• Early Filings Signal Higher Out-of-Pocket Costs for Bronze Plans
• Workers Are Not Prepared For Consumer-Driven Health Care
• Healthcare Costs Increases to Slow
• Price Transparency Efforts Miss the Mark
• Insurers Don’t Provide Enough Cost and Quality Information
• Consumer Directed Health Plan Enrollment Surges in 2012
• Research Finds Momentum for Health Care Payment Reform
• Long Term Care Puts a Big Burden on Caregivers
• Insurance Industry Lacks Women Leaders
• Aetna to Stop Selling Individual Plans in California
• Commissioner Approves Emergency Regs for Essential Health Benefits
• NAILBA Meeting in Texas
• CAHU Conference
• Pet Health Insurance is One of Fastest Growing Employee Benefits
Early Filings Signal Higher Out-of-Pocket Costs for Bronze Plans
The least expensive plans under the Affordable Care Act (ACA) come with higher out-of-pocket costs compared to existing plans in the individual and family insurance market. Bronze Plan filings from California and six other states indicate that consumers may pay more in deductibles, copayments, and coinsurance for their medical services under these entry level plans compared to what they pay now, according to an analysis of early health insurance rate filings by HealthPocket.
Based on a review of over 9,500 health plans in the individual and family health insurance market, copayments for doctor visits were estimated at $28 on average. In comparison, Bronze plans averaged a $41 copayment — an increase of 46%. The lowest Bronze Plan copayment for a doctor was $15 and the highest was $60.
In the pre-reform market, 37% of health plans include doctor visits as part of the deductible. For the new Bronze Plan filings, 84% had doctor visits subject to the deductible. Bronze plan consumers are likely to be charged the full amount for some doctor visits until they have met their plans’ deductible. However, in California, it is standard plan design that the deductible will not be applied for the first three doctor visits. In the seven states where HealthPocket examined rate filings, the average medical deductible was $3,589. In those same states, the Bronze Plans’ average medical deductible was 26% higher at $4,509. For more information, visit www.HealthPocket.com.
Workers Are Not Prepared For Consumer-Driven Health Care
Consumer driven plans are getting more popular, but many consumers are not prepared to make their own healthcare choices, according to an Aflac survey. The survey reveals the following about consumers:
• 72% have never heard the phrase, “consumer-driven health care.”
• 54% don’t want more control over their insurance options because they think they don’t have the time or knowledge to manage it.
• 62% expect to be responsible for paying for more of their medical costs while only 23% are saving money for potential increases.
• 32% are not very or at all knowledgeable about health savings accounts.
• 76% are not very or at all knowledgeable about federal and state health care exchanges.
• 49% are not very or at all knowledgeable about health reimbursement. accounts.
• 25% are not very or at all knowledgeable about flex spending accounts.
• 75% expect their employer to educate them about changes to their health care coverage as a result of health reform, but only 13% of employers say that it is important for them to educate employees about health care reform.
Many workers already find health insurance decisions daunting. Fifty-three percent fear that they may not manage their coverage adequately, leaving their families less protected. Eighty-nine percent choose the same benefits year over year, and many don’t understand their options.
Fifty-three percent of employers have implemented a high-deductible health plan (HDHP) over the past three years — a trend that shows no sign of slowing down. A 2012 Employer Health Plan Study by J.D. Power and Associates found that 47% of employers would definitely or probably switch to a defined contribution health care plan.
Fifty-five percent of workers have not done anything to prepare for changes to the health care system even with the shift towards HDHPs, defined contribution plans, and insurance exchanges. The U.S. government predicts that household out-of-pocket health care expenses will reach an average of $3,301 per year by 2014. However, only 23% of workers are saving more in anticipation of potential increases in medical costs; 46% have less than $1,000 in savings to use for out-of-pocket expenses associated with an unexpected serious illness or accident; and 25% have less than $500. For more information, visit AflacWorkForcesReport.com.
Healthcare Costs Increases to Slow
Defying historical patterns, medical inflation will dip even lower in 2014 than in 2013. Several factors are expected to moderate costs including aggressive and creative cost-saving steps from employers, new venues and models for delivering care, and the Affordable Care Act (ACA), according to a report by Pricewaterhouse Coopers.
Healthcare organizations have spent the past few years adapting to more modest growth rates. The industry will continue those efforts in 2014 including a push towards moving care to lower-cost locations and personnel. Also, the decline in personal wealth has lowered the demand for healthcare; and the sluggish recovery has created a new normal in healthcare spending patterns.
Since consumers have more financial responsibility for their medical bills, they are questioning and sometimes delaying procedures, imaging, and elective services. New delivery models, such as accountable care organizations (ACOs), are promising, but their prospects for significant savings remain largely unproven, according to Kelly Barnes, PwC partner and US health industries leader.
The ACA will play a role in the slowdown of cost increases in 2014, with hospitals working to hold down expensive readmissions (or face the law’s penalties) and employers having more power to influence employee behavior through increased or discounted premiums – up to 50% in some cases.
Care continues to move outside hospitals to more affordable retail clinics and mobile health centers. Consumers value the convenience while costs can be as little as one-third of the bill in a traditional healthcare site. Major employers, such as Wal-Mart, Boeing, and Lowe’s, contract directly with big name health systems for costly and complicated procedures, such as heart surgery and spinal fusion. Employers are moving to high performance networks far from the home office, believing that these networks still deliver savings even with travel costs.
The federal government’s new readmission penalties take direct aim at waste in the health system, estimated to be as high as 30%. According to government data, hospital readmissions dropped nearly 70,000 in 2012, and this trend is expected to accelerate through 2014 as hospitals focus on discharge planning, compliance and the continuum of care.
Seventeen percent of employers in PwC’s 2013 Touchstone survey offer a high deductible health plan as the only option for employees. And more than 44% are considering offering it as the only option. When consumers pay more for their healthcare, they often make more cost-conscious choices.
Until recently, widespread adoption of generic medicines helped dampen medical inflation, but the rise of expensive complex biologics will nudge spending trends upward. Approvals of new biologics now outpace traditional therapies, and that pattern will continue in 2014 as research efforts target complex cases such as cancer.
Health industry consolidation has increased more than 50% since 2009 and is expected to continue through 2014. Higher prices are sure to follow in some markets. Hospital mergers can lead to price increases of up to 20.3%. These price increases are especially acute in markets with one dominant system. For more information, visit www.pwc.com.
Price Transparency Efforts Miss the Mark
Most health care price transparency initiatives don’t help patients identify the hospitals and physicians that provide high quality care efficiently, according to recent congressional testimony by Paul B. Ginsburg, Ph.D., president of the Center for Studying Health System Change (HSC).
Consumers need meaningful quality data before they decide to choose a lower-cost provider. Perceptions of quality are based largely on reputation among clinicians, but it is by no means clear that a good reputation equates with better outcomes, said Ginsburg. Patients need to know what they will pay if they choose different providers. Employers can change insurance benefit- and network designs to make employees more sensitive to price and shift use of services to higher-value providers. Policy makers can pursue approaches to increase the degree of price competition in the market or regulate prices directly, said Ginsburg. For more information, visit www.hschange.org.
Insurers Don’t Provide Enough Cost and Quality Information
A recent study by HealthSparq reveals that a majority of insurers offer only basic provider search tools to members – not the essential healthcare cost and quality information they need. More than two-thirds of health-plan executives and managers say it’s important to give members tools that help them make informed healthcare decisions, said Cicero Group CEO Randy Shumway. As health insurers focus more on transparency, more third-party tools will be available to provide enhanced transparency for consumers. For more information, visit www.healthsparq.com/study.
Consumer Directed Health Plan Enrollment Surges in 2012
Enrollment in consumer-directed health plans (CDHPs) grew 19% in 2012, according to a Mercer survey commissioned by the American Association of Preferred Provider Organizations. The survey reveals the following:
• 36% of large employers (500 of more employees) offered CDHPs in 2012, up from 32% from the year before.
• 22% of small employers (under 499 employees) offered employees a CDHP option, up from 20% in 2011.
• 59% of the nation’s largest employers (20,000+ employees) offered CDHPs in 2012, up from 48% the year before. Additionally, 62% of these employers expect to offer CDHPs in 2013 and 68% by 2018.
Sixteen percent of all employees with employer-sponsored plans chose CDHPs in 2012 – showing a larger enrollment growth than any other type of insurance plan. This trend corresponds with a slight, but steady decline in HMOs over that same period.
Karen Greenrose, AAPPO president and CEO said, “It’s clear that employers – especially our largest ones – are increasingly looking to…consumer-driven health plans, which are predominantly built on well-established PPO networks, offer affordability, choice, access, and stability that employers and consumers are looking for in this uncertain environment.”
Last year’s increase continues a steady growth trend that started in 2008 (7% increase) and continued through 2011 (13% increase). That trend is likely to continue in the near future as well, with 40% of employers of all sizes expecting to offer a CDHP in the next five years. For more information, visit www.aappo.org
Patients Are Stuck With a Big Chunk of the Medical Bill
Patients are responsible for nearly one-quarter of their medical bills through copays, deductibles, and coinsurance, according to a study by the American Medical Assn. (AMA). During Feb. and March of this year, patients paid 23.6% of the amount that health insurers set for paying physicians. The AMA is calling on insurers to give physicians the tools to automatically determine a patient’s payment responsibility prior to treatment.
The AMA also unveiled its new Administrative Burden Index (ABI), which ranks commercial health insurers according to how much unnecessary cost they contribute to the billing and payment of medical claims. Avoidable errors, inefficiency, and waste in medical claims resulted in an average ABI cost per claim of $2.36 for physicians and insurers. Cigna had the best ABI cost per claim of $1.25, or 47% below the commercial insurer average.
The AMA estimates that insurers could save the system $12 billion a year if they used automated systems for processing and paying medical claims. This savings represents 21% of total administrative costs that physicians spend to ensure accurate payments from insurers.
Commercial health insurers’ error rates on paid medical claims have dropped significantly – from nearly 20% in 2010 to 7.1% in 2013. While they have made dramatic improvements, commercial insurers could have saved more than $43 billion if they had consistently paid claims correctly since 2010. UnitedHealthcare led commercial health insurers with an accuracy rating of 97.52%. Medicare led all insurers with an accuracy rating of 98.10%.
Medical claim denials dropped 47% in 2013 after a sharp spike among most commercial health insurers in 2012. The denial rate for commercial health insurers went from 3.48% in 2012 to 1.82% in 2013. Cigna had the lowest denial rate at .54%, while Medicare had the highest denial rate at 4.92%.
Health insurers have improved response times to medical claims by 17% from 2008 to 2013. Humana had the fastest median response time at six days while Aetna had the slowest at 14 days. Medicare’s median response time of 14 days is has not changed from 2008.
Health insurers have improved the transparency of rules used to edit medical claims by 37% from 2008 to 2013. Reducing the use of undisclosed payer-edits reduces the administrative costs of reconciling medical claims. For more information, visit www.ama-assn.org/go/reportcard.
Research Finds Momentum for Health Care Payment Reform
Efforts are well underway to change the way health care providers are compensated. The trend is moving away from fee-for-service toward payment for a bundled set of services, according to research commissioned by the Health Care Incentives Improvement Institute. While some early commercial-sector adopters have abandoned bundled payments, other payers and providers in the public and commercial sectors are making it a part of their permanent reimbursement strategy. Certain challenges plague the carriers’ bundled payment efforts, including a lack of data, leadership, resources, and a lack of engagement in local efforts. For more information, visit www.HCI3.org.
Long Term Care Puts a Big Burden on Caregivers
Caregivers have an average of $8,080 in out-of-pocket expenses, with one-third providing 30 or more hours of care per week, according to a Genworth study. Due to caregiver responsibilities, 58% are cutting into discretionary spending including eating out, buying new clothes, or buying a new car. Care recipients are also affected as a result of their care needs with more than a third cutting back on family celebrations (36%) and basic needs like groceries (32%).
Wendy Boglioli, national spokesperson for Genworth said that, beyond dollars, caregivers face emotional and even physical issues that can often be avoided by coming up with a care coordination plan should a long term care event occur. Boglioli said, “What’s concerning…is that the people who are often providing the care…need to start thinking about their own care plans, but are not.”
The role of caregiver, predominately held by women (52%), is seeing an influx of males (48%). The average caregiver is 49 years old and 61% are married and earning an average income of $67,900 a year. Fifty-nine percent are caring for a parent, and 44% have been caregivers for three years or more. For more information, visit www.genworth.com.
Insurance Industry Lacks Women Leaders
Gender diversity is lacking across all leadership levels in the insurance industry, according research from Saint Joseph’s University. While employment of women in the insurance industry is high, they remain poorly represented in top positions.
The findings are not to limited to the insurance industry, but reflect a national trend. Decades after the Equal Pay Act, the full-time gender pay gap remains at over 10%. Despite the success of some prominent women, there is continuing under-representation in positions of leadership. Women hold only 4% of the Fortune 500 CEO positions. “This research will hopefully give the industry the data they need to work toward a sustainable solution, in which many executives are very interested in taking part,” said Mike Angelina, executive director of Saint Joseph’s Academy. For more information, visit http://www.sju.edu/int/academics/hsb/special/armi/thoughtleadership.html)
Aetna to Stop Selling Individual Plans in California
Aetna Inc. will stop selling individual health insurance policies in California next month, reports the Associated Press. This is just weeks after opting out of the exchange that is being established as part of the national health care reforms, a state regulator said Tuesday.
California Insurance Commissioner Dave Jones said he was disappointed in Aetna’s decision because consumers need more choices. The decision does not affect people who have Aetna insurance through their employer. “This is not good news for California consumers,” Jones said in a statement. “A competitive market with more choices for consumers is important, as we implement the Affordable Care Act and health insurance coverage is a requirement.”
Aetna is a relatively small player in California’s individual health insurance market. According to 2011 figures compiled by the California HealthCare Foundation, Aetna has about 5 percent of the state’s individual health market. By comparison, Anthem Blue Cross, Blue Shield and Kaiser share 87 percent.
Aetna says it has about 58,000 individual enrollees in the state and expects to have about 49,000 by the end of the year. It plans to withdraw from the state at the end of the year but will continue to offer small and large group plans, as well as Medicare, dental and life insurance products. Starting Oct. 1, those seeking to buy their own health insurance will be directed to Covered California, the state’s new health insurance exchange. Aetna was not among 13 insurance carriers that will sell individual coverage to millions of Californians through the exchange.
Commissioner Approves Emergency Regs for Essential Health Benefits
Insurance Commissioner Dave Jones approved an emergency regulation requiring health insurers to cover all essential health benefits for new policies in effect after January 1, 2014. The Affordable Care Act requires non-grandfathered health insurance policies in the individual and small group markets to provide coverage for a comprehensive package of healthcare benefits, known as “essential health benefits.” This applies to plans inside and outside of the health benefit exchange.
Jones said, “Our essential health benefits emergency regulation ensures all Californians purchasing individual or small group health insurance policies will have coverage for a comprehensive set of health benefits when they need medical care. In the past, some policies have included very limited or no coverage for important healthcare services. Starting in January all the new health insurance policies will cover 10 broad categories of essential benefits that will meet most healthcare needs. Issuance of the emergency regulation is a critical step in the implementation of the Affordable Care Act, because it provides the legal authority for the department to implement the essential health benefits requirement as we review new health insurance policies sold, including those in the Exchange.”
The Following 10 categories of benefits make up the essential health benefits coverage:
1. Ambulatory patient services
2. Emergency services
3. Maternity and newborn care
4. Prescription drugs
6. Laboratory services
7. Pediatric services, including oral and vision care
8. Rehabilitative and habilitative services and devices
9. Preventive and wellness services and chronic disease management
10. Mental health and substance use disorder services, including behavioral health treatment.
Less Competition on Health Insurance Exchange Could Lead to Higher Rates
Consumers could see higher premiums since the state’s three largest health insurance companies will continue to dominate the health insurance market in the California. Blue Cross, Blue Shield, and Kaiser are in the health exchange. United Healthcare, Aetna, and CIGNA say they will not participate in the exchange, and the law prevents them from reconsidering joining for the next two years. “When smaller companies step aside, the Big Three insurers gain even more power over prices in the health insurance market,” said Jamie Court, president of Consumer Watchdog. In some states with rate regulation in place, health insurance companies have proposed higher rates than necessary and lowered them when confronted by regulators and competitors with lower prices, he noted.
NAILBA Meeting in Texas
The National Association of Independent Life Brokerage Agencies (NAILBA) has opened registration for its 32nd Annual Meeting. Scheduled November 21 to 23, at the Gaylord Texan Resort and Convention Center in Dallas. For more information, visit www.nailba.org.
CAHU will hold its Professional Development Day October 23 in Universal City, Calif. For more information, visit www.cahu.org.
Pet Health Insurance is One of Fastest Growing Employee Benefits
One in three Fortune 500 companies now offers veterinary pet insurance. More than 3,400 employers have added this coverage to their voluntary benefit portfolio, including Chipotle Mexican Grill, Deloitte LLP, Delta Airlines, T-Mobile and Zynga, according to VPI Pet Insurance, the nation’s largest provider of pet health insurance.
Deana Single, director of group accounts for VPI said that many companies are subsidizing a percentage of their employee’s cost, with some now paying as much as 100% of their employee’s pet insurance premiums. Plan options and premiums start at about $14 per month and average $25 to $35 monthly, with deductibles ranging from $100 to $1,000. Many companies allow employees to pay their premiums via payroll deduction. For more information, e-mail email@example.com.