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by Leila Morris
• Changes Are Coming to Regional Health Care Markets
• Exchange Board Considers Allowing Stand Alone Vision Plans
• Unum Offers Dental Insurance in California
• LA City Employees Are Shut Out of Cedars Sinai & UCLA
• An Employers’ Guide to the Health Care Law
• One 401(k) Strategy That Could Increase Retirement Security
• Medicare Advantage Remains Strong
• Medicare Prescription Savings Through the ACA
• Millions of Uninsured to Face Tax Penalties Under the ACA
• The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT)
• Health Spending Grows Faster Than Expected
• Costs Continue to Rise for Employee Health Benefits
• RetireEase Choice
• A Guide to LinkedIn
• Out-of-Pocket Estimator
• A True Variable Annuity
• Fixed Annuity Webinar Tomorrow
Changes Are Coming to Regional Health Care Markets
In some markets, California hospitals will face increased pressure to contain costs. There is also growing concern about physician shortages and strained safety nets, according to local health care leaders surveyed by the Center for Studying Health System Change (HSC). The report looks at Sacramento and Riverside/San Bernardino. In the coming months, the California HealthCare Foundation (CHCF) will publish studies of the San Francisco Bay Area, Fresno, Los Angeles, and San Diego.
Hospitals and physicians in the Sacramento region have weathered the economic downturn fairly well, but the following trends have posed challenges:
1. More pressure on hospitals to contain costs – Hospitals face deteriorating payer mixes because of declining commercial coverage, an increase in public coverage, smaller rate increases for commercial payments, and rising numbers of uninsured patients. Despite these pressures, most hospitals still have strong financial performance.
2. Increased use of narrow-networks – New health plan-provider collaborations are developing including accountable-care organizations and narrow provider networks that accept lower payment rates in exchange for exclusivity.
3. An inadequate supply of physicians in the future, especially primary care physicians – In the words of one respondent, “The coverage expansions under health reform will result in a tsunami of unmet need among privately and publicly insured people.”
4. Increased dominance of Kaiser Permanente Health Plan – Kaiser has become an even more formidable competitor, especially given the perception of Kaiser as a lower-cost option.
5. Increased pressure on outpatient capacity at safety net providers – With the economic downturn driving up the number of uninsured, the fragmented safety net of outpatient centers can’t keep pace with demand. This is despite considerable growth in community health centers.
The Sacramento report is available at
Access to care continues to be a challenge as the vast Riverside/San Bernardino region recovers slowly from the economic downturn. The following are key findings:
1. Improved hospital financial performance – Many hospitals maintain bargaining clout on payment rates because health plans must ensure access in each of the region’s many sub-markets, some of which are underserved. This has helped maintain and even improve financial performance while hospitals struggle with a declining payer mix with people losing private health coverage.
2. Increased presence of Kaiser – Kaiser Permanente’s presence has expanded. Other providers (hospitals and physicians) view Kaiser as their biggest competitive threat.
3. Growing concerns about physician supply – The per capita physician supply in the region is low compared to other California markets. Some say that demand for physicians continues to outpace supply.
4. Growing efforts by hospitals to align with physicians – Although physicians remain largely independent, some are joining larger physician-owned organizations. Hospitals are seeking to align more closely with physicians to gain patient referrals and inpatient admissions and prepare for new payment arrangements under national health reform.
5. Increased pressures on safety nets – County-run safety net organizations face pressures to care for growing numbers of Medi-Cal and uninsured patients. Counties are trying to work more with federally qualified health centers and other private community clinics and health centers, especially as they prepare for health reform.
The San Bernardino/Riverside report is available at
Exchange Board Considers Allowing Stand Alone Vision Plans
The California Health Benefit Exchange Board had voted to exclude stand-alone vision plans from coverage through the California Health Benefit Exchange, at least for the first year. But the board may be reconsidering its decision, according to an article in the Sacramento Bee. Last week, the agency indicated it might back down. Without going into details, executive director Peter Lee said the board expects to revisit this matter next month. “We want to make sure we don’t foreclose any options,” he said during the monthly meeting of the agency’s governing board. VSP said in a statement that it was pleased the agency would take another look at the issue.
Unum Offers Dental Insurance in California
California is the newest market for Unum’s dental benefits. The company offers dental coverage through a partnership with United Concordia. Unum is the primary brand and United Concordia is the underwriter. Unum dental is designed to encourage preventive care. Two enhancements offer extra cleanings, disease management services, and incentives for employees to get the check-ups and care they need. Unum dental customers have access to the United Concordia network, which has more then 17,500 dentists at nearly 41,000 access points in California. For more information, visit www.unum.com.
LA City Employees Are Shut Out of Cedars Sinai & UCLA
The Los Angeles Times reports that Cedars-Sinai and UCLA are getting shut out of Anthem Blue Cross for being too expensive. Anthem has eliminated doctors affiliated with the hospitals from a health plan that’s offered to about 60,000 employees and dependents in Los Angeles.
Major hospitals and medical groups face growing pressure to justify their charges. And employers increasingly are willing to risk the ire of workers by cutting popular providers to clamp down on costs. Cheryl Damberg, a senior researcher at Rand Corp. told the Times, “Organizations like Cedars and UCLA are going to have to make some substantial changes to get their prices more in line. My guess is Cedars and UCLA are hoping employees will raise Cain and create a backlash.”
An Employers’ Guide to the Health Care Law
The California Endowment, along with business leaders, created the “Health Law Guide for Business.” It helps employers evaluate health insurance choices during open enrollment and contains easy-to-understand information about the
Patient Protection and Affordable Care Act. For more information, visit www.healthlawguideforbusiness.org.
One 401(k) Strategy That Could Increase Retirement Security
Raising the 401(k) default savings rate to 6% of pay would significantly increase the chances of achieving adequate retirement savings for low-income and high-income workers, according a study by the Employee Benefit Research Institute (EBRI). Most private-sector employers that enroll 401(k) participants automatically do so at a default savings rate of 3% of pay. That level is consistent with the starting rate set out in the Pension Protection Act of 2006, but many financial experts say that it’s is far too low to generate enough assets for a comfortable retirement.
Under EBRI modeling, 26% of people in the lowest-income quartile who had not been modeled to have a financially successful retirement (under the 3% default savings rate) would be successful by increasing the starting deferral rate to 6%. Even workers in the highest-income quartile would benefit, although not as much: Just over 18% who would be not be successful with a 3% default savings rate would be successful with a 6% default savings rate. For more information, visit www.ebri.org.
Medicare Advantage Remains Strong
Enrollment in the Medicare Advantage (MA) program is expected to increase 11% in the next year and premiums will remain steady, Health and Human Services Secretary Kathleen Sebelius announced. Since the Affordable Care Act was passed in 2010, Medicare Advantage premiums have fallen 10% and enrollment has risen 28%. Access to the Medicare Advantage program will remain strong, with 99.6% of beneficiaries having access to a plan. Additionally, the number of plan choices will increase by 7% in 2013.
Sebelius said, “Thanks to the Affordable Care Act, the Medicare Advantage and Prescription Drug programs have been strengthened…Since the law was enacted in 2010, average premiums have gone down; enrollment has gone up; and new benefits and lower drug costs continue to help millions of seniors and people with disabilities.”
For the third year in a row, the Centers for Medicare & Medicaid Services (CMS) used authority provided by the Affordable Care Act to protect beneficiaries from significant increases in costs or cuts in benefits. Access to supplemental benefits remains steady and beneficiaries’ average out-of-pocket spending remains constant. The average Medicare Advantage premium in 2013 is expected to increase only $1.47 from last year, coming to $32.59. However, the average premium would only increase 57 cents if, in 2013, if beneficiaries choose lower cost plans at the same rate they did in 2012.
Last month, CMS announced said that the basic Medicare prescription drug plan premium is expected to be $30 in 2013, holding steady from last year. As a result of the Affordable Care Act, coverage for brand name and generic drugs in the Part D donut hole coverage gap will continue to increase until 2020 when the gap is closed. In 2013, Medicare Part D’s coverage of brand name drugs will begin to increase. People with Medicare will get about 53% off the cost of brand name drugs. They will also get coverage for 21% of the cost of generic drugs.
Since the health reform law was enacted, 5.4 million people with Medicare have saved over $4.1 billion on prescription drugs in the donut hole. The annual open enrollment period for health and drug plans begins on October 15 and ends December 7. For more information, visit www.cms.gov/center/openenrollment.asp.
Medicare Prescription Savings Through the ACA
The average person with traditional Medicare will save $5,000 from 2010 to 2022 thanks to the Affordable Care Act, according to an HHS report. Also, because of the health care law, more than 5.5 million seniors and people with disabilities saved nearly $4.5 billion on prescription drugs since the law was enacted. Seniors in the Medicare prescription drug coverage gap known as the “donut hole” have saved an average of $641 in the first eight months of 2012 alone. This includes $195 million in savings on prescriptions for diabetes, over $140 million on drugs to lower cholesterol and blood pressure, and $75 million on cancer drugs so far this year. Also in the first eight months of 2012, more than 19 million people with original Medicare got at least one preventive service at no cost to them.
In 2010, anyone with Medicare who hit the prescription drug donut hole got a $250 rebate. In 2011, people with Medicare who hit the donut hole began receiving a 50% discount on covered brand-name drugs and a discount on generic drugs. These discounts and Medicare coverage gradually increase until 2020, when the donut hole will be closed.
Because of the Affordable Care Act, many preventive services are now offered free to beneficiaries (with no deductible or co-pay). In 2012 alone, 19 million people with traditional Medicare have got at least one preventive service at no cost to them. This includes 1.9 million who have taken advantage of the Annual Wellness Visit provided by the Affordable Care Act – almost 600,000 more than had used this service by this point in the year in 2011. In 2011, an estimated 32.5 million people with traditional Medicare or Medicare Advantage got one or more preventive benefits free of charge. For state-by-state information on savings in the donut hole, please visit: http://downloads.cms.gov/files/Summary-Chart-2010-2012.pdf.
Millions of Uninsured To Face Tax Penalties Under the ACA
Beginning in 2014, the Affordable Care Act requires most legal residents of the United States to get health insurance or pay a penalty tax. That penalty will be whichever of the following is greater:
1. A flat dollar amount per person. It rises to $695 in 2016 and is indexed by inflation thereafter (The penalty for children will be half that amount and a cap will apply to family payments) or
2. A percentage of the household’s income that rises to 2.5% for 2016 and subsequent years (also subject to a cap).
The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) estimate that about 30 million non-elderly residents will be uninsured in 2016, but the majority will not be subject to the penalty tax. People who are exempt from the mandate include unauthorized immigrants who are prohibited from receiving almost all Medicaid benefits and all subsidies through the insurance exchanges.
Others will be subject to the mandate, but will be exempt from the penalty tax for the following reasons:
1. Their income low enough that they are not required to file an income tax return.
2. They are members of an Indian tribe.
3. The premium they would have to pay would exceed a specified share of their income (initially 8% in 2014 and indexed over time).
In 2016, 18 million to 19 million uninsured people are expected to qualify for one or more of those exemptions. Some of the remaining 11 million to 12 million uninsured will be granted exemptions because of hardship while others will be exempted on the basis of their religious beliefs.
After accounting for those who will not be subject to the penalty tax, CBO and JCT now estimate that about 6 million people will pay a penalty because they are uninsured in 2016 (That includes uninsured dependents who have the penalty paid on their behalf.) CBO and JCT also say that total collections will be about $7 billion in 2016 and will average about $8 billion per year from 2017 to 2022.
In general, lower income households will be subject to the flat dollar penalty (with adjustments to account for the lower penalty for children and a cap on family payments). Higher-income households will owe a percentage of their income. In 2016, households with income that exceeds 400% of the FPL are estimated to constitute about one-third of people paying penalties and account for about two-thirds of the receipts from those penalties. For more information, visit http://www.cbo.gov/publication/43628.
Health Spending Grows Faster Than Expected
At a growth rate of 4.6%, U.S. health care spending for people with employer-sponsored coverage grew faster than expected in 2011, according to the Health Care Cost Institute (HCCI). Health care spending growth had been on a downward trajectory for those with employer-sponsored insurance – from 5.8% in 2009 to 3.8 % in 2010. And with a sluggish economy, many experts expected a modest growth rate for 2011.
But, prices rose for all major health care categories including hospital stays, outpatient care, procedures, and prescriptions. Prices rose fastest for outpatient care.
HCCI Executive Director David Newman said, “Prices continue be the main culprit for rising health care costs. If we are really going to get health care spending under control, we have to better understand why those prices are rising and the implications those increases have for the U.S. health care budget.”
A slowdown in prescription spending partly offset overall health care spending. Prescription costs grew just 1% from 2010 to 2011, rising to $773 per capita. Brand name prescription prices rose 17.7% to an average of $268 per prescription. But the use of brand name prescriptions fell nearly 13%. Generic prices fell 7.2% to an average of $33 per prescription while the use of generics rose 3.4%.
In 2011, the growth rate of spending on children increased 2.1 percentage points to 7.7%, which is more than twice the growth rate of spending for people aged 19 to 44 and 55 to 64.
Cost sharing remains stable among patients and payers. Spending on health care was split between consumers and insurance companies in much the same way as in previous years, with insurers paying for 83.8% of total expenditures and insured enrollees paying 16.2%. Payers contributed $3,812 per person in 2011.
In 2011, people with employer-sponsored insurance used more outpatient services and had more procedures than in 2010. Emergency room visits increased 3.7%. However, patients had fewer hospitals stays and prescriptions filled.
In 2011, out-of-pocket spending reached $735 per person – a $32 increase from 2010. Costs covered by insurance grew at nearly the same rate. Spending grew fastest for outpatient services, for people ages 18 and younger, and for people in the Northeast. Spending grew the slowest for prescriptions. For more information, visit http://www.healthcostinstitute.org/2011report
Costs Continue to Rise for Employee Health Benefits
In related news, the cost of claims continues to rise in employer-sponsored health plans, according to a survey of more than 70 insurance companies by Wells Fargo Insurance. Although rates remain consistent compared to six months ago, overall claim costs will continue to increase in the high single digits next year. The Wells Fargo Insurance Employee Benefits Survey was conducted between July and August 2012.
Dan Gowen of Wells Fargo Insurance said, “Despite ongoing efforts to control healthcare expenses insurers are not expecting a drop in claim costs for 2013. This means that employer premiums will likely rise; it’s also likely that consumers may pay more for their share of employer-sponsored healthcare plans. Employers seeking to minimize cost increases should explore more sophisticated ways to maintain and improve the health risk of employees and maximize their benefit investment.”
The survey also found that dental cost trends are lower than medical trends due to lack of cost shifting from public to private plans and a negative cost impact from improvements in the dental technology field. Finally, survey results indicate that prescription costs are down slightly, due to greater availability and the use of generic drugs.
Reflecting claim activity over a six-month period, the following are expected increases in the national average cost of claims:
• HMOs – 8.5%
• Point-of-sale (POS) – 8.7%
• PPOs and consumer driver health plans – 9.3%
• Exclusive provider organizations (EPO) – 9.4%
• Indemnity plans – 10.2%
• Prescription plans – 7.6%
In addition to healthcare reform provisions, claim trends are influenced by price inflation or deflation (changes in unit prices for the same services), increased or decreased use of services, population age, benefit design, changes in provider treatment patterns, improvements in technology and drug therapies, and cost shifting. For more information, visit www.wellsfargo.com/wfis.
MassMutual introduced “RetireEase Choice,” a flexible premium deferred income annuity. It differs from traditional deferred annuities in that it guarantees a specific amount of future income when a purchase payment is made. This guarantee is possible because assets within the contract are dedicated to meeting long-term retirement income needs. The only distributions made from the contract are in the form of annuity payments or a death benefit. For more information, visit www.massmutual.com
A Guide to LinkedIn
HubSpot’s newest Linkedin Ebook, “Learning LinkedIn From the Experts,” explains how to use LinkedIn to grow your network and business. For more information, visit http://blog.hubspot.com/linkedin-experts-ebook/tabid/77782/Default.aspx.
Aetna has combined the attributes of two of its most popular member tools “Ask Ann” and the Member Payment Estimator. “Ann,” is a personalized, virtual assistant at Aetna’s member website. The Member Payment Estimator provides out-of-pocket cost estimates and cost comparisons for more than 550 commonly used, non-emergency in-network health services, as well as many common out-of-network physician services. The enhanced version of “Ann” can quickly help members do the following:
* Find out if a service is covered.
* Estimate the cost of services.
* Locate an in-network facility or physician.
* Compare costs by facility or physician.
Ann averages more than 20,000 chats per day, making her one of the most popular features on Aetna Navigator. Members can click on Ann to open a chat window and enter a question. She provides an immediate written and spoken response. For more information, visit www.aetnatools.com,
A True Variable Annuity
Semetra introduced its pension reserve fund sub-accounts to provide defined benefit plans with the flexibility of defined contribution and cash balance plans. Key features include a guaranteed income start, pre-income stream flexibility, pre-income stream death benefit, and income stream payments. Advisers can call 855-878-3827.
Fixed Annuity Webinar Tomorrow
The National Assn. for Fixed Annuities is holding a Webinar on how to access articles, videos, testimonials, calculators and valuable tools to educate clients and prospects about fixed annuities. It will be held Thursday, September 27 at 8:30 a.m. PST. For more information, visit https://www1.gotomeeting.com/register/429259856.