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Wednesday April 16th 2014



IRS is Accused of Abuse of Power in the Seizure of Medical Records

• IRS is Accused of Abusing its Power Taking Medical Records
• State Reaches Settlement With Life Insurance Companies
• Study Finds Fewer Office Visits & Prescriptions With CDHP
• Employers Increasingly Pay-for-Performance Strategies
• Pent-up Healthcare Demand Threatens to Increase Premiums
• Disability Conference
• MIB Life Index Reports U.S. Life Insurance Drops in May
• Individual Life Insurance Premiums Increase
• Life Claimants Report High Satisfaction
• Trends in Employee Recognition
• Research Shows That Life Settlements Pay Off
• Rising Interest Rates May Boost Corporate Pensions Funding
• More 401(k) Participants Use Professional Help
• Financial Educational Videos in Spanish
• Policy Brief Outlining Innovative Health Care Payment Models


IRS is Accused of Abusing it Power in the Seizure of Medical Records

An unnamed insurance provider has filed a class-action suit against the IRS in the Superior Court of The State of California for San Diego for illegally seizing the medial records of millions of Americans.

IRSRepublicans on the House Energy and Commerce Committee sent a letter to the IRS asking for an explanation of the Agency’s procedures for seizing documents. The plaintiff says that the IRS abused its power during a raid of “John Doe Company.” The following is a summary of the plaintiff’s complaint.

The search warrant authorized the IRS to seize the financial records of of one former employee; it did not authorize the IRS to seize any medical records — least of all third parties completely unrelated to the matter.

And yet, IRS agents confiscated more than 60 million medical records of more than 10 million Americans, including at least 1 million Californians. The seizure may have included intimate medical records on every state judge in California, every state court employee, leading and politically controversial members of the Screen Actors Guild and the Directors Guild, and prominent citizens in the world of entertainment, business, and government, from all walks of life.

Before executing the warrant, IRS agents were notified that John Doe Company had a HIPPA secure facility. When IRS agents came to the facility, they were warned again, by company officials, that the private medical records were HIPPA-protected and were for people who were not related to the search warrant. The IRS agents threatened to rip the servers, containing the medical data, out of the building if IT personnel did not hand them over.

IRS agents also seized personal mobile phones without attempting to protect private and privileged information on the phones, all of which was completely unapproved by the search warrant. To add insult to injury, the 15 IRS agents enjoyed soda and pizza from a pizza delivery while watching a basketball game on the company’s media system. Defendants are asking that the IRS to be prohibited from sharing the records with anyone. They also want the records to be returned as well as any copies of the records.

Tough Questions About Navigators
The National Association of Professional Insurance Agents (PIA) is thanking Rep. Duncan Hunter (R-Calif.) for raising significant concerns about healthcare navigators. In a June 7 letter to HHS Secretary Kathleen Sebelius, Rep. Hunter and 32 other Members of Congress focused on the need for appropriate oversight and the fact that navigators are not required to be licensed or carry liability insurance to protect consumers against errors or omissions (as are professional insurance agents ).

The letter notes that HHS’s proposed rule governing navigators and non-navigator assisters does not ensure that clients will get information on the plan that may best suit their needs, whether that plan is available in the marketplaces or through the traditional market. The letter also notes that navigators will not be allowed to help consumers determine the appropriate plan. PIA says that, while it is appropriate that unlicensed navigators or assisters to not be permitted to make plan recommendations, this puts the consumer in the position of lacking needed information.

The letter states that the complexities of these plans is best handled by licensed insurance agents or brokers who are trained and state-certified to sell such products. Also, insurance agents and brokers carry errors and omission (E&O) insurance to protect themselves and consumers from accidental wrongdoing. If an error occurs, consumers have recourse to recoup any losses that they may have endured. “It is our understanding that your Department will not recommend E&O coverage for navigators, resulting in possible large gaps in consumer protections,” the letter states.

The lawmakers also note that the ACA preserves state regulatory authority of insurance and that many state legislatures have passed legislation to strengthen consumer protections, such as further defining the role of a navigator.

The letter prompts HHS to provide the Department’s perspective on key areas of consumer protection, including inquiries into background checks, training, and oversight. For more information, visit

State Reaches Settlement with Life Insurance Companies

State Controller John Chiang announced multi-state settlements over unpaid life insurance benefits with 11 life insurance companies, including Transamerica and New York Life. The Controller’s five-year investigation revealed an industry-wide practice of failing to pay death benefits to beneficiaries and ignoring a legal duty to turn the money over to the State for safe keeping.

Instead, companies would draw down the policies’ cash reserves to continue collecting premium payments from the deceased and then cancel the policy once the cash reserves were depleted. Also, insurers did not routinely crosscheck the owners of dormant accounts with government databases of the deceased. In other cases, companies had direct knowledge of the policy owner’s death, but still did not notify the beneficiaries of the policy. The companies have agreed to make policy beneficiaries whole, pay 3% compounded interest, and adopt business procedures to ensure full compliance with the unclaimed property laws. California’s 50-year-old consumer protection law requires businesses to send lost or abandoned properties to the State after three years of inactivity. These multi-state settlements are worth up to $763 million nationwide, with up to $86.7 million going to California beneficiaries.

Companies involved in the latest settlements include Transamerica, New York Life, Western & Southern, Pacific Life, Genworth, Hartford, ING, Symetra, Northwest Mutual, Sammons (Midland and North American), and TIAA-CREF.

Like previous settlements, the agreements announced require the companies to do the following:
• Restore the full value of all effected accounts dating back to 1995.
• Fully comply with California’s unclaimed property laws and cooperate with the Controller’s efforts to reunite these death benefits, annuity contracts, and retained asset accounts with their owners or, in many cases, the owners’ heirs.
• Pay beneficiaries 3% compounded interest on the value of the held amounts from 1995, or from the date of the owner’s death, whichever is later. To date, Controller Chiang has reached global settlements with 18 life insurance companies, with an aggregate value of $266.7 million belonging to California beneficiaries, and an estimated $2.4 billion nationally. These 18 companies write more than 50% of all the issued and active life insurance policies nationwide.


Study Finds Fewer Office Visits & Prescriptions With CDHP

Consumer-directed health plans (CDHP) reduce the long-term use of outpatient physician visits and prescription drugs, according to a study by the Employee Benefit Research Institute (EBRI). The research used data from two large employers – one that adopted a health savings account (HSA) plan for all employees in 2007 and another with no CDHP. After four years under the HSA plan, there were 0.26 fewer physician office visits per enrollee per year and 0.85 fewer prescriptions filled, although there were 0.018 more emergency department visits (all of which are considered statistically significant).

Additionally, the likelihood of receiving recommended cancer screenings was lower under the HSA plan after one year and, even after recovering somewhat in later years, still lower than baseline at the study’s conclusion.

Paul Fronstin of EBRI notes that there have been recent regulatory decisions related to employer contributions to health reimbursement arrangements and health savings accounts. Also, the excise tax on high-cost health plans takes effect in 2018. These factors make CDHPs more attractive to employers because they may keep costs below the threshold that triggers the tax. For more information, visit or

Employers Adopt Pay-For-Peformance Strategies

Fifty-three percent of large- and mid-size employers, surveyed by Aon Hewitt, are moving toward pay-for-performance payment models to promote cost effective, high quality health care. Jim Winkler of Aon Hewitt said that employers are beginning to work directly with health plans to reduce unnecessary expenses and create more efficiency in the way they purchase health care.

Thirty-one percent of employers adjust the compensation of health care vendors based on performance targets, and another 44% are considering doing so in the next three-to-five years. Just 14% of employers use integrated delivery models, including patient-centered medical homes. But another 61% plan to do so in the next few years.

Pay-for-performance is moving beyond measuring how fast customer service reps answer the phone toward a focus on fees and increases in medical spending. A growing number of employers are interested in shifting to reference-based pricing and value-based pricing over the next three-to-five years. Reference-based pricing limits benefits for specified procedures to a specific dollar amount. Value based pricing rewards performance based on patient outcomes.

Just 8% of companies limit plan reimbursements to a set dollar amount for certain medical services when there is wide cost variation. However, 62% are considering adopting reference-based pricing, which has been commonplace for prescription drug coverage.

Fifty-nine percent of employers plan to steer participants to high-quality hospitals or physicians through plan design or lower cost. Thirty-eight percent plan to participate in cooperative purchasing efforts with other employers or groups (coalition-based pricing). For more information, visit

Pent-up Health Care Demand Could Increase Premiums

In a new HealthPocket survey, 42% of respondents say they would see the doctor more often or get a medical procedure that they have been putting off if they had better health insurance. Since the Affordable Care Act (ACA) broadens health insurance coverage and benefits, health insurance premiums could rise in 2015 to cover increased medical service use starting in 2014.

Beginning in 2014, health insurance plans will have to meet minimum coverage standards called “Essential Health Benefits.” Today’s individual health plans provide only 76% of the ACA’s Essential Health Benefits. HealthPocket estimates a two-year period for consumers to exhaust the pent-up demand for healthcare, so the  of the ACA’s effect on premiums won’t be evident until 2016.

Bruce Telkamp, CEO of HealthPocket said, “These results suggest that many consumers will become more active in their use of healthcare starting next January when many consumers have first-time coverage or simply better health insurance under Obamacare. On the positive side, this should lead to improved health and cost savings in the long term through preventive care that offsets the need for more expensive acute care. On the other hand, we do expect to see some increases in premiums in the short term, to mitigate the use of a larger volume of doctor services, which are already in short supply.” For more information, visit


Disability Conference

The Disability Management Employer Coalition (DMEC) is holding its annual conference in Atlanta on August 18 to 21. It will feature the following topics: the Affordable Care Act and the implications for mental health and disability benefits, improved return-to-work outcomes, and real time ADA reasonable accommodation. For more information, call 202-595-9008 x63.


MIB Life Index Reports U.S. Life Insurance Drops in May

U.S. application activity for individually underwritten life insurance declined 1.9% in May, year-over-year, according to the MIB Life Index. Year-end 2012 gains (1.2%) continued to erode in the first five months of 2013, except for March. For 2013, application activity is off 2% year-to-date compared to the same five-month period last year. May’s application activity was 5.1% less than that of April, which consistent with previous time periods. Application activity was down 2.2% for ages birth to 44 and down 3.4% for ages 45 to 59. Activity was up 1.6% for ages 60 and up. The 60 and up age group is the only demographic with steady and progressive growth since 2000. For more information, visit

Individual Life Insurance Premiums Increase

New annualized premium for individual life insurance grew 7% in the first quarter of 2013, with every major product line experiencing positive premium growth, according to a LIMRA survey. Total individual policy count had been increasing slightly over the last two years, but fell 5% in the first quarter. All product lines except term experienced declines in policy count.

Universal life (UL) premium grew 8% in the first quarter, mostly because of strong indexed UL sales. IUL premium increased 23% compared to the first quarter last year, which is the 16th consecutive quarter of growth. UL premium represents 40% of the total individual life insurance market.

Universal life was the biggest driver of growth in the first quarter of 2013. “IUL offers upside potential without the worry of market-related loss, which continues to appeal to today’s buyers,” said Ashley Durham, senior analyst, LIMRA Product Research. UL policy count dropped 18% in the quarter. LIMRA attributes much of the decline to companies discontinuing their term-UL products.

Lifetime guaranteed (LTG) UL premium increased 9% through first quarter 2013. Companies cited improved competitive positions, fire sales, and the ability to keep cost increases to a minimum. LTG now represents 35% of UL premium, down from a high of 53% in 2009. It still represents the largest share of new UL premium.

Whole life sales remained strong in the first quarter of 2013. Premium increased 7% in the first quarter, which is the 15th consecutive quarter of positive growth. WL policy count declined 5% compared to the first quarter of last year. WL market share was 33% in the first three months of 2013.

Term premium grew 3% and policy count grew 1% in the first quarter. More than a third of term writers reported positive growth. Variable universal life (VUL) premium grew 10% in the first quarter, mainly due to sales of small corporate-owned life insurance and private placement. VUL policy count dropped 5% in the first quarter. VUL policy count hasn’t increased for 34 consecutive quarters. For more information, visit

Life Claimants Report High Satisfaction

Ninety-five percent of life insurance beneficiaries are satisfied with their claims experience, according to a LIMRA study. But the level of satisfaction matters a great deal. An extremely satisfied claimant is nearly four times as likely as is a merely satisfied claimant to be very interested in doing business with the insuring company. The extremely claimant is also more than three times as likely to recommend the carrier, and more than twice as likely to feel strongly about the critical role life insurance plays following the death of a loved one.

Top-performing companies demonstrated better responsiveness and ease of the claims experience. Nearly three in four beneficiaries said the life insurance claims process was easier and less stressful than their other administrative tasks. They also gave higher ratings to the top performers for the care and compassion, and the knowledge and competence exhibited by the professional they worked with most closely.

Just over a quarter of beneficiaries work with an agent, and a disproportionately high percentage express gratitude and admiration for their agent. Often referring to their agent and office staff by name, beneficiaries commented on how beautifully everything was handled following their loved one’s death.

Many beneficiaries said how quickly their claims were paid. Yet, the median turnaround time for top performers is 19 days, which is exactly the same turnaround time for all carriers combined, suggesting that acceptable turnaround times for life insurance claims are often based on the beneficiaries’ perceptions.

While many aspects of the claims process are transactional, companies and agents can really make a difference in service. Insurers can offer additional support to overwhelmed beneficiaries, such as grief counseling, coordination of coverage, and legal services. Companies can train their distribution force to play a more personal and visible role before, during, and after the claim.

The study underscores the fact that processing a life insurance claim offers the greatest opportunity to make a lasting impression on an insured’s immediate family as well as broader circles of family and friends. For more information, visit


Trends in Employee Recognition

Employers are increasingly focusing programs to reward positive behavior, such as teamwork, creativity, and problem-solving, according to a survey by WorldatWork. For the first time in the survey’s 11-year history, programs to motivate behavior jumped to a top-tier goal, cited by 41% of employers in 2013 versus 25% in 2008.

Rose Stanley of WorldatWork said, “We are beginning to see a trend where wellness and recognition programs to motivate behaviors are starting to intersect. We expect this intersection to become more pronounced as a way to drive health-care costs down and increase productivity.”

Employers are reviewing their wellness programs in light of the final rules under the Affordable Care Act. Employers will need to familiarize themselves with the new rules as they design wellness plans or recognition plans with wellness incentives that take effect on or after Jan. 1, 2014, she said. The survey also reveals the following about employers:
• 70% offer three to six recognition programs.
• Employers budget for recognition programs at an average of 2% of payroll. Nearly 1 in 3 respondents said they budget exactly 1% of payroll.
• Recognition budgets are centralized (39%), held in each department (17%), or split between the two areas (44%).
• 41% say that senior management has a high level of support for recognition programs, up from 37% in 2010.
• Employers measure program success using employee satisfaction surveys, participation rates, number of nominations, turnover, productivity, customer surveys, and return on investment (ROI). Only 10% of employers measure ROI on their recognition programs. For more information, visit


Research Shows That Life Settlements Pay Off

A study by the London Business School reveals that the policyowners who sold their life insurance policies received more than four times what they would have gotten if they surrendered their policies to the life insurance companies. The report also highlights two recent trends – more policyowners are retaining a share in the benefits of their policies and there is a move towards life settlements for smaller policies. The study was based on more than 9,000 settled policies from Coventry. For more information, visit


Rising Interest Rates May Boost Pensions Funding

A Milliman study finds that corporate pension plans experienced a $95 billion increase in funded status, primarily based on a $101 billion decrease in the pension benefit obligation (PBO). There was a small offsetting decrease in assets. John Ehrhardt, co-author of the study said, “We finally see a long-awaited spike in interest rates and the resulting massive deficit reduction. This is the biggest interest rate increase since 2009 and one of the more significant increases in the history of our study.”

In May, the discount rate used to calculate pension liabilities increased from 3.98% to 4.41%. The asset value for these 100 pension plans decreased slightly. Their pension-funded ratio would improve from 86% to 89% by the end of 2013 and up to 94% by the end of 2014. That is, if the plans achieve their expected 7.5% median asset return and if the discount rate of 4.41% is maintained throughout 2013 and 2014. To view the complete study, go to

More 401(k) Participants Use Professional Help

In 2012, 36% of all participants in 401(k) retirement plans at Vanguard invested their plan assets in a professionally managed investment option, dramatically improving their portfolio diversification and potentially, making them more financially prepared for retirement compared with participants making investment choices on their own. Vanguard estimates that 55% of all participants will be entirely invested in a professionally managed investment option by 2017.

Twenty seven percent of all participants in 2012 were invested in a single target-date fund, 6% held a single traditional balanced fund, and 3% used a managed account advisory program. The total number of participants invested in a professionally managed allocation has more than doubled from 17% at the end of 2007.

Furthermore, 14% of participants who were offered an investment advice service through their plan used the service. “The number of participants completely turning their portfolio construction over to a professional, or obtaining advice from professionals, is an important trend in the potential future financial security of retirees,” said Jean Young, co-author of How America Saves. For more information, visit


Financial Educational Videos in Spanish

MassMutual has produced three videos available in Spanish or English. They explain the basics of annuity, disability income insurance, and life insurance products. For more information, visit

Policy Brief Outlining Innovative Health Care Payment Models

A policy brief by the Harvey L. Neiman Health Policy Institute outlines innovative payment models that can increase access to affordable medical imaging and other specialty services. According to the policy brief, giving providers incentivizes to curb costs by making them assume greater financial risk for a patient’s care doesn’t have to reduce access to specialty care. In fact, new payment models can align the payment of specialty care with efforts to ensure a sustainable, high-quality health care system.

Richard Duszak, MD, FACR said, “What this policy brief tells us is that we can use ‘big data’ and what we know about care patterns to design payment models that employ imaging and various specialty care services for the right patients at the right time, in a cost-effective manner.” For more information, visit