Subscribe to Insurance Insider News
by Leila Morris
IN CALIFORNIA
• Legislature Passes LTC Insurance Reform
• Legislature Passes Regulatory Framework For CO-OPs
• Legislature Passes Bill to Double Carrier’s Assessment to Fund Fraud Prevention
• Physical Therapy Bill Killed
• Download the Affordable Care Act Toolkits for Californians
• Probation Officer Arrested on Disability Fraud
• Life Agent Rips Off Elderly Client
• Conference on Healthcare Consumerism
DISABILITY INSURANCE
• A Snapshot of Long Term Disability Claims
HEALTHCARE
• Improving the Fee-for-Service Model
RETIREMENT PLANNING
• Work to Age 70? For Many, That Still Won’t Pay for Retirement
PERSONNEL ANNOUNCEMENTS
• Wendy Gibson Joins BenefitMall
NEW PRODUCTS
• Disability Plan for Loss of Future Earnings
• Fully Insured Vision Plans
• Social Security Planning Tools
MERGERS & AQUISITIONS
• MassMutual To Acquire The Hartford’s Retirement Plans Business
Legislature Passes LTC Insurance Reform
The California Legislature passed AB 999, which modifies the rate development process for long-term care insurance (LTC) premiums. California Health Underwriters (CAHU) originally opposed AB 999 because of a provision that would have created a five-year ban on increasing that rates on long-term care insurance policies sold before 2002. Another provision would have implemented a 10-year ban on increasing rates for rate-stabilized LTCi policies. CAHU was successful in removing both bans from AB 999 and is now neutral on the bill as amended. The following are some of the bill’s provisions:
• Premium rate schedules for individual and group LTC insurance policies must be approved by the Insurance Commissioner.
• For each policy, LTC insurance carriers must post, on their Websites, a specimen individual policy form or group master policy and a certificate form.
• The annual consumer rate guide must outline coverage for each product listed in the rate guide.
• For any filing made after January 1, 2013, the insurer must reduce the premiums so that the current lifetime expected loss ratio is equal to or greater than the highest filed loss ratio.
• A condition of approval for proposed rate increases is the contingent benefit on lapse, unless it threatens the insurer’s financial condition. If the insurer increases the premium above a defined threshold, the insured can convert the coverage to paid-up coverage with a new maximum lifetime benefit.
Legislature Passes Regulatory Framework For CO-OPs
The Legislature passed AB 1846, which establishes Consumer Owned and Operated Plans (CO-OPs), as outlined under the Affordable Care Act (ACA). AB 1846 establishes a regulatory framework for CO-OPs so that non-profit organizations can participate in the program and receive federal funding.
CO-OPs are private, non-profit health insurers whose boards of directors are made up of CO-OP customers. Members elect the board of directors. CO-OPs must use their profits to lower premiums; improve health benefits and quality of health care; expand enrollment; or otherwise contribute to the stability of coverage for members. As non-profit health insurers or HMOs, CO-Ops are subject to the same state laws and regulations that apply to all similarly situated issuers.
By January 1, 2014, consumers will be able to buy a CO-OP health plan through an Affordable Insurance Exchange. Consumers may also be able to buy a plan outside of an exchange. A CO-OP could sell coverage to small businesses. Small business owners would be able to go through a new competitive insurance marketplace for small businesses known as a Small Business Health Option Program (SHOP).
On December 8, the Dept. of Health and Human Services (HHS) issued final standards for establishing CO-OP health insurance plans. Eligible organizations seeking to establish a CO-OP can apply for low interest loans to fund start-up costs and meet solvency requirements. The first round of loan applications was due on October 17, 2011 with subsequent quarterly application deadlines through December 31, 2012. To date, 19 non-profits, offering coverage in 18 states, have been awarded over $1 billion dollars.
Legislature Passes Bill to Double Carrier’s Assessment to Fund Fraud Prevention
The Legislature passed Assembly Bill 2138. It would increase the current annual assessment from 10 cents up to 20 cents that health and disability insurers pay per insured. It would give local district attorneys more funding to investigate and prosecute health and disability insurance fraud throughout California.
In May 2009, a report bythe California Dept. of Insurance (CDI) revealed that the health and disability insurance lines had insufficient policy assessments to support a statewide anti-fraud effort. This led to the recommendation to increase the funding that is called for in AB 2138.
From 2007 to 2010, CDI received more than 6,000 health and disability-suspected fraudulent claims statewide, with a fraction of those claims referred to the local district attorneys. They were only able to conduct 656 investigations from these claims, resulting in 221 arrests and 184 convictions with an annual average of $223 million in chargeable fraud.
Physical Therapy Bill Killed
On August 31, 2012, Senate Bill 924, sponsored by the California Physical Therapy Assn. (CPTA), died in the Assembly Committee on Rules. The CPTA says that the bill would have improved access to physical therapy services. Many people are denied direct access to the physical therapist of their choice unless they get a physician’s diagnosis. Patients often endure needless pain while waiting for treatment as well making duplicative visits to physician offices for the same condition that a highly qualified physical therapist can treat.
Dr. James Syms, PT, DSc, ATC, SCS, president of the CPTA, said “Californians took a big step backward with the defeat of SB 924, which would have allowed them access to necessary and affordable health care services…SB 924 had strong bi-partisan support. We acted in good faith and made every effort to work with opponents, which translated into making substantial amendments to the bill. California remains the only Western state without direct access to physical therapy services without delay…By holding SB 924 in the Rules Committee, our policymakers have allowed physicians to gain tighter control on the health care delivery marketplace and sanctioned an increase in unnecessary visits, co-payments and costs to California consumers.”
Download Affordable Care Act Toolkits for Californians
The Department of Managed Health Care (DMHC) is offering toolkits to educate Californians about the changes that have already occurred as a result of the Affordable Care Act in 2014. The four toolkits are targeted to individuals, families, seniors, and small businesses. They contain audience-specific questions and answers as well as a resource guide. The toolkits also include fact sheets on topics such as, when a plan can cancel your coverage, how to file a grievance or appeal, how to keep your coverage through a grandfathered health plan, how to get the most from your health care dollars, and the Pre-Existing Condition Insurance Plan (PCIP). To download the toolkits, visit http://healthhelp.ca.gov/aboutthedmhc/gen/ann/gen_ann_hcr.aspx.
Probation Officer Arrested on Disability Fraud
Rochelle Williams, 36, has been arrested by Detectives from the California Department of Insurance (CDI) with the assistance of the Los Angeles County Probation Department. Williams has been with the Probation Department since 2006 and has been placed on administrative leave. According to detectives, from 2009 to July 2010, she allegedly received $12,000 in disability insurance benefits from an insurer. Detectives discovered that Williams forged her doctor’s signature on claim forms, as well as the necessary signatures of other Los Angeles County Probation personnel. Williams was receiving disability benefits for an alleged back and neck injury. During this benefit period, Williams claimed she was unable to work.
Life Agent Rips Off Elderly Client
According to Investigators from the California Department of Insurance (CDI), Alvin Leroy Black, 75, of Penn Valley, sold seven annuity policies to an 80 year-old victim from July 2001 to August 2004. The deposit amount totaled $1,535,000. He did not fully disclose the terms of the annuities and the victim did not fully understand what she was purchasing. Black earned $87,336 in commissions for transacting the annuities.
In March 2003, he formed a California non-profit corporation, in the victim’s name, without her consent. Without knowing what she was signing, the victim signed documents to change the beneficiary and ownership of all her annuities to a foundation. Black submitted the change of ownership and change of beneficiary forms to the insurance company without her consent. He eventually cashed three of the policies for a total of $224,703.89, causing the victim to incur over $26,919.74 in surrender charges as well as income tax liabilities. Black deposited the money into the foundation’s bank account and used it for his personal gain. The victim never had access to the foundation’s bank account.
He was sentenced to 180 days in Jail and five years of supervised probation; he was ordered to pay $204,777.93 in restitution; and his insurance license was revoked.
Conference on Healthcare Consumerism
Executives from Change Healthcare are sponsoring seminars on healthcare consumerism. The California meeting will be September 9 to12 in San Jose. For more information, visit www.changehealthcare.com.
A Snapshot of Long Term Disability Claims
Top long-term disability insurance carriers paid $9.3 billion in claims in 2011 and 57% of claims were from women, according to a study by the Council for Disability Awareness (CDA). “We continue to see an overall increase in long term disability claims filed over time. The aging workforce and a painfully slow jobs recovery are clearly having an impact. Also, the jobs environment continues to be an obstacle to returning recovering workers to productive employment,” said Barry Lundquist, president of the CDA.
Lundquist added, “When you look at the Social Security Disability Insurance program, the number of workers receiving payments increased to 8.6 million by the end of 2011 – its highest level ever. Given the current trends, analysts predict that the SSDI trust fund will be depleted within five years. The silver lining is that applications and new SSDI claim approvals declined during 2011 after several years of increased applications and approvals.”
The number of insured with private employer-paid and employer-sponsored group long-term disability coverage declined 0.5 %. It’s the third straight year this number has dropped. Contributing factors include the poor economic and jobs climate and a gradual transfer of benefit costs from employers to employees.
The leading cause of disability claims continues to be diseases of the musculoskeletal system and connective tissue, such as arthritis, spine disorders, back pain, sciatica, and osteoporosis – representing 30.5 % of all 2011 claims. New disability claims resulting from complications of pregnancy and childbirth increased in 2011; they now account for more than 9 % of new long-term disability claims for female wage earners.
People over 60 had the largest increase in new approved claims over the past four years. New claims remained steady for those under 40 and those in their 50s. Claims for people 40 to 50 declined over the past four years. For more information, visit http://www.disabilitycanhappen.org.
Improving the Fee-for-Service Model
There has been a growing interest in replacing fee-for-service payments to health care providers, but this payment method is likely to remain the core way of paying physicians. So ensuring the accuracy of these payments will be important to the success of broader payment reforms, according to an article by Paul B. Ginsburg, Ph.D., and president of the Center for Studying Health System Change (HSC), published in the September edition of Health Affairs. “Many health policy analysts envision provider payment reforms under development as replacements for the traditional fee-for-service payment system. Reforms include per episode bundled payment and elements of capitation, such as global payments or accountable care organizations. But even if these approaches succeed and are widely adopted, the core method of payment to many physicians for the services they provide is likely to remain fee-for-service. It is therefore critical to address the current shortcomings in the Medicare physician fee schedule, because it will affect physician incentives and will continue to play an important role in determining the payment amounts under payment reform,” according to the article.
Funded by the Robert Wood Johnson Foundation, the article details the development of the Medicare physician fee schedule, which many private insurers and Medicaid programs use as a starting point for physician payment. It covers shortcomings in the fee schedule; and recent policy changes to improve accuracy. For more information, visit http://www.hschange.org/CONTENT/1310.
Work to Age 70? For Many, That Still Won’t Pay for Retirement
Sixty-four percent of those who were 50 to 59 in 2007 will be ready to retire at 70, according to a study by the Employee Benefit Research Institute (EBRI). Fifty-two percent will be ready at 65. Participating in a defined contribution (DC) retirement plan at age 65 is extremely important due to the multi-year consequences of additional and employer contributions to the plan. EBRI’s research is based on data from millions of 401(k) participants. For more information, visit www.ebri.org.
Wendy Gibson Joins BenefitMall
BenefitMall hired Wendy Gibson to lead the company’s marketing team. Gibson has helped start-ups and established corporations increase their growth through product innovation, business development, sales, brand launches, and marketing campaigns. Gibson has extensive experience in mergers and acquisitions, including integrating employees, companies, and products. For more information, visit http://www.benefitmall.com.
Disability Plan for Loss of Future Earnings
Petersen International introduced a disability insurance product that pays benefits based on an insured’s potential income. The “Loss of Future Earnings Disability” plan features simplified medical underwriting and a true “own occupation” definition. The product may be beneficial for medical students and young physicians who earn modest wages, but whose salary is sure to increase later in their careers. For more information visit www.piu.org.
Fully Insured Vision Plans
Lincoln Financial introduced “Lincoln VisionConnect,” a fully insured vision plan. It is available in combination with Lincoln’s other group benefit products and offers a broad range of vision benefits covering glasses and contacts to routine and preventive care. Members have access to a national network of more than 35,000 providers, with in-network and out-of-network benefits. For more information, visit www.LincolnFinancial.com.
Social Security Planning Tools
Pacific Life is offering Social Security educational tools to help financial professionals start the conversation about retirement income. These non-product specific resources focus on helping clients understand how to maximize their Social Security benefits and plan for additional sources of retirement income. Also included are tools to guide clients through the retirement income-planning process. Financial professionals can contact a consultative wholesaler at 800-722-2333 or visit www.PacificLife.com.
MassMutual To Acquire The Hartford’s Retirement Plans Business
MassMutual entered into a definitive agreement to purchase The Hartford’s retirement plan business. The transaction will significantly increase the size of MassMutual’s retirement business and will strengthen its position as a leading retirement plan provider.
The purchase price is $400 million, subject to adjustment at closing. The transaction, which is subject to regulatory and other approvals, is expected to close by the end of 2012.
The Hartford’s chairman, president, and CEO Liam E. McGee said, “The agreement marks the second of three planned business sales…With The Hartford’s sharper focus on its historical strength in insurance underwriting, along with efforts to improve expense efficiencies, increase capital generation and reduce market risks, we are on the right path to deliver greater shareholder value.” For more information, visit www.thehartford.com.
