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Saturday April 19th 2014



California Granted Approval to Operate Exchange

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by Leila Morris


• California Granted Approval to Operate Exchange
• Attend Regional Health Exchange Board Meetings
• SeeChange Secures Financing
• Report Finds Medicare Advantage Overpayments
• Barney & Barney Names Four New Principals
• IRS Proposes Rule on FTE Employees
• Several Factors Affect Health Spending
• Consumer Driven Plans Continue to Grow
• MassMutual Acquires The Hartford’s Retirement Plan Business
• EPIC Acquires Homeplace Insurance Brokers
• Guardian Life Acquires Reed Group
• Long Term Care Insurance Conference in Dallas
• Variable Annuity
• Website Helps Patients Navigate Complex Medical Decisions
• Health Care Wars Book
• Electronic Disability Applications
• Guidance on Managing Workplace Health Data



California Granted Approval to Operate Exchange

CoveredCaliforniaHHS has granted California conditional approval to establish Covered California, the state’s health-benefit exchange. The Fed’s approval is conditional on the state meeting regulatory and start-up benchmarks. Peter Lee, executive director of Covered California said that that state is making steady progress towards its October marketplace launch. Covered California has been working with private health care plans to offer quality health benefit products online for individuals and small businesses.

Consumers can begin using the Web portal on October 1, 2013 to select a health plan and determine if they qualify for federal subsidies to offset the cost of their premiums. In addition, consumers will be able to determine whether they’re eligible for other public insurance programs.

California has been working to establish a network of community-based assisters and a call center to help consumers with questions to make enrollment easier. There are also plans to launch marketing and education efforts to increase awareness for individuals and businesses, with special attention to California’s diverse populations. For more information, visit

Attend Regional Health Exchange Board Meetings

If you want to hear about California’s health exchange from the horse’s mouth, consider attending regional board meetings, which are open to the public. The next board meeting of the California Health Benefit Exchange will be held Thursday, January 17 from 10:00 am to 4:00 pm. at the offices of First 5 LA, 750 N. Alameda St., Los Angeles, CA 90012.  The open session for the public begins essentially at 12:00. A Webcast will also be available. You can make comments in person or by phone. The call-in number for the teleconference is 800-288-8960. For more information, visit

SeeChange Secures Financing

SeeChange Health, which provides value-based benefit design solutions, has secured its third round of $15 million in Series C financing from Psilos Group and Maverick Capital. Martin Watson, CEO of SeeChange Health said, “This round of investment augments our rapid growth model. Our SeeChange Health Solutions platform now serves more than one million consumers, and SeeChange Health Insurance is the fastest-growing health plan in California and Colorado. Given customer demand, we will continue to experience significant growth in both businesses in 2013.”

Al Waxman , senior managing member of Psilos and chairman of SeeChange Health’s Board of Directors said, “There is a dramatic shift in the employer-provided health care market [that's] focused on encouraging and engaging employees in their well-being …as a cornerstone of designing benefit solutions. SeeChange Health is well positioned to lead this trend.” For more information, visit

Report Finds Medicare Advantage Overpayments

The HHS Office of Inspector General contends that, as a result of unsupported diagnoses, PacifiCare received $423.7 million in overpayments for its Medicare Advantage plan in calendar year 2007. PacifiCare of California submitted diagnoses for use in CMS’s risk score calculations that did not always comply with Federal requirements for Medicare Advantage plans, according to HHS.

According to HHS, “The risk scores calculated using the diagnoses that PacifiCare submitted for 55 of the 100 beneficiaries in our sample were valid. The risk scores for the remaining 45 beneficiaries were invalid because the diagnoses were not supported by the documentation provided by PacifiCare.”

HHS described the following procedure for calculating payments:

1. Medicare Advantage organizations submit diagnoses to CMS.
2. CMS categorizes the diagnoses into groups of clinically related diseases.
3. CMS uses categories and demographic characteristics to calculate a risk score for each beneficiary.
4. CMS uses the risk scores to adjust the monthly capitated payments to Medicare Advantage organizations for the next payment period.

HHS recommends the following:

• PacifiCare should refund to the federal government $224,000 in overpayments identified for the sampled beneficiaries.
• PacifiCare should work with CMS to determine the correct contract-level adjustment for the estimated $423.7 million of overpayments.
• PacifiCare should implement written policies and procedures for obtaining, processing, and submitting valid risk adjustment data.
• PacifiCare should improve its current practices to ensure compliance with federal requirements.

HHS said, “PacifiCare disagreed with our findings and our recommendation that it refund the identified overpayments.” According to a statement published in by UnitedHealthcare Medicare & Retirement, “The audit does not follow Medicare’s own guidelines, standards or accepted methodology for validating risk-adjustment payments. In fact, it differs much from (Medicare’s) adopted methodology. The OIG appears to have relied instead on a methodology of its own making.”

Barney & Barney Names Four New Principals

Barney & Barney, LLC, one of the nation’s largest independent insurance Brokerages, promoted four senior executives to principals of the firm. The new owners are Dianne Wingfield and Todd Bennett, executives in the firm’s Employee Benefits practice in San Diego; Steve Fisk, an executive in the firm’s Property & Casualty Group in Orange County; and Brian Hegarty, an executive in the Employee Benefits practice in Orange County. Barney & Barney now has 40 partners in its four offices in San Diego, Orange County, Oakland and San Francisco.


IRS Proposes Rule On FTE Employees

On Jan. 2, the IRS proposed a new regulation clarifying the requirements for companies to provide health insurance to full-time equivalent (FTE) employees under the Affordable Care Act. Companies with 50 or more full-time employees (or an equivalent combination of full- and part-time employees) are required to provide ”affordable” health insurance coverage to workers that meet time-in-service qualifications.

The proposed rule states that an FTE employee working 130 hours in a calendar month satisfies the 30 hours of work per week requirement. The proposal would prescribe three different methods to determine whether a non-hourly employee qualifies:

1. Counting actual hours of service.
2. Using a days-worked equivalency, in which eight hours of service counts as a day.
3. Using a weeks-worked equivalency, in which 40 hours of service per week counts as a week.

Companies can apply the methods to different classifications of non-hourly employees, as long as it is done consistently and does not understate their hours in service so as to disqualify them from health coverage.

New hires will be under a 12-week grace period before their status is reviewed under a look-back formula, which lays out how to classify variable-hour employees and new hires whose statuses have changed in the first three months of work.

The proposed rule would require employer plans to offer coverage to a qualifying employee’s dependents, defined as children under the age of 26. Companies will not be required to include an employee’s spouse in their medical plans. For more information, see the proposed IRS FTE regulations here.

Several Factors Affect Health Spending

U.S. health care spending grew 3.9% in 2011, marking the third consecutive year of relatively slow growth. Growth in national health spending was similar to growth in nominal gross domestic product (GDP) in 2010 and 2011, according to research published in

However, the growth in personal health care spending jumped from 3.7% to 4.1% in 2011, partly because of faster spending growth for prescription drugs as well as physician and clinical services. Personal health care spending grew faster as the economy continued to recover from the recession and private health insurance enrollment stabilized after substantial losses over the prior three years.

The growth in Medicaid spending slowed. But spending growth jumped for Medicare, private health insurance, and out-of-pocket costs. There was relatively slow growth in incomes, jobs, and GDP in 2011, which raises questions about whether U.S. health care spending will rebound over the next few years as it typically has after past economic downturns.

Employer-sponsored insurance spending increased as 2.7 million young adult dependents moved to their parents’ plans. However, these younger and healthier enrollees are typically less expensive than average, which has tempered cost increases.

The Affordable Care Act increased prescription drug rebates for Medicaid fee-for-service enrollees and extended rebates to Medicaid managed care plans, which slowed the growth in Medicaid prescription drug spending in 2011.

Medicare Part D enrollees whose out-of-pocket drug spending reached the coverage gap (doughnut hole) got a 50% discount on brand-name prescription drugs. This led to a somewhat greater use of brand-name drugs and decreased out-of-pocket drug spending among Medicare beneficiaries.

Other provisions affecting Medicare expenditures include coverage for new preventive services, reduced cost-sharing requirements for existing services, and lower payment rate updates for hospitals and certain other providers.

The medical loss ratio provision increased benefit spending as a share of premiums for some plans in 2011. Although it is clear that the Affordable Care Act contributed to shifts in spending for payers and services, there is no discernible impact of the legislation on aggregate health spending trends.

In 2011, spending for private health insurance premiums and benefits increased 3.8%. The net cost ratio for private health insurance remained unchanged at 12.3%. The net cost ratio for commercial group insurance increased slightly in 2011 while the ratio for individually purchased policies declined. Some of this decline was probably due to the newly effective medical loss ratio provisions of the Affordable Care Act, according to researchers.

Private health insurance plans grew by 1 million enrollees or 0.5%, in 2011, mostly because of the increased coverage of dependents younger than  26 as mandated by the Affordable Care Act. This growth in enrollment occurred after a decline of nearly 11.2 million people with private health insurance during 2007 to 2010.

Per-enrollee spending on private health insurance benefits increased 3.2% in 2011 compared to 4.6% in 2010. This slowdown reflects a changing enrollment mix. Many people who gained insurance coverage were younger and healthier people with lower per=person expenditures.

In 2011, 17% of covered workers were enrolled in consumer-directed health plans, up from 8% in 2008. Enrollment has grown 23% per year since 2008, making consumer-directed plans and HMOs the second and third most popular plan types after PPOs. The shift to consumer-directed health plans and the decline in the number of people with private health insurance played a role in the low growth in private health insurance spending during 2008 to 2011. For more information, visit,

Consumer Driven Plans Continue to Grow

Ten percent of the population was enrolled in a consumer driven health plan (CDHP) in 2012, up from 7% in 2011. Enrollment in HDHPs remained at 16%, according to a study by the Employee Benefits Research Institute (EBRI). Fifteen percent of 21- to 64-year olds with private insurance were in a CDHP or an HDHP that was eligible for an HSA. When their children were counted, about 25 million people with private insurance,were in a CDHP or an HSA-eligible plan  — representing about 14.6% of the market.

CDHP enrollees were more likely to evaluate provider cost information compared to traditional plan enrollees. They were also more likely to look outside their health plan for information about their doctors’ costs and quality. CDHP enrollees were also more likely to participate in wellness programs, such as health-risk assessments, health-promotion programs, and biometric screenings. In addition, financial incentives mattered more to CDHP enrollees than to traditional-plan enrollees.

Compared to those in traditional plans, adults in a CDHP were much more likely to say they were in excellent or very good health, much more likely to exercise, and much  less likely to smoke. CDHP and HDHP enrollees were also more likely to be highly educated. For more information, visit


MassMutual Acquires The Hartford’s Retirement Plan Business

MassMutual completed its acquisition of The Hartford’s retirement plan business. The transaction nearly doubles the number of MassMutual’s retirement plan participants. The combined business now has about 40,000 retirement plans, three million participants, and $120 billion in retirement assets under management. MassMutual’s retirement plan business has had a strong focus on the mid-size market, offering a range of products and services to corporate, union, nonprofit and governmental employers. The newly acquired business focuses on the small- to mid-size and tax-exempt retirement markets and provides administrative services for defined benefit programs. MassMutual is not affiliated with Hartford Retirement Services, LLC.

EPIC Acquires Homeplace Insurance Brokers

Edgewood Partners Insurance Center (EPIC) will acquire Homeplace Insurance Brokers. Established in 1998, Homeplace specializes in risk management and insurance programs for the transportation, warehousing and logistics industries. EPIC is a California-based retail property & casualty and employee benefit insurance brokerage and consulting firm. For more information, visit

Guardian Life Acquires Reed Group

Guardian Life has acquired Westminster, Colorado-based Reed Group, which helps employers comply with federal and state regulation and get employees back to work quickly and safely. Its products and services address FMLA, ADA, state leaves, company leave plans, and short- and long-term disability programs. Reed Group will operate as an independent, wholly owned subsidiary of Guardian, will retain its name, and will continue to serve all of its customers. Reed Group helps its customers reduce the cost, compliance risk, and complexity of employee absences.


Long Term Care Insurance Conference in Dallas

The ILTCI is sponsoring its annual long-term care insurance conference March 3 to 6 in Dallas. There will be a two-day pre-conference CLTC master class and a Wednesday morning CLTC advanced class. For more information, visit


Variable Annuity

Securian’s Minnesota Life is offering a simpler variable annuity that is easier for clients to understand. The MultiOption annuity line now includes the Guide series. It offers competitive optional living benefits including Ovation Lifetime Income II. A streamlined investment lineup makes it easier for clients to build portfolios for their variable annuities. For more information about the MultiOption annuity, visit here

Website Helps Patients Navigate Complex Medical Decisions

A new website,, helps people make complex medical decisions. The site was developed by researchers from the UCSF-affiliated San Francisco VA Medical Center and the Veterans Health Research Institute.

Health Care Wars Book

In his new book, “Health Care Wars,” physician John P. Geyman, M.D explains why he believes that healthcare reform benefits the insurance, pharmaceutical and medical industries, but not health care consumers. He says that, under Obamacare, patients will be buried under paperwork while receiving less care and fewer services. For more information, email

Electronic Disability Applications

Guardian Life launched a Web-based alternative eliminates the need to get ink signatures from disability applicants and enables faster, more accurate processing of income protection applications. It offers the following:

• A questionnaire-style experience that reduces steps.
• A system that automatically pre-populates applications with existing client data, identifies the forms needed, and assembles a complete application package.
• The ability to view, sign, and witness applications electronically.
• A dashboard that enables the agent to keep the client apprised of the progress of an application.
• A faster decision on whether and how much coverage has been approved.

For more information, visit

Guidance on Managing Workplace Health Data

The Integrated Benefits Institute is offering a report titled, “Data Strategies for Managing Health and Productivity.” It features case studies from three employers and examines tools that improve workforce health and productivity. For more information, visit