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Thursday April 24th 2014



How the Adult Mandate Affects Healthcare Spending

• How the Adult Mandate Affects Healthcare Spending
• Trends in Health Coverage
• Will the ACA Increase Underinsuance?
• Workers Expect Employers to Educate Them on Health Reform
• Republicans Withdraw bill on High Risk Pool
• How Pharmacy Benefits May Evolve
• Employers Miss the Mark in Absence Management
• Cancer Leads Long-Term Disability Claims
• Matrix Names COO
• Pair Charged with Scamming Seniors with Phony Home Care Plan
• LAAHU University Day May 22
• Guide To LTC Benefits
• Critical Illness Guide
• Hospital Advantage Policy
• Expatriate Wellness Tools


How the Adult Mandate Affects Healthcare Spending

AdultMandatehealthcareTotal health care spending increased 0.2% for large employers that offered dependent coverage to children up to age 26. Workers paid for some of that spending through cost sharing and their share of the premium while employers paid for the remainder, according to a report by the Employee Benefits Research Institute (EBRI).

The Affordable Care Act (ACA) requires plans and issuers that offer dependent coverage to make it available until a child reaches the age of 26. While employers are not allowed to directly charge higher premiums for the cost of adult-dependent coverage, employers and workers will share the higher cost of health care services through claims payments, cost sharing, and worker premiums.

EBRI found that these newly covered dependents were more likely to incur claims related to mental health, substance abuse, and pregnancy. It has been estimated that 3.1 million young adults have acquired health coverage under the provision. For more information, visit

Trends in Health Coverage

Researchers at the Commonwealth Fund reveal why they feel that it is critical for ACA implementation to continue on schedule. Forty-six percent of adults 19 to 64 did not have insurance for the full year in 2012 or were underinsured and unprotected from high out-of-pocket costs; 41% had problems paying medical bills or were paying off medical debt; and 43% had cost-related problems getting needed health care.

The major health coverage provisions of the Affordable Care Act go into effect in January 2014. The Congressional Budget Office projects that the combination of new subsidies for health insurance and consumer protections will enable 14 million uninsured people to gain coverage in 2014, and 27 million by 2021. Seventy-nine percent of young adults were insured in 2012, up from 69% in 2010. This trend reverses a decade-long upward climb in the number of uninsured young adults.

In 2012, 46% of U.S. adults 19 to 64 did not have insurance for the full year or had inadequate protection from health care costs. Thirty percent were uninsured at the time of the survey or had spent some time uninsured in the past year. An additional 16% were underinsured due high out-of-pocket medical costs in relation to their income.

Many Americans with low or moderate incomes are uninsured or have coverage with high cost-sharing requirements, whether copayments or coinsurance. People with incomes under 250% of poverty comprised 72% of the total number of Americans who were uninsured or poorly insured in 2012. Three-quarters of working-age adults with incomes under 133% of the federal poverty level were uninsured for a period in 2012 or were underinsured. The same is true for 59% of adults earning 133% to 249% of the federal poverty level.

Gaps in health insurance, inadequate coverage, and large medical bills leave millions of U.S. adults burdened with debt. In 2012, 41% of adults 19 to 64 had problems paying medical bills or were paying off medical debt. Forty-two percent of those who said they had difficulties paying medical bills or paying off medical debt also said they got a lower credit rating as result of unpaid medical bills.

In 2012, 43% of adults faced financial barriers to getting needed health care – up from 37% in 2003. That includes 67% of those who were uninsured at any time and more than 51% of those who were underinsured. People who were uninsured were significantly less likely to have a regular source of care or to be up-to-date on recommended cholesterol, blood pressure, and colon cancer screenings, and mammograms.

Eighty-seven percent of those who had a gap in coverage in 2012 would be eligible for subsidized health insurance under the ACA. In addition, 85% of underinsured adults in 2012 would be eligible for Medicaid or subsidized health plans, with reduced out-of-pocket spending.

Jonathan Gruber, an economist at the Massachusetts Institute of Technology, has estimated that about 5 million undocumented immigrants will remain uninsured in 2016. Gruber also predicts that many Americans will not be insured, even though they are eligible for the new coverage options because they are not aware of their eligibility; they are unable to find an affordable premium; or they chose not to enroll. For more information, visit

Will the ACA Increase Underinsuance?

The Affordable Care Act (ACA) may actually increase the number of underinsured according to an editorial by Drs. Steffie Woolhandler and David Himmelste in the April Journal of General Internal Medicine. About 40% of those gaining coverage will get Medicaid. However, many current Medicaid enrollees are woefully underinsured. Disturbingly, CMS will probably allow state Medicaid programs to demand copayments and deductibles, even from the poorest of the poor.

Underinsurance among Medicaid recipients will probably increase since several states have already reduced benefits, cut provider payments, and narrowed provider networks. More ominously, the White House is encouraging state officials to use federal Medicaid expansion funds to purchase private insurance, a shift that’s likely to raise both taxpayers’ costs and poor patients’ copayments.

Insurance exchanges offered to near poor and middle income individuals will also leave many underinsured. Bronze plans (the minimum coverage mandated by the ACA) will only cover 60 % of average medical expenses. Silver plans will cover 70 %. That’s far worse than the roughly 80% coverage under today’s average job-based policy equivalent to the ACA’s Gold plans.

In concrete terms, a 56-year-old making $45,900 will pay $4,361 in premiums for individual Bronze coverage, and up to $4,167 in additional deductibles and copayments for covered services. Subsidies disappear at 401% of poverty ($46,100). The mandatory premium would be $10,585,with out-of-pocket costs for covered services capped at $6,250. In effect, the federal government is endorsing skimpy plans that offer scant protection from impoverishment, according to the authors.

They say that Massachusetts’s health reform has not reduced the number of medical bankruptcies. Researchers say that both Massachusetts and the ACA have avoided the social insurance approach, which makes care health free at the time of use; puts the burden of health costs on those most able to pay (the healthy and wealthy); and relies on readily enforced global budgets for cost control. Instead, they embraced market-based policies that demand more (percentage wise) from the middle class than the rich and compound the misfortune of illness with financial penalties.

International evidence indicates that cost sharing is neither necessary nor particularly effective for cost control. The U.S. has high cost sharing and the highest costs. Canada, which outlawed copayments and deductibles in 1981, has seen faster health improvement and slower cost growth. Canadian provinces control costs by tax-based funding, global hospital budgeting, binding, negotiated physician fee schedules, and a simple unified single- payer structure that minimizes administrative burdens and costs. Scotland, which has avoided market-based policies and patient payments, has health care costs that are about half of those in the U.S. For more information, visit

Workers Expect Employers to Educate Them on Health Reform

Seventy-five percent of workers expect their employers to educate them about health care reform and explain how it will affect their coverage. However, only 13% of employers say that educating employees on health care reform is important for their organization, according to a study by Aflac.

Fifty-four percent of workers say they would not want greater control over their insurance options because they don’t have the time or knowledge to manage it. Fifty-three percent fear they would not manage their coverage adequately, leaving their families less protected. Seventy-six percent say they are not very knowledgeable or not at all knowledgeable about federal and state health insurance exchanges.

Fifty-eight percent of employers that said they are extremely knowledgeable about health care reform also say that their employees are extremely knowledgeable about their benefits. However, only 27% of employers say they understand healthcare legislation extremely or very well. Seventy-four percent of workers who are extremely satisfied with their job are also satisfied with their benefits, compared to only 30% of workers who are not satisfied with benefits.

More employees are using voluntary insurance products to cover costs not covered in their high deductible insurance plans. In 2013, 43% of workers were enrolled in voluntary products, compared to 31% in 2012.

The survey also reveals the following about employees:
• 32% are not knowledgeable about health savings accounts (HSAs)
• 6% are not knowledgeable about federal and state health care exchanges
• 49% are not knowledgeable about health reimbursement accounts
• 25% are not knowledgeable about flex spending accounts (FSAs).
• 23% 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% of employees have less than $500.

The survey reveals the following about employers:
• 53% have implemented a high-deductible health plan (HDHP) over the past three years — a trend that shows no sign of slowing.
• 55% have done nothing to prepare for possible changes to the health care system.

Aflac has created the booklet, “An Employer’s Guide to Health Care Reform.” For more information, visit

ACA Will Test Consumers’ Loyalty to Their Doctors

Half of consumers would switch their doctor if they could save a certain amount in annual health care costs, according to a survey by HealthPocket. Thirty-four percent would switch if they could save $500 to $1,000; eight percent would switch if they could save $1,000 to $2,000; and 8% would switch if they could save $3,000 or more.

Consumers and small employers will face an array of new health plan choices in 2014. Other than cost, one of the key factors in consumers’ selection process is whether their doctor participates in a plan’s provider network. Cost pressures are moving insurers to limit their provider networks. They are seeking to negotiate lower rates to healthcare providers in exchange for a larger volume of patients.

HealthPocket is offering a physician search component on its site at It allows consumers to compare all commercial health plans, Medicare plans and Medicaid programs that their doctor may accept.

Republicans Withdraw bill on High Risk Pool

House Republican leaders withdrew a bill, (HR 1549), when it became clear that it would not get enough votes for passage. The bill would have shifted funds under the Affordable Care Act to sustain the ACA’s temporary high-risk insurance pool program The program, called the “Pre-Existing Condition Insurance Plan,” was designed to help sick U.S. residents gain coverage ahead of January 2014, when the ACA’s ban on denying individuals coverage because of pre-existing conditions is set to take effect.

How Pharmacy Benefits May Evolve

Pharmacy benefit programs are evolving from simply using cost shifting to providing more complex offerings and adopting new management tools, according to a report by the Pharmacy Benefit Management Institute. The report reveals the following trends:

More Cost-Sharing Among Tiers – The use of four-tier, copay designs continues to grow, fueled by the addition of a separate tier for specialty drugs. Innovative cost-share structures with five or more tiers are emerging, but it is unclear whether they will become mainstream. Tier categories include preferred and non-preferred generics as well as a split by clinically and cost-effective therapies. In addition, the copay differential continues to widen. The average difference between generic and preferred brand copays is $19 compared to $7 about 10 years ago. The average difference between preferred and non-preferred brand copays is $23, compared to $13 a decade ago. As benefit designs move towards more tiers, the use of coinsurance designs are declining. This may be due to concerns over the members’ out-of-pocket costs.

Alternative Incentives for Behavioral Change – Several studies have challenged the assumption that copay waivers increase medication adherence or help to contain overall health care costs. However, when alternative incentives are provided, most employers still focus the incentives on participation.

Management of Purchasing Channels– Benefit programs often vary the cost share by the type of pharmacy in order to encourage members to use certain channels. Copays are less for a 90-day supply filled once in a mail pharmacy than for a 30-day supply filled three times at a retail pharmacy. A new trend is to provide incentives to use certain retail pharmacies. This allows plan sponsors to keep the broad network while managing costs since the preferred retailers typically offer better pricing.

Limited Networks– Limited pharmacy networks were not talked of much before 2012. But they have become more of a consideration after the contract dispute between Walgreens and Express Scripts. Providing the broadest access to providers may no longer trump the more favorable pricing of a narrowed network.

Trend Management– Drug benefit plans often exclude medications deemed nonessential. Even when medications are covered, employers use coverage limitations to promote appropriate use, such as prior authorization, quantity limits, refill-too-soon limits, and step therapy. The vast majority of plan sponsors already use prior authorization, refill-too-soon, and quantity limits. Sixty-five percent of plans use step therapy. The one exception is pill splitting, which has never experienced widespread adoption. PBMs generally do not promote these programs due to safety concerns.

Specialty Drugs– Traditional pharmacy benefit management strategies are now used widely for specialty drugs. The strategies include the use of pharmacy networks, formulary management, prior authorization, and step therapy programs. Quantity limits are also common, in which specialty products are limited to a 30-day supply. Another strategy is to limit the first fill to one or two weeks to ensure the patient tolerates the medication.

Site-of-Care and White Bagging– White bagging is a fairly new strategy, which has gained ground recently. It’s the practice of having medications or supplies delivered directly to the practice setting (outpatient infusion center, physician office, hospital) for use by a specific patient. The idea is to allow the payer to purchase the drugs for less from a specialty pharmacy. Also coverage of drugs can be shifted from the medical benefit to the pharmacy benefit. There are potential drawbacks, such as patient safety, wasted medication, and operational headaches for the provider. Once a drug is received, providers have the burden of storing it separately from their regular inventory. If there is a last-minute change to a treatment plan, a new or additional drug may need to be ordered, resulting in delays in care.

Copay Assistance– Specialty drug manufacturers frequently offer copay assistance programs that cover the member’s share of the cost. Many programs will cover the member’s cost share up to $500 a month, and very few have a maximum income requirement. This may be an effective strategy to maintain patient adherence. However, many employers say the programs only add more complexity.

Over the past few years, there has been a significant increase in the number of copay programs for non-specialty medications, mainly because many brand drugs have come off patent. Plan sponsors say these programs undermine copay tier structures, which provide incentives for patients to use lower-cost alternatives, such as generics. Some advocate the use of coupons to make drugs more affordable, thereby increasing adherence. The authors say that plan sponsors would be prudent to develop a strategy for drug coupons on the traditional pharmacy side. For more information, visit


Employers Miss the Mark in Absence Management

While 84% of employers are making some effort to manage absences only 45% have been successful. On average, employers scored a 3.7 out of 10 in how well they manage absences, according to a report by The Guardian. The report suggests the following strategies:

  • A full return-to-work program, starting with a written return-to-work policy.
  • Detailed reporting of disability and Family and Medical Leave Act (FMLA) usage patterns, costs, and more.
  • A process that gives employees referrals to health management programs.
  • A central leave-reporting portal for short-term disability (STD) and FMLA.
  • The same resource for STD, FMLA and other benefit programs.

For more information about Guardian, please visit:

Cancer Leads Long-Term Disability Claims

For the 12th year, cancer is the top reason for long-term disability, followed closely by back disorders, according to Unum’s 2012 claims data. Cancer claims were nearly 16% of the company’s long-term disability claims. “Although cancer remains a significant area of focus for our disability claims professionals, we are seeing some dramatic trends in recovery and return to work,” said Kristin Tugman, senior director of Health and Productivity at Unum.

Cancer patients have a wide range of side effects from treatment, including fatigue and cognitive issues, Tugman said. Possible workplace accommodations could include the following:
• Clearly defining work expectations and limitations.
• Creating a flexible or reduced work schedule.
• Modifying work stations to avoid having to stand or sit for too long.
• Allowing extra time for breaks to combat fatigue.
• Coaching and providing feedback on performance.

Other leading causes of long-term disability claims for Unum in 2012 include the following:
• 15% Back disorders excluding injury.
• 10% Injuries.
• 10% Behavioral health issues.
• 9% Circulatory system disorders.
• 8% Joint disorders.

Leading causes of short-term disability claims were the following:
• 19% Normal pregnancy.
• 11% Injuries.
• 8% Complications from pregnancy.
• 8% Digestive disorders.
• 7% Back disorders.
• 7% Cancer

For more information, visit


Matrix Names COO

Matrix Absence Management has named William Schutz chief operating officer (COO), replacing Ken Cope who has been named president. Matrix is a San Jose-based firm that integrates workers’ compensation, short and long term disability, return-to-work services, and personal/family and medical leave (FMLA) programs. For more information, visit

Pair Charged with Scamming Seniors with Phony Home Care Plan

Michael Woodward, 50, and his wife Melissa Woodward, 47, were arraigned in a San Diego courtroom and charged with 11 felony counts for scamming more than 230 San Diego area senior citizens out of $1.9 million.

Investigators say the Woodwards sold fraudulent in-home non-medical senior service contracts. Services were to include cooking, cleaning, bathing, dressing, laundry, and shopping. They promised seniors unlimited non-medical services for a pre-paid annual fee. But the Woodwards allegedly failed to provide the services they promised. Inexpensive claims, such as requests for housecleaning, were often paid while more expensive claims were often rejected. They also allegedly returned to victim’s homes to collect additional premiums that went well beyond the original cost of the plan.

For more than a decade the Woodwards allegedly ran a $6 million scam bilking hundreds of seniors across 10 states while operating under numerous aliases and bogus businesses, such as Secure Care, All Secure Care, Home Health America, Americare, American Home Health, and US Home Care. The Better Business Bureau gives Home Health Care an A minus rating.

Insurance Commissioner Dave Jones said the pair’s alleged actions have resulted in the loss of nearly $2 million. The Woodwards were arrested at their Las Vegas home on April 10, 2013 by investigators with the Nevada Attorney General’s Office.Based on records seized by investigators, officials believe there are additional victims in Riverside and Orange counties and possibly more victims throughout the state. Officials are asking anyone who suspect they or someone they know have been victimized, to call the Department of Insurance at 800-927-4357.

LAAHU University Day May 22

The Los Angeles Association of Health Underwriters (LAAHU) is holding University Day May 22 at the Los Angeles Convention Center. The conference will highlight the implementation of the Patient Protection and Affordable Care Act (ACA). It will offer insurance processionals the training and tools they need to assist California consumers and employers with the new benefits.

Keynote presenters include the following:
• Dave Jones, California Insurance Commissioner.
• Michael Lujan, Covered California, director of the SHOP Exchange
• Herb Shultz, Health & Human Services, Region IX director
• Julianne Broyles, CalAdvocates, CAHU lobbyist

For more information, visit


Guide to LTC Benefits

LTC Financial Partners is offering an updated workplace guide to the tax advantages to offering long-term care insurance.  For more information, visit:

Critical Illness Guide

American Independent Marketing is offering a free downloadable eGuide to critical illness insurance for individuals and employers. For more information, visit

Hospital Advantage Policy

Aflac’s new hospital plan is designed to help employees pay for expenses not covered by major medical insurance. It includes the following:
• Lump sum payment for a hospital confinement and daily benefits for treatment at a medical facility.
• Options to add additional coverage to help cover out-of-pocket expenses associated with doctor visits, medical diagnostic and imaging, and transportation

For more information, visit

Expatriate Wellness Tools

MetLife is offering support tools help enhance the value of our expatriate benefit programs. The site,, allows customers to do the following:
• Enter their health records to create a personal health profile.
• Complete a health risk assessment and get a personalized plan of activities for improving their health.
• Track over 20 wellness metrics as they adopt healthy activities into their daily living, Learn more about hundreds of health topics and conditions.

For more information, visit