neurosurgeries, dissects America’s sick health care system in a new documentary film titled, “Bitter Pill.” You can view it free online at www.bitterpilldoc.com only on November 1, 2012
Could an ACA Advisory Board Limit Care?
A controversial feature of the Patient Protection and Affordable Care Act (ACA) is the new Independent Payment Advisory Board (IPAB). This appointed panel will be tasked with cutting Medicare spending, but some of its features appear to be problematic, according to a report by Douglas Holtz of the American Action Forum. IPAB appears to be barred from recommending rationing health care, raising revenue or premiums, increasing cost sharing, or restricting benefits and eligibility. But it may bring Medicare dangerously close to a rationed system. It will become more difficult to make appointments with providers of all sorts, thereby restricting care. On top of which, a provider will not offer a poorly reimbursed, but effective, treatment unless there does not appear to be a therapeutic alternative. Rationing will occur in complex and often subtle ways, and patients may never know that they could have received a more effective treatment, according to Holtz.
The board is prohibited from recommending changes that would reduce payments to certain providers before 2020, especially hospitals. Because of directives and restrictions written into the law, reductions achieved by IPAB between 2013 and 2020 are likely to be limited primarily to Medicare Advantage (23% of total Medicare expenditures), to the Part D prescription drug program (11%), and to skilled nursing facility services (5%). That means that reductions will have to come from segments that together represent less than half of overall Medicare spending.
The law makes it almost impossible for Congress to reject or modify IPAB’s decisions, even if those decisions override existing laws and protections that Congress passed. As a result, it is not in fact an advisory body, despite its name. The system is set up so that IPAB makes policy choices about Medicare.
Finally, IPAB’s time horizon is too short. IPAB’s cuts have to be achieved in one-year periods, which rules out long term quality improvements or preventive programs. Instead, IPAB will be forced to focus on reducing reimbursements to providers due to their short-term nature.
He warns that IPAB will be an agent for reimbursement cuts in Medicare. This has two potentially damaging effects on Medicare and health care in the United States. First, IPAB’s actions may stifle U.S. led medical innovation in the medical device, pharmaceutical, biotechnology, and mobile health industries. As noted above, by statute, IPAB cannot directly alter Medicare benefits. Instead, the more likely threat to patients is that IPAB will be forced to limit or deny payments for medical services. In the process, it will effectively determine that patients should have coverage for one particular treatment option but not another, or must pay much more out of pocket for one of the treatment options. This is especially troubling because it may choose to disproportionately make cuts to expensive new treatments, he said. New medicines for conditions like Alzheimer’s or Parkinson’s will likely have rapid cost growth,
Because about one-half of spending is off limits until after 2020, there will be a disproportionate and uneven application of IPAB’s scrutiny and payment initiatives. IPAB creates a level of uncertainty that will have a detrimental impact on venture capital investment in start-up firms and research and development investments from established firms.
If Medicare’s provider reimbursements are reduced drastically, providers will have three options: close up shop, refuse to treat Medicare patients, or shift the costs onto the other patients. None of these options help our healthcare system operate more effectively or more efficiently, he said. To get the full report, visit http://americanactionforum.org.
Rate Review Rules Hold Down Premiums
The ACA’s rate review program may be responsible for holding down health insurance premium increases. The report by the Kaiser Family Foundation finds that this may be true even in states that had review programs before the ACA went into effect. Under rate review, states and the federal government review proposed premium increases of 10% or more.
The average rates implemented were lower than the average rates requested in 21 states. For example, in Iowa and Oregon, the average rate that went into effect was more than 4% lower than the average rate requested by the carrier. In contrast, there was no difference between the average rates requested and the average rates that went into effect in 11 states plus D.C. The following are statistics for California:
• Number of filings submitted – 65
• Number of filings lowered, rejected, or withdrawn – 14
• Average rate change requested – 9.9%
• Average rate change implemented – 9.3%
The new 10% threshold for review may have discouraged insurers from proposing increases of 10% or more in states that did not have rate review programs before the ACA. Increased emphasis on rate review and transparency may have given state regulators an incentive to apply greater scrutiny during rate review. Federal rate review enabled many states to enhance their rate review processes by hiring additional actuarial staff.
The rates that went into effect averaged 20% lower than the rates initially requested for filings submitted to state regulators during 2011. Nationwide, about one in five requests by insurers to change premiums were denied, lowered, or withdrawn during state review. The difference between average rates requested and implemented was greater in the individual market than in the small group market, though the individual market also saw higher average requested rates.
Insurers have been submitting fewer requests above the 10% threshold following implementation of the ACA’s rate review standards. Also, after September 1, 2011, rate requests above 10% were more likely to be denied, modified, or withdrawn than similar requests made earlier in the year.
Proposed increases of 10% or more are now published on HealthCare.gov whether they are reviewed by state or federal regulators. While regulators may be able to exert pressure on insurers to control costs more aggressively, rate review cannot alter the factors driving increases in health care costs, such as the underlying prices charged by doctors and hospitals, the amount of health care utilized by enrollees, and new medical technologies, according to researchers. http://www.kff.org/healthreform/upload/8376.pdf
Romney’s Bid to Undo Health Law Faces Hurdles
An analysis in the Washington Times finds that if Mitt Romney wins the White House, he’s more likely to set up roadblocks to President Obama’s health care law than to wipe it off the books or even block it by issuing waivers, as he’s promised.
For one thing, Republicans have little chance of seizing enough Senate seats for the filibuster-proof, 60-seat majority. Romney would need to repeal the entire Affordable Care Act. Republicans do have a shot at gaining a simple majority in the Senate, which could allow them to ditch most of the law through the budget-reconciliation process, which is one of the few legislative vehicles that can’t be blocked by a filibuster.
He could rewrite some of the rules the Obama administration has already handed down, like changing the list of preventive services insurance plans must cover without co-pays including contraception. Sylvia Law, a health law professor at New York University told the Washington Times, “Romney could undo that in a flash. He could just say, ‘Sorry, contraception is a lifestyle choice, and insurance companies don’t have to cover it.’” GOP vice presidential nominee Rep. Paul Ryan said, “When Mitt Romney is president, this mandate will be gone. That’s a fact.”
Romney has vowed to issue an executive order his first day in office waiving states from having to comply with the rules for the federally mandated health exchanges, but his legal authority to do so is questionable. The law doesn’t allow such waivers to be granted until 2017, but some lawmakers have introduced legislation to move that date up earlier.
And then there’s the option of simply directing his administration to procrastinate on putting the legislation into effect. An obvious target could be the Independent Payment Advisory Board, a new board charged with reducing Medicare costs, but which Republicans complain will cut payments to doctors. “Those folks have not been appointed [to the board]. He could just decline to implement it, and it would be very hard to challenge,” Law said.Other presidents have done the same thing with laws they didn’t like, said Roderick Hills, a constitutional law professor at New York University.
Multi-Employer Plans and the Exchanges
Multi-Employer and union-sponsored plans, which have provided health insurance coverage to millions of union workers, must be allowed to coexist with the insurance exchanges. This coexistence can ensure that more Americans, not just union members, have greater access to health insurance coverage. Otherwise, the rising number of uninsured and the growing costs of health care will remain a challenging public policy issue, according to an analysis by Daniel Wolak, president of The Union Labor Life Insurance Company and acting president of Ullico Casualty Company.
One way is through the ACA’s premium income tax credit provision to help low to moderate-income people and families afford coverage through the exchanges. Multi-employer plans can provide comprehensive coverage and support the integrity of the exchanges if union workers are eligible for this income tax credit. This eligibility will help to offset the workers’ premium costs and ensure that they can continue to receive their coverage as part of an insured group. In addition, it will allow employers, who provide coverage through collectively bargained plans, to continue offering health insurance to their workers and control their own insurance costs.
The alternative is for employers to discontinue their multi-employer plans, leaving participants a choice: purchase coverage on their own through the exchanges or pay a penalty. If faced with this choice, it is possible that union workers, who have affordable benefits, will not buy ealth insurance if their only option is through the exchanges. These potential interruptions in health care coverage will negate the two primary goals of the PPACA — reducing the number of uninsured and the overall cost of health care. For more information, visit http://www.ullico.com/sites/ullico.com/files/ExpertsCorner-Wolak.pdf
Does The Medicare Drug Discount Program Drive up Prices?
The Patient Protection and Affordable Care Act established the Discount Program to help Medicare Part D beneficiaries with their prescription drug costs while in the coverage gap. Until the Discount Program began in 2011, beneficiaries in the coverage gap paid 100% of drug costs. The Discount Program required manufacturers to provide a 50% discount on the price of brand-name drugs for beneficiaries in the gap.
The General Accountability Office (GAO) interviewed pharmacy benefit managers (PBMs) to get their take on the effects of the program. Most sponsors and PBMs told GAO that the Discount Program may be contributing to rising prices of some brand-name drugs by some manufacturers. However, most manufacturers say they don’t think that the Discount Program affected the drug prices that they had negotiated with sponsors and PBMs.
The PBMs said that some manufacturers decreased rebates for their brand-name drugs because of the Discount Program. In comparison, most of the plan sponsors did not observe manufacturers decreasing rebate amounts and most manufacturers said the Discount Program had no effects on their rebate negotiations. Most sponsors and PBMs told GAO that the Discount Program did not affect Part D plan formularies, plan benefit designs, or utilization management practices.
Prices for high-expenditure brand-name drugs increased at a similar rate before and after the Discount Program was implemented in January 2011. Specifically, from January 2007 to December 2010, before the Discount Program began, the median price for the basket of 77 brand-name drugs (weighted by the utilization of each drug) used by beneficiaries in the coverage gap increased 36.2%. During the same period, the median price for the basket of 78 brand-name drugs used by beneficiaries who did not reach the coverage gap increased 35.2%. From December 2010 through December 2011, the first year with the Discount Program, the median price for the two baskets increased equally by about 13%, the greatest increase in median price for both baskets compared to earlier individual years.
For more information, contact http://www.gao.gov/products/GAO-12-914
Studies Address Health Policy on the Campaign Trail
Medicare vouchers are part of Ryan’s health reform proposals. But replacing traditional Medicare with vouchers for private plans would divide the market by beneficiaries’ income and health status, undermine Medicare’s market power to limit provider payments, and shift costs and risk to participants, according to a study by the Urban Institute. In theory, seniors using vouchers to purchase private or public insurance will harness the power of the marketplace to temper Medicare’s rising bill. In practice, seniors can already enroll in private Medicare Advantage plans, which compete directly with Medicare for participants. But, private Medicare Advantage plans cost less than traditional Medicare in only 15% of the nation’s counties.
The law would not affect employer premium spending per-person insured at about $3,600. But spending would decline for small employers. The 2.7% increase in people covered by employer plans comes at a cost to employers equal to 0.0003% of total national wages. The study’s estimates do not include the potential effects of cost containment initiatives in the ACA or strategies available to employers to reduce their costs by modifying their contributions or benefits. For more information, visit http://www.urban.org.
Employer-Sponsored Coverage Expands in Massachusetts
Contrary to the notion of harming workers in Massachusetts, health reform may have mitigated the full effect of the recession on employer-sponsored coverage, according to-a report by the Urban Institute. As has been documented in numerous surveys and studies, uninsurance in Massachusetts dropped significantly under reform and has stayed quite low despite the recession that began in 2007. Researchers say that the state’s individual mandate has increased workers’ demand for coverage, and employers may need to offer coverage to stay competitive in the labor market.
Employer-sponsored coverage among non-elderly workers was declining before health reform in Massachusetts, but increased after reform from 70% in 2006 to 75% in 2008. Meanwhile, the rest of the nation saw a continuing decline in employer-sponsored coverage over this period. By 2010 the gap in employer-sponsored coverage between Massachusetts and the rest of the nation grew from 4.3% in 2006 to 7.9% in 2010.
Before reform, the share of Massachusetts employers offering health insurance stayed relatively flat while the rate for the nation fell. Between 2006 and 2008, the share of employers that offered coverage stayed relatively constant nationally. Massachusetts saw an increase of 2.5% in employer offer rates under health reform. Offer rates increased from 2006 to 2008 and beyond for firms with more than 10 workers that were required to provide affordable coverage or face a penalty.
Medication for Normal Aging Overtakes Costs of Treating Most Chronic Diseases
A study by Express Scripts reveals that spending on medications for normal aging conditions in 2011 ranked third in annual prescription-drug costs of the commercially insured. These conditions involve mental alertness, sexual dysfunction, menopause, aging skin, and hair loss. This spending was surpassed only by the cost of treating diabetes and high cholesterol.
There was an 18.5% increase in the use of drugs to treat normal aging. Costs increased nearly 46% from 2006 to 2011. Increased use of these drugs was even more pronounced for the Medicare population (age 65+), up 32% from 2007 to 2011. The largest utilization jump among Medicare beneficiaries was from 2010 to 2011, up more than 13% and outpacing increases in the use of drugs for diabetes, high cholesterol and high blood pressure combined.
In 2011, more than $73.3 million was spent for every 1 million commercially insured people, and the cost was nearly $90 million per 1 million Medicare members on these aging-related medications. The United States is in the midst of a profound demographic change, with the number of elderly people projected to reach nearly 20% of the entire population by 2030, up from less than 13% in 2009. This increase will continue to drive use and costs of medications to treat the natural conditions of aging.
While utilization and drug costs were highest among older commercially insured people, the greatest growth in cost per insured was seen among the 45 to 54 age group — up almost 21% over the five-year period. Rules for the new program have been under review by the White House for three months, and officials said they would be issued soon.
CDHPs Lead to Positive Behavior Changes
Consumers enrolled in consumer driven health plans (CDHPs) are more likely to make sustainable, positive behavior change leading to significant health plan spending reductions year over year, according to data studied by Health Care Service Corporation (HCSC), operator of the Blue Cross and Blue Shield Plans in Illinois, Texas, Oklahoma and New Mexico. The CDHP program, BlueEdge, is offered through the four Blue Cross and Blue Shield Plans, and includes Health Savings Account (HSA) and Health Reimbursement Account (HRA) options.
Members who migrated to CDHP plans reduced their health care spending significantly. Changes in behavior, including increases in preventive care and use of generic prescriptions, helped contribute to a reduction in health care spending for employers and members.
Researchers observed the following about members who moved from a traditional plan to a CDHP:
• They ere 4% more likely to use preventive services.
• They reduced health care utilization by more than 12%.
• They were 10% more likely to fill their prescriptions with generics.
• They spent 24% less on inpatient hospital services and 8% less on outpatient services.
• They had 12% fewer emergency room visits.
• They reduced combined medical and pharmacy spending by 11%.
Employers that offered only a CDHP saw even greater spend reductions – up to 14.4% over the three years after moving from a traditional plan to a CDHP. For more information, visit www.HCSC.com.
