• Individual Life Sales Improve
• High Demand for Employee Choice In Exchanges
• Voluntary Carriers Offer More Guaranteed Issue
• Most Voluntary Carriers Will Introduce New Products In 2012
• Benefit Brokers Gained Voluntary Market Share
• Financial Benefit Plans Gain Popularity
• The Self Employed Are Skeptical of Health Reform
• Humana and United Preserve Health Care Reform Protections
• Most Employers Expect to Maintain Coverage
• Young, Uninsured, and in Debt
• Healthcare Spending to Grow Modestly
• Medicaid Costs Keep Growing Despite Cost Containment Measures
• Variable Annuity Products
• Wellness Plan
• Group Voluntary Disability Insurance
• Decision Support Tool for Surgery
ONE THE MOVE
(our new personnel feature)
Individual Life Sales Improve
Total individual life insurance premium grew 3% in the first quarter of 2012 compared to the prior year. Overall policy count rose 5%. “The biggest driver behind total premium and policy count growth continues to be whole life. We saw growth in whole life sales across the industry, including three quarters of our survey’s participants and all but one of the dominant top twenty. It remains very attractive to consumers looking for security of premium and cash-value guarantees along with lifetime coverage,” said Ashley Durham, senior analyst for LIMRA product research. WL premium increased 10% in the first quarter while policy count improved 6%. Half of all the individual life insurance policies issued in the first quarter were WL products. Measuring annualized premium, WL market share reached 32% in the first quarter — just 7% lower than universal life (UL), which has held the lion’s share of premium sales since 2003. At its peak in 2007, UL market share was 20% higher than WL. Total UL premium was flat in the first quarter. Policy count grew 5%, representing the 12th consecutive quarter of growth in policy count for UL. Lifetime-guarantee UL premium fell 12% in the first quarter of 2012. This product’s market share has been declining over the past few years as companies have had to take steps to mitigate the poor investment environment. While it still represents the largest portion of overall UL premium, its market share is down to about 35%. Indexed UL (IUL) jumped 22% in the first quarter and IUL policy count grew 41%. Companies continue to introduce IUL and these sales represent more than 25% of all UL sold in the first quarter. Variable UL (VUL) premium declined 1% in the first quarter. VUL policy count dropped 9%. Just under a quarter of VUL writers were able to increase their premium sales over first quarter 2011. Term life insurance sales experienced some positive growth in the first quarter of 2012. New term life premium grew by 1% in the first quarter. More than half of the writers brought in more new term premium than they had during the first quarter of 2011, including nine of the top 10 writers. Term policy count grew 4% in the first quarter; over half of companies surveyed had issued more policies, including nine of the top 10 companies. For more information, visit www.limra.com.
High Demand for Employee Choice In Exchanges
What small businesses in California want most from state exchanges are the ability of employees to choose among multiple insurance carriers as well as more disease prevention and wellness programs. The survey was conducted by Field Research Corp. on behalf of Small Business Majority and Kaiser Permanente. States across the country are working to develop Small Business Health Options Program (SHOP) exchanges. Small businesses can purchase health insurance through the SHOP online marketplaces. The survey found that interest in the SHOP exchange is high while awareness among owners of small business tax credits is low. “The fact that these exchanges are enticing to small business owners demonstrates the importance of getting them up and running and making sure they offer the features small businesses are looking for,” said Joe Smith, vice president for Small Business, Kaiser Permanente. Sixty-seven percent of small business owners that are planning to offer benefits in 2014 want employees to be able to choose between multiple insurance carriers. Small businesses want the SHOP exchanges to handle enrollment and provide a single, consolidated bill, regardless of the number of insurance carriers that employees select. Forty-eight percent of the small business owners said that offering a plan with prevention and wellness programs is attractive to them. Small businesses owners who expect to offer health benefits in 2014 are even more likely to feel this way at 66%. Fifty-one percent of the small businesses surveyed were not even aware of the tax credits available to them for providing health benefits through the new health reform law. Upon learning about the availability of the tax credit, 58% said they would be more likely to go to the exchanges in 2014. John Arensmeyer, founder & CEO of Small Business Majority said, “Small employers and their employees want the same options and benefits that large companies already enjoy. Small business owners are eagerly awaiting 2014, when the exchanges will be up and running. These marketplaces will give them more choice of plans and make it easier and more affordable for them to offer their employees insurance.” SHOP exchanges, which become available in 2014, could spur more small business owners to provide health benefits. In California, just 32% small businesses offer health insurance to their employees and another 4% offer it to some of their employees. But, the proportion of those who are likely to offer health coverage to their employees jumps to 44% when small business owners are told that California’s exchange will allow them to shop for health insurance among competing companies online or via a broker. For more information, visit: www.kp.org/newscenter.
Voluntary Carriers Offer More Guaranteed Issue
The most significant product trend in today’s voluntary market is the growth in guaranteed issue followed closely by more features and options, according to more than three-quarters of the carriers surveyed by Eastbridge. In 2010, lower participation requirements came in second as a popular trend, but it was listed third in the most recent study. Only about one-third of respondents said there is a trend for lower prices, about the same as in 2010. All other trends (higher commissions, fewer/more age bands, and more shelf rates) received significantly fewer responses. Respondents were also asked about the greatest pressure concerning voluntary products. Consistent with trends, 40% selected pressure to liberalize guaranteed issue guidelines, followed by pressure to lower prices. Interestingly, no carriers mentioned feeling pressure to increase compensation/commissions. This was a significant decrease from the 18% in the 2010 survey. Seventy-four percent had said that the pressure was clearly coming from brokers/producers while just 21% said it was from their field staff. For more information, visit www.eastbridge.com.
Most Voluntary Carriers Will Introduce New Products In 2012
Eighty-two percent of carriers surveyed by Eastbridge Consulting plan to introduce at least one new voluntary product in the next one to two years, up from 66% in the 2010 survey. About half of those who plan to introduce new products expect to introduce more new products than in a typical year. Critical illness and accident insurance were mentioned most often as new products being introduced (selected by almost half of the respondents). Critical illness was named as the top product in the 2008, 2010, and 2012 studies. About three-quarters of respondents mentioned adding term life and hospital indemnity products over the next two years. Just 11% are not planning to add any new products for next year, a significant decrease from the 34% in 2010 and 22% in the 2008. When asked how new products introduced over the past two years are performing, 66% said that product sales and profitability are as expected. This was higher than in the 2008 and 2010 studies. The percentage saying the products are performing better than anticipated was up to 29%. Only 6% said their products were under-performing.
Benefit Brokers Gained Voluntary Market Share
The benefit broker’s share of total voluntary sales is now at 55%, up from 52% last year. As a sale segment, the benefit broker was the only one with a sales increase over 2010, according to Eastbridge Consulting. In fact, all other segments were down slightly. The career agent segment had the second largest share of the total sales. Classics and specialists (the two segments focused on voluntary) together were larger at $1.217 billion, but individually were lower than the career agents. The following compares 2011 to 2010 in each distributor segment:
- Benefit brokers – up 10.9%.
- Career agents – down 2.9%.
- Classic worksite brokers – down 2.2%.
- Worksite specialist – down 1.9%
- Occasional – down 2.5%.
Financial Benefit Plans Gain Popularity
Financial benefit plans play an increasingly important role in employers’ benefit strategies, according to a study by Bank of America Merrill Lynch. “To keep up with employee expectations, we see employers moving toward more flexible benefit programs that offer an opportunity to deliver greater value and more effectively address the longer term financial security of their employees,” said Steve Ulian of Bank of America Merrill Lynch. The study examines employer and employee perspectives on workplace benefits — from 401(k) plans and health savings accounts (HSA) to financial advice and education. Key findings include the following about employers: • 90% say that financial benefits are just as important to potential hires as they were five years ago – with half say they are more important. • 81% will offer financial benefit plans. • When it comes to financial benefit plans and wellness programs, employers place the greatest importance on a plan’s usefulness to employees (88%), the quality of service (86%), and the cost (80%). • 72% say that it is important for the plan to be flexible enough to support a demographically diverse workforce. • 46% are concerned about the possibility of a policy change that could reduce tax incentives for employees participating in 401(k)s. • 30% offer an HSA option to employees, among whom 35% participate. • 79% expect greater demand for saving and investment advice among employees. • 56% offer access to professional financial advice in the workplace. • 55% communicate with employees about their financial benefit plans once a year or less. • Most admit that they could do more to help workers understand the benefits, including discussing the broader advantages of each benefit plan (80%), providing access to financial professionals for advice (79%), increasing the number of communication methods (69%), increasing the frequency of communications (66%), and targeting communications to employees (63%). • 39% offer their retiring employees guidance on what to do with their 401(k) assets. • 20% help educate employees on issues, such as preparing for future health care costs or understanding when to take Social Security as they approach traditional retirement age. • 33% reinstated or raised their company match, whereas just 8% eliminated or lowered their match – another indication perhaps that economic conditions are improving. Key findings include the following about employees:
- 91% say their 401(k) plan is one of the most critical retirement savings vehicles.
- Nearly 80% view financial benefits as a key consideration in accepting a new position.
- 42% are on track to support their desired lifestyle in retirement and another 22% have no idea whether they’re on track.
- 73% expect to work into their 70s.
- 82% are willing to give up 5% or more of their salary to have a reliable income in retirement; 42% are willing to give up 10% or more.
- 84% say their employer matches some level of 401(k) plan contributions. When asked what would encourage them to contribute more into their 401(k) account, employees cited an increase in company match (89%); more affordable health care benefits (73%); greater access to education and advice about saving and investing in the plan (53%); and a higher maximum contribution limit (46%).
- 57% view an HSA as important to their financial security.
- 50% of those without access to professional advice would like their employer to offer it.
- 43% say that the availability of financial education and advice at work increases loyalty to their company.
- Employees are most seeking the advice in the following financial areas: investing in their 401(k) plan (45%); preparing for retirement (44%); budgeting for present health care expenses (40%) budgeting for future (33%) health care expenses; and maximizing their company stock and equity plans (42%).
- 30% are not taking full advantage of financial benefits. When asked why, 35% don’t know how to best use their benefits and 10% don’t know what benefits their company offers.
- 48% are less than satisfied with the benefits offered to them.
The Self Employed Are Skeptical of Health Reform
Unlike most Americans, the more the self-employed and micro-businesses learn about the health reform law, the less likely they are to support it, according to the National Association for the Self-Employed (NASE). (Micro-businesses have 10 or fewer employees.) NASE president Kristie L. Arslan said, “Even if the Affordable Care Act lowers coverage costs, over 65% of the self employed and micro-businesses are unlikely or unsure if they will provide and pay for a portion of health coverage for their employees in the future.” This insight comes on the heels of a Government Accountability Office report that shows utilization of the Small Business Health Care Tax Credit is sadly low, especially under the country’s Main Street businesses, most of which do not even qualify for the credit because their business is deemed too small.” The general opinion of the Affordable Care Act is fairly evenly divided among the self-employed, but one thing that nearly one in four say is that the cost of their health coverage will increase after the law’s implementation. Satisfaction about insurance cost and affordability continues to be low among the self-employed. These concerns show little signs of abating in 2014, when the individual mandate in the law is scheduled to kick in. At that point, the self-employed will be required to purchase more expansive and more expensive coverage. The survey reveals the following: • 77% of the self-employed have health insurance — the largest percentage on record. But, more than eight in 10 respondents feel that they are at disadvantage compared to larger businesses, when it comes to health insurance access. • Nearly 85% said that rising health coverage costs have been detrimental to themselves, their families, their businesses, and their bottom line over the past three years. • While more self-employed people have health insurance coverage, there has been a 10% decline in the number of individuals who purchase their policy through their business. • The number of employers who cost-share with their employees is up more than 11%, with the employee paying an average of 85% of the cost. One in four say the cost of their health insurance will increase when the Affordable Care Act goes into full effect in 2014. For complete survey results, visit www.nase.org.
Humana and United Preserve Health Care Reform Protections
Regardless of the outcome of a Supreme Court ruling on the Affordable Care Act expected later this month, Humana says that it will maintain these health care reform provisions:
- Humana will not impose lifetime dollar limits on policies.
- Humana will maintain the health care reform law’s rescission standard for its individual insurance policies. The company will not rescind (retroactively cancel) individual health insurance policies except in cases of fraud or intentional misrepresentation of material facts by an applicant for insurance.
- Humana will continue to provide a clear and simple process for appealing claims decisions, as well as the option for health plan members to have their cases reviewed by independent review organizations. Humana members will continue to receive important preventive care services with no out-of-pocket cost sharing.
- Humana will continue to permit dependent family members to remain covered on their parents’ policies up to age 26. Humana’s pledge to preserve these protections applies to its fully insured commercial health insurance policies. The company will also work with its employer clients that self-insure their health benefits to emphasize the importance of the continuity of policies and coverage.
United Healthcare also announced that the company will continue to offer important health care insurance protections that were included in the 2010 health care reform law, no matter how the U.S. Supreme Court rules. UnitedHealthcare will continue to offer the following:
- A spectrum of preventive health care services that do not require cost sharing, such as those tailored to preventive health care needs, yearly preventive medicine visits, screening for high blood pressure and diabetes, and all standard immunizations recommended by the American Committee on Immunization Practices.
- Dependent Coverage Up to Age 26, regardless of their eligibility for other insurance coverage, including those who are not enrolled in school, those who are not dependents on their parents’ tax returns, and those who are married.
- No lifetime limits – UnitedHealthcare does not impose lifetime dollar limits on policies — that practice will continue.
- No Rescissions, Except for Fraud. UnitedHealthcare will not pursue rescissions of individual coverage except, as provided for in the Reform law, in cases of fraud or intentional misrepresentation of a material fact. Rescissions generally are considered to be any retroactive termination or cancellation of coverage, except when due to the failure to timely pay premiums.
- UnitedHealthcare will continue to ensure that consumers are offered a simple, accessible external appeals channel and a process that is clear and timely. The company will give consumers notice of available appeals processes and the opportunity to review their files and present evidence as part of the appeals process.
Most Employers Expect to Maintain Coverage
Though everyone is waiting for the Supreme Court to rule on the Affordable Care Act (ACA) this month, 86% of single employers and corporations will continue to provide health coverage to their employees in 2014 or are likely to do so, according to a survey by the International Foundation of Employee Benefit Plans. Only one percent of the respondents say they will definitely not provide coverage to all full-time employees in 2014. Julie Stich, the International Foundation’s Director of Research said, “Employers are redesigning their health plans to remain in compliance and to curb anticipated costs…Increasing participants’ share of premium costs is the most common technique, followed by increasing in-network deductibles and out-of-pocket limits. “ The survey also revealed the following about employers: • 39% are developing ways to deal with the reform while 31.3% are taking a wait and see approach. • 47% have looked at how the health care reform law will affect their plan costs. • 70% expect the health reform law to increase their costs in 2012. For more information, visit www.ifebp.org.
Young, Uninsured, and in Debt
In 2011, 13.7 million young adults ages 19 to 25 stayed on or joined their parents’ health plans, including 6.6 million who would likely not have been able to do so before passage of the Affordable Care Act, according to a report by the Commonwealth Fund. However, not all young adults have parents with health plans they can join and many still experience gaps in coverage and face medical bill problems and medical debt. The survey revealed the following about young adults: • 39% went without health insurance at some time in 2011. • 36% had medical bill problems or were paying off medical debt. • Many of those who reported problems with medical bills or debt faced serious financial consequences such as using all of their savings (43%), being unable to make student loan or tuition payments (32%), delaying education or career plans (31%), or being unable to pay for necessities such as food, heat, or rent (28%). 70% with incomes under 133% of poverty ($14,484 for a single person) had a gap in coverage in 2011, more than three times the rate of those with incomes over 400% of poverty ($43,560 for a single person). • 17% in low-income families stayed on or joined their parents’ plans, compared to 69% in the highest income households. Commonwealth Fund vice president Sara Collins said, “Young adults over 25 cannot take advantage of the early provision. While the Affordable Care Act has already provided a new source of coverage for millions of young adults at risk of being uninsured, more help is needed for those left behind. The law’s major insurance provisions slated for 2014, including expanded Medicaid and subsidized private plans through state insurance exchanges, will provide nearly all young adults across the income spectrum with affordable and comprehensive health plans. For more information, visit www.commonwealthfund.org..
Healthcare Spending to Grow Modestly
The annual growth rate for U.S. healthcare spending will hover near historic lows in 2013 and rise at a modest pace for much of the next decade, even if the Supreme Court allows the expansion of coverage to millions more Americans to proceed, according to a report by the U.S. Centers for Medicare and Medicaid Services (CMS). CMS estimates that healthcare spending will rise about 4% a year between now and 2014 when the reform law takes full effect. That compares with an average annual rate of 6.8 percent for the last decade. Preliminary data suggest that growth in consumers’ use of health services remained slow in 2011 and this pattern is expected to continue this year and next. In 2014, health-spending growth is expected to accelerate to 7.4% as the major coverage expansions from the Affordable Care Act begin. For 2011 through 2021, national health spending is projected to grow at an average rate of 5.7% annually, which would be 0.9% faster than the expected annual increase in the GDP. By 2021, federal, state, and local government health care spending is projected to be nearly 50% of national health expenditures, up from 46% in 2011, with federal spending accounting for about two-thirds of the total government share. Rising government spending on health care is expected to be driven by faster growth in Medicare enrollment, expanded Medicaid coverage, and the introduction of premium and cost-sharing subsidies for health insurance exchange plans. For more information, visit www.cms.gov.
Medicaid Costs Keep Growing Despite Cost Containment Measures
States will face significant fiscal challenges with Medicaid continuing to outpace overall general fund expenditures, according to a survey by the National Governors Association (NGA) and the National Association of State Budget Officers (NASBO). Medicaid is the single largest portion of total state spending, estimated to account for 24% in fiscal 2011. State funds directed towards Medicaid increased dramatically in fiscal 2012 while federal spending declined rapidly because of the expiration of the enhanced federal matching rates temporarily authorized by American Recovery and Reinvestment Act of 2009 (ARRA). State spending on Medicaid increased by 20% in fiscal 2012 (following a 23% increase in fiscal 2011) while federal spending declined by 8%. Although overall governors’ proposed budgets for fiscal 2013 project a 4% rate of growth in state Medicaid spending, Medicaid continues to outpace overall general fund expenditure growth in governors’ recommended budgets. Over the past 10 years, the growth in state spending on Medicaid has exceeded the growth in all other categories of spending, and has been twice as much as the growth in education spending. “States have undertaken numerous actions to contain Medicaid costs, including reducing provider payments, cutting prescription drug benefits, limiting benefits, reforming delivery systems, expanding managed care and enhancing program integrity efforts. These efforts alone, however, cannot stop the growth of Medicaid,” said NGA executive director Dan Crippen. Budgets continue to be squeezed by constrained revenues, increased expenditure pressures, reductions in federal funding and the need to replenish reserves and provide resources for critical areas that were cut during the recession. States have been slow to recover from the recession because of the severity of the economic contraction and the lag time between tax collections and changes in the national economy. The fallout from unprecedented budgetary declines in fiscal 2009 and 2010 put states well below historical growth trends in general fund spending and revenue. Despite some improvement in state budgets since the depths of the recession, state budget growth is still significantly below average – growing at less than half the average growth of the past few decades, according to NASBO Executive director Scott Pattison. For more information, visit www.nasbo.org.
Variable Annuity Products
Wells Fargo Advisors launched the advisory variable annuity (AVA), an investment advisory fee-based program. It allows advisors to deliver the benefits and guarantees of annuity products as part of the overall portfolio management of the account. The AVA will provide greater fee and pricing transparency and will be reflected in the account performance reports. The Wells Fargo Advisory Variable Annuity will be available from the following Insurance Carriers: 1. Allianz Life 2. Lincoln Financial Group 3. Nationwide 4. Pacific Life For more information, visit www.wellsfargoadvisors.com.
“HumanaVitality” and The Vitality Group introduced Vitality Kids. Children (aged 17 and under) and their parents can earn points for participating in healthy activities. Kids earn points for activities, such as getting immunizations and flu shots, participating in team sports, and attending health education classes with parents. Families redeem their collective Vitality Points for items including movie tickets, music downloads, electronics, and hotel stays. For more information, visit www.humana.com.
Group Voluntary Disability Insurance
Sun Life Financial launched flexible voluntary group disability insurance options: Voluntary Short Term Disability (VSTD) and Voluntary Long Term Disability (VLTD). Workers can gain short-term and long-term disability coverage at group rates, tailor-made to their wallets, and without increasing their employer’s overhead costs. For more information, visit www.sunlife.com/us.
Decision Support Tool for Surgery
Aetna is offering the Welvie Surgery Decision Support Program to members who are considering surgery. The online program, which includes easy-to-understand video content, guides members through six steps. The first three steps focus on helping them work with their doctors to determine an accurate diagnosis and understand treatment options, including surgery. If surgery is the determined course of treatment, the last three steps help members prepare for the procedure and recovery. For more information, visit www.aetna.com.
ONE THE MOVE (our new personnel feature)
Kaiser Permanente has named Peter Andrade to the position of senior vice president, California Sales and Account Management, responsible for overseeing sales and account management activities for more than 85,000 California group purchasers, with nearly 7 million members.