Insurance Insider News:
How HSAs Beat HRAs
by Leila Morris

BusinessBoxingPeople with HSAs are more likely to engage in cost-conscious behavior compared to those in HRAs, according to a report by the Employee Benefit Research Institute (EBRI). HSA participants are more likely to ask for a generic drug instead of a brand name, check the price of a service before getting care, ask a doctor to recommend less costly precriptions, develop a budget to manage health care expenses, and use an online cost-tracking tool provided by the health plan. Paul Fronstin of EBRI said, “HRAs and HSAs may be similar, but there are some key differences that may produce different incentives …Those with an HSA are more likely to respond to health pricing.” An employee owns the HSA, which is completely portable. With HRAs, an employer is not required to provide the unused balance to a worker when they leave the company. For more information, visit www.ebri.org.

Most States Expected to Expand Medicare

Several Republican governors originally rebelled against Obamacare by refusing to expand eligibility to their state’s Medicaid program. But more and more are caving in. An analysis by Decision Resources Group finds that most states will move toward Medicaid expansion in the next few years. Hospital systems in non-expansion states are losing millions of dollars on uncompensated care, not to mention the millions of federal dollars left on the table with waiver-based initiatives.

Ric Gross, senior analyst at Decision Resources Group said, “One noteworthy byproduct of the state-by-state Medicaid expansion battle is the level of experimentation allowed by the Obama administration. Republican-heavy states, such as Arkansas and Iowa, received CMS permission to move Medicaid expansion beneficiaries into the private exchange. This level of adaptation has prompted other states, such as Indiana, to push for even more liberties in a bid to expand. While CMS won’t simply rubber stamp these requests, they certainly want as many states as possible to open up the program and bring more uninsured into the fold.”

While states generally aren’t shrinking their use of managed care organizations, several are expanding managed Medicaid in varying capacities as they seek to restrain healthcare cost increases. More states are implementing accountable care organizations in their Medicaid programs to coordinate care for the sickest beneficiaries. However, after an early flurry of interest from 26 states in 2012, just 12 are moving ahead with demonstration projects to coordinate care for those who qualify for full Medicaid and Medicare benefits. For more information, visit www.decisionresourcesgroup.com. In related news, the White House issued a report on the economic consequences for states that don’t expand Medicaid.  For more information download http://www.whitehouse.gov/sites/default/files/docs/missed_opportunities_medicaid.pdf.

Healthcare Cost Trend Slows in 2014

Healthcare costs rose 3.5% in the 12 months ending February 2014 compared to 4.9% for the same period in 2013. Healthcare cost trends are lower than a year or two ago, but remain 1% to 2% above inflation. In-patient fee-for-service rose 2.6% compared to 4.3% in 2013. Out-patient fee-for-service costs rose 4.9% compared to 6.3% in 2013. All but prescription drugs rose at a slower pace, according to the S&P Healthcare Claim Indices. Prescription drugs rose 3.5% compared to 1.5% in 2013. Higher growth in prescription drug costs reflects higher prices for generic and branded pharmaceuticals and shifting market shares between generic and branded.

Expenditures for large and small groups and administrative services only (ASO) plans show stable growth. Individual plans are the most volatile. While the growth in costs moved down through 2013, the most recent data suggest a jump in expenditures. Since this  segment that the will be most affected by Obamacare, it is likely to be watched closely as the new healthcare law is implemented in coming years. For more information, visit www.spdji.com.

How Small Business Can Get the Best Health Coverage at Most Affordable Price

Frank Saltzburg, a partner with Healthcare Solutions Team, LLC (www.ushcre.com) outlines his strategies for businesses to lower their health care premiums while providing the most comprehensive health plans:
•  Always use a professional, state-licensed broker or agent who is certified as a health care reform specialist. They are trained and educated to be aware of the best plans in the ever-changing current market, both in the private and public exchanges. It does not cost you any more to use a broker since major medical rates are already approved by your State Insurance Commissioner.
•  Don’t use a public online quote engine as your final answer. It is only a starting point and is susceptible to data breaches leading to identity theft.
•  Be aware of the limitations of public exchange call center navigators who don’t hold a state-issued health insurance license. In many cases, navigators are not state-licensed to represent major medical coverage and are not even government-certified as health care reform specialists in the Affordable Care Act.
•  Use the bundle concept to give you better coverage at a more affordable price with less out-of-pocket financial exposure.

Saltzburg says there has been an influx of online insurance quote engines through the public insurance exchanges. “The problem here is these public exchange quote engines will list  ‘bargain health plans’ that typically have the smallest network of doctors and hospitals. Many people are shocked to learn their plan’s network is limited to one county within their state and their doctors are not part of these networks. A recent Associated Press survey found that most cancer hospitals don’t accept Obamacare,” he stated.

“One big, ongoing concern is that the average deductible is estimated at $5,000. However, what everyone should really be looking at is the out-of-pocket maximum per calendar year. This is the true financial exposure we all experience. We design our plans so that the deductible and the maximum out-of-pocket exposure are no longer a major issue…We bundle our plans to include accidental coverage to pay up to the deductible amount and cover out-of-pocket expenses. Plus, we offer critical illness coverage to also offset the deductible and any out-of-pocket expenses. The critical illness coverage offers the ability to have a lump sum payout allowing the insured to have an extra $5,000 to $200,000 of living expense money. While people are recuperating from their critical illness, they won’t worry about paying daily living bills. Bundling allows the insured to have a more comprehensive plan with true peace of mind,” he said. For more information, visit http://www.ushcre.com.

Small Business Owners Are Not Faring Better Under the ACA

Fifty one percent of business owners say their employees are not getting better healthcare or more affordable healthcare under the Affordable Care Act  (ACA). Fifty-five percent are unsatisfied with or unsure about their current healthcare solution. Only 19% say their employees received healthcare that is more affordable and better under the Affordable Care Act, while over 80% were unsure or said they did not get more affordable care. Barry Sloane of The Small Business Authority said, “In the near term, the promise of more affordable care from the Affordable Care Act has not yet materialized. Hopefully the government and the health insurance providers will take the necessary steps to decrease healthcare costs, increase choice, and improve services to independent business owners and their employees.” For more information, visit http://www.thesba.com.

IN CALIFORNIA

Five Arrested For Ripping Off Insurers

California Department of Insurance detectives arrested Tyler Wilkinson, 37, Ian Frisch, 31, Ruben Banuelos, 63, Edward, 71, and Maxine Putnam, 68, on multiple felony charges of grand theft. The five suspects are accused of falsifying life insurance applications to collect more than $600,000 in commissions. Wilkinson targeted victims through the use of cappers (people paid to recruit policy applicants) and finders to locate potential policyholders. Wilkinson would then submit the fraudulent application to insurers through Frisch, a former life insurance agent. The pair then profited by allowing the life and whole life policies to lapse after a year while retaining the commissions paid by the insurer for the initial policy application. Several insurers paid commissions totaling more than $600,000.

This scheme began with three complicit life insurance applicants. The Putnams and Banuelos knowingly made false statements on life insurance applications allegedly working in cahoots with Wilkinson and Frisch. The policies are then allowed to lapse after just one year while the people involved profited from commissions. In June 2014, Banuelos and the Putnam’s are each charged with one felony count of grand theft, one count of great taking allegations.

This case was investigated by the California Department of Insurance, with assistance from California Department of Business Oversight, the Orange County District Attorney, and the Federal Bureau of Investigations. The criminal investigation is ongoing. The investigation and prosecution of this case is under CDI’s Life and Annuity Consumer Protection Program (LACPP). LACPP provides grant funds to counties for the prosecution of financial abuse in life insurance and annuity product transactions.

Wilkinson and Frisch were booked in the San Diego County Jail with bail set at $600,000. Wilkinson and Frisch are being charged with four counts 487(a) PC Felony Grand Theft, along with the Aggravated White Collar Crime Enhancement 186.11 PC, and the Great Taking Allegation under 12022.6 PC. Banuelos and Mr. and Mrs. Putnam are booked at the Orange County Central jail -with bail set for Banuelos at $180,000 and $200,000 and $170,000 for Mr. and Mrs. Putnam, respectively. Banuelos and Mr. and Mrs. Putnam are charged June 23, 2014, by the Orange County District Attorney’s office. The three are charged with one felony count each of 487(a) PC Felony Grand Theft, and one count each of the Great Taking Allegation under 12022.6 PC. In January 2014, Department of Insurance detectives arrested Morgan Laws, 84, of San Clemente for investment fraud and grand theft related to this case. Laws pled guilty to Grand Theft and unlicensed sales.

LIFE SETTLEMENTS

The Life Settlement Market Is Turning Around

Life settlement transactions stopped their precipitous decline last year. The face value of life insurance policies sold reached $2.57 billion, an increase from $2.13 billion the year before, according to a report by The Deal. Donna Horowitz, senior editor for The Deal, said “This is the first time in several years in which the number of life settlement transactions has gone up. This can only mean the market is starting to bounce back after years of being in the doldrums following the recession. One of the main challenges…is consumer awareness. Most people still don’t know that they have the right to sell their policies. Unlike the reverse mortgage market, the life settlement market remains largely unknown to the public.” The following are highlights from the report:
•  The number of policy sales, at 1,356, represented 10 more deals than in 2011 when the total face value purchased was $5.07 billion and 160 more transactions than in 2012. In all, $406.2 million was paid to purchase policies last year compared to $319.4 million paid the year before.
•  The total face value of policies sold reached $2.57 billion, an increase from $2.13 billion the year before.
•  Coventry First led the market in the total number of transactions, buying 637 policies in 2013 compared to 597 policies the year before. Coventry paid $71.8 million and purchased $340.1 million in policies.
•  Magna Life Settlements overtook long-time market leader Coventry First LLC in the amount paid and the face value of policies purchased in 2013. Magna paid $153 million, more than double the amount paid by Coventry. Policies purchased by Magna totaled $930 million in face value — almost triple the value of Coventry’s policies.
•  The Settlement Group came in third place with 71 transactions last year, compared to 53 in 2012 and a fourth-place ranking. Settlement Group paid $12.5 million for 71 policies with $107.2 million in face value last year. Although it did fewer deals in 2012, the Settlement Group paid almost twice as much for them at $24.7 million. The face amount, at $149.7 million in 2012, also was higher than last year.
•  Life Equity LLC had a better year last year, jumping to fourth place with 65 transactions from fifth place with 50 transactions in 2012. The Hudson, Ohio-based provider paid $10.2 million for policies with $121.9 million in face value last year compared to spending $12 million for $137.7 million in death benefits in 2012, reflecting a trend toward smaller policies.
•  Abacus Settlements LLC ranked fifth with 56 settlements, $13.5 million paid and a face value of $119.4 million.
To get the full report online visit www.thestreet.com

LISA Offers Membership to Producers and Advisors

The Life Insurance Settlement Association (LISA) is welcoming producers and advisors. Under a new membership category, producers will have access to educational tools and resources in professional networking, legal compliance, legislation and regulation, industry news, and more. Darwin Bayston, LISA president and CEO said, “Millions of Baby Boomers hold hundreds of billions of dollars of life insurance that could become life settlements. After years of premium payments, many seniors often experience unexpected changes that alter their priorities regarding life insurance. When these changes occur, advisors should understand the options available for clients’ life insurance policies that are no longer needed, wanted or affordable, including a life settlement.” He added that the life settlement industry is attracting growing interest from the financial advising sector, policy makers, and the press. The association is hosting an exclusive advisor track at its 20th Fall Conference at the Omni Scottsdale Resort & Spa at Montelucia on October 7th, 2014. Attendees will be eligible for up to six CFP Continuing Education credits. For more information, visit http://www.lisa.org.

LIFE INSURANCE

IUL And Chronic Illness Riders Remain Priority For Life Insurers

Total indexed universal life (IUL) sales increased from 14% in 2010 to 31% during the first nine months of 2013, according to a survey by Milliman. In recent years more companies have entered the IUL market. Survey participants expect companies to focus more on cash accumulation IUL and current assumption IUL products and less on universal life with secondary guarantees (ULSG). Five of the 26 survey participants discontinued sales of ULSG products.

The popularity of chronic illness riders has also increased over the past few years. Fourteen participants offer a chronic illness accelerated benefit rider on a UL or IUL chassis. During the first nine months of 2013 sales of chronic illness riders were 11% for UL products and 33% for IUL products. The majority of participants that reported UL/IUL sales with a chronic illness rider provide a discounted death benefit as an accelerated benefit. Similarly, during the first nine months of 2013, sales of long term care (LTC) riders as a percentage of total sales were 17% for UL products and 9% for IUL products. Nearly 85% of survey respondents expect to market an LTC or chronic illness rider within 12 to 24 months. The 484 page, “Universal Life and Indexed Universal Life Issues — Detailed Report” is available for purchase at http://www.milliman.com/insight/2014/Universal-life-and-indexed-universal-life-issues–2013-survey/ or by calling Gina Ritchie at -312-499-5605.

EMPLOYEE BENEFITS

Employees Don’t Have to Be Web-Savvy to Self Enroll

Even employees who are only occasional Internet users can enroll themselves in their employers’ benefits, according to a survey of Spotlite Choice users. Thirty-six percent of describe themselves as only occasional or rare Internet users while 64% rate themselves as very web savvy, according to responses from 185 employees who reported their experience using the benefit enrollment system’s optional feedback survey. The feedback function was implemented in May. For more information, visit www.spotlite.com.

NEW PRODUCTS

Long Term Care Website

Genworth Financial launched a consumer website (www.longtermcareinsurance.org) focusing on the reality of long-term care and the importance of planning for the future. It presents a holistic view of the long-term care issue and allows consumers to compare the cost of care, determine care needs and develop a long-term care strategy.

Healthcare Alerts

Change Healthcare is offering targeted messaging to support workplace initiatives centered on wellness, chronic care management, medication adherence, and point-of-care optimization. For more information, visit www.changehealthcare.com.

Defined Contribution Plan Management

MassMutual is teaming up with BlackRock to introduce a customized, lower-cost alternative to managed accounts for defined contribution retirement plans. Financial advisors can offer professionally managed asset allocation strategies to help achieve the diversification and customization. For more information, call 800-874-2502, option 4.

Cancer Coverage

MetLife is adding cancer insurance to its portfolio of supplemental health insurance products. Lump-sum benefits are paid directly to the covered employee to spend as they choose, regardless of what is covered by other insurance. The plan is available to employees and eligible family members and features guaranteed issue coverage, a 3/6 pre-existing condition limitation, a recurrence benefit, no waiting periods or age limitations on coverage for employee or spouse/domestic partner, and continuation of coverage. The Cancer Insurance plan is based on the MetLife Critical Illness Insurance (CII) policy www.metlife.com/lifevalueadds. As of June 2014, the company will be participating on 11 private exchanges and third-party platforms and offering a variety of group insurance products, including dental, vision, life, disability, critical illness, accident, group legal services and group property and casualty. For more information, visit www.metlife.com.

HSA Comparison Shopping

The website, www.hsasearch.com, allows buyers to do comparison shopping among more than a hundred institutions offering HSAs.

WEBINARS

Premium Financing Webinar

Succession Capital Alliance is holding its next advanced premium financing Webinar on Wednesday, July 16th, at 11:00 am PST. For more information, visit www.successioncapital.com.

Webinar on Private Exchange Technology

Benefitfocus will host a live Webinar titled, “Private Exchanges: Build Your Technology Foundation on July 17, 2014, at 10:00 p.m. PST. The Webinar will focus on how insurance carriers can leverage the power of private exchange technology to support an employer’s whole workforce by incorporating mandatory and voluntary benefits. For more information, visit http://www.benefitfocus.com/events/private-exchange-technology-webinar.

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