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by Leila Morris
• Medicare Program Announces Premium Rates
• Employers’ See Smallest Healthcare Cost Increases in 15 Years
• Wal-Mart to Offer Leading Hypertension Drugs for a Penny
• Administration Issues Proposed Rules Implementing the ACA
• 2012 Report on the $500 billion US Health Insurance Carriers
• Most Doctors Report Cancer Drug Shortages
• Life Settlements See Weak Investor Supply Despite Growing Consumer Demand
• Succession Planning Webina
• My Annuity Manager website
Anthem Blue Cross, University of California Health Form Alliance
Settlement Reached In Death Master Investigation
• Provider Support
• Corporate Rx Program
MOVERS & SHAKERS
• Babikian to Head Transamerica’s Brokerage Division
Medicare Program Announces Premium Rates
The Centers for Medicare & Medicaid Services (CMS) announced monthly actuarial rates for beneficiaries age 65 and over and disabled beneficiaries under age 65 who are enrolled in Medicare Part B. The monthly actuarial rates for 2013 are $209.80 for aged enrollees and $235.50 for disabled enrollees. The standard monthly Part B premium rate is $104.90 for all enrollees for 2013. That is equal to 50% of the monthly actuarial rate for aged enrollees or approximately 25% of the expected average total cost of Part B coverage for aged enrollees. (The 2012 standard premium rate was $99.90.)
The Part B deductible is $147 for all Part B beneficiaries for 2013. If a beneficiary has to pay an income-related monthly adjustment, they may have to pay a total monthly premium of about 35%, 50%, 65%, or 80% of the total cost of Part B coverage.
Employers’ See Smallest Healthcare Cost Increases in 15 Years
In 2012, employers saw the lowest average annual cost increase in healthcare costs since 1997, according to a Mercer survey. Growth in the average total health benefit cost per employee slowed from 6.1% last year to just 4.1% in 2012. Cost averaged $10,558 per employee in 2012. Large employers (500 or more employees) experienced a higher increase (5.4%) and higher average cost. Employers expect another relatively low increase of 5% for 2013. However, this increase reflects changes they plan to make to reduce cost; if they made no changes, cost would rise by an average of 7.4%.
“Over the past decade, employers have figured out how to stabilize cost increases for health benefits through cost-shifting and other cost management techniques. Now we’re seeing a move toward even greater control through defined contribution strategies,” says Sharon Cunninghis of Mercer.
Employers have been moving more employees into low-cost consumer-directed health plans and beefing up their health management programs. Julio Portalatin, president and CEO of Mercer said, “Employers are very aware that, in 2014, when the health reform law’s provisions kick in, they will be asked to cover more employees and face added cost pressure. They’ve taken bold steps to soften the impact and it’s paying off already.”
Success in controlling cost growth in recent years may be contributing to employers’ commitment to providing health coverage. Few expect to terminate their employee health plans in the next five years even though state-based health insurance exchanges will provide another source of health coverage for individuals beginning in 2014. Just 7% of large employers and 22% of small employers (10 to 499 employees) believe it is likely or very likely that they will do so.
In fact, there was a slight increase in the percentage of employers offering coverage in 2012: it rose from 55% to 59% after falling in each of the previous two years. Most of the increase was among the smallest employers (10 to 49 employees), which are the least likely to offer coverage and the quickest to drop it when cost goes up.
Employee enrollment jumped from 13% to 16% of all covered employees in 2012 with a growing number of employers now positioning a high-deductible, account-based consumer-directed health plan as their primary plan or even their only plan. Many employers see these plans as central to their response to health care reform provisions that will raise enrollment. Over the past two years, offerings of CDHPs have risen from 17% to 22% of all employers and from 23% to 36% of employers with 500 or more employees.
Fifty-nine percent of very large organizations (20,000 or more employees) now offer a CDHP. “If we’re not already at the tipping point for CDHPs – and we may well be – at this rate of growth it’s coming soon,” says Cunninghis.
Moving even a small number of employees out of a more expensive plan into a CDHP can result in significant savings for an employer. The cost of coverage in a CDHP with a health savings account is about 20% lower, on average. While employers have been reluctant to offer the CDHP as the only medical plan, attitudes are shifting. Eighteen percent of large employers expect to offer a CDHP as the only plan, up from 11% in 2011. Average enrollment rose from 25% to 32% among large employers that offer an HSA-based CDHP.
The ACA requires that health plans cover, at a minimum, 60% of eligible health plan expenses. Some employers are resetting their health plan value to move closer to that minimum, and saving money as a result. Some employers are offering a lower-cost CDHP in 2012 while others simply raised the deductible of an existing PPO plan. The average PPO in-network deductible reached $1,427 for an individual in 2012. Although large employers typically require much lower deductibles, the average deductible among employers with 500 or more employees rose by about $80 in 2012, to reach $666.
An example of a defined contribution strategy is determining the employer’s contribution to the cost of coverage and requiring employees to pay anything above that amount. Employees can save money by choosing a lower-cost plan. Forty-five percent of the employers say they use or are considering using a defined contribution strategy.
Offering a wellness plan has emerged as an employers’ top long-term strategy for controlling health spending. Seventy-eight percent of large employers say that senior leadership is supportive of health management programs to encourage more health-conscious behavior.
Most employers believe that health management programs are making a difference, but proving the return-on-investment (ROI) remains a challenge. The largest employers are the most likely to have measured the ROI of their health management programs (53% of employers with 20,000 or more employees). More than three-quarters of those say that their programs have had a positive effect on medical plan trend.
Forty-eight percent of large employers with health management programs provided financial incentives or penalties, up from 33% last year. When non-financial incentives (recognition, gifts or lotteries) are included, this figure reaches 54%. In 2012 18% of large-employer health management programs include incentives for achieving, maintaining, or showing progress toward specific health status targets. These incentives were rare in 2011.
With the future of health reform secured by the re-election of President Obama, employers will be focusing on the next generation of cost management strategies. One approach that is increasingly in the spotlight is the use of private exchanges, a private-sector alternative to the state health insurance exchanges. Private exchanges give employers a way to offer employees a broader choice of benefits while allowing carriers to compete for their business and manage their risk. Fifty-six percent of employers would consider a private exchange for active or retired employees.
The use of high-performance (or narrow) provider networks rose from 14% to 23% in 2012 among very large employers (5,000 or more employees) while the use of surgical centers of excellence rose from 18% to 35%. There was also strong growth in the use of medical homes (from 3% to 9%), which also promise to save money by improving care.
Twenty four percent of large employers offer an ongoing plan to retirees under age 65 and just 17% offer a plan to Medicare-eligible employees, which is essentially unchanged from 2011. An additional 15% stopped offering a plan for which new hires will be eligible, but they continue to offer coverage to a closed group of employees retiring or hired before a specific date.
Forty-seven percent of large employers include same-sex domestic partners as eligible dependents, up from 39% in 2010. This varies significantly based on geographic regions, from 73% of employers in the West to 30% in the South.
Very large employers are adopting special provisions concerning spouses of employees with other coverage available. In 2012, 18% of employers with 5,000 or more employees had such a provision in place, up from 15% in 2011. They imposed a surcharge for spouses with other coverage available (14%) or denied them coverage entirely (4%).
Nineteen percent of large employers vary the employee contribution amounts based on tobacco use status or provide other incentives to encourage employees not to use tobacco – up from 17% in 2011. Growth was especially strong among very large employers: 46% of employers with 20,000 or more employees now use an incentive, up from just 35% in 2011. For more information, visit www.mercer.com.
Wal-Mart to Offer Leading Hypertension Drugs for a Penny
Starting in 2013, members of the Humana Wal-Mart-Preferred Rx Plan will have access to 10 hypertension drugs for one cent each when filled at one of the 4,400 Wal-Mart or Sam’s Club stores. A recent study from the Centers for Disease Control and Prevention found that close to 70% of Medicare beneficiaries aged 65 and older have hypertension,
The Humana Wal-Mart-Preferred Rx Plan has grown by more than 50% over the past year and has nearly 1.5 million Medicare beneficiaries enrolled. The new offering makes the following prescriptions more affordable for Humana Wal-Mart-Preferred Rx Plan members living with high blood pressure:
• Metoprolol Tartrate
• Enalapril Maleate
Additional Humana Wal-Mart-Preferred Rx Plan features can be found at http://press.humana.com/news/humana/20121014005054/en/Humana-Walmart-Preferred-Rx-Plan-PDP-Affordable-Prescriptions.
Administration Issues Proposed Rules Implementing the ACA
The Obama administration issued a proposed rule that, beginning in 2014, prohibits health insurance companies from discriminating against individuals because of a pre-existing or chronic condition. Under the rule, insurance companies would be allowed to vary premiums within limits, based only on age, tobacco use, family size, and geography. Health insurance companies would be prohibited from denying coverage to any American because of a pre-existing condition or from charging higher premiums to certain enrollees because of their current or past health problems, gender, occupation, and small employer size or industry. The rule would ensure that people for whom coverage would otherwise be unaffordable and young adults have access to a catastrophic coverage plan in the individual market. For more information regarding this rule, visit http://www.healthcare.gov/news/factsheets/2012/11/market-reforms11202012a.html.
The administration also issued proposed rule outlining policies and standards for coverage of essential health benefits while giving states more flexibility to implement the Affordable Care Act. Essential health benefits make up a core set of benefits that would give consumers a consistent way to compare health plans in the individual and small group markets. A companion letter on the flexibility in implementing the essential health benefits in Medicaid was also sent to states. For more information regarding this rule, visit http://www.healthcare.gov/news/factsheets/2012/11/ehb11202012a.html.
In addition, the administration issued a proposed rule implementing and expanding employment-based wellness programs to promote health and help control health care spending while ensuring that individuals are protected from unfair underwriting practices that could otherwise reduce benefits based on health status. For more information regarding this rule, visit http://www.healthcare.gov/news/factsheets/2012/11/wellness11202012a.html.
Most Doctors Report Cancer Drug Shortages
As many as 98.9% of physicians recently reported cancer drug shortages, according to the Community Oncology Alliance (COA). The surveyed physicians said that, because of drug shortages, the cancer progressed faster in more than 60% of patients and more than 70% of patients had more severe side effects.
Almost half saw more than one patient per day affected by a drug shortage and 58% say the shortage in cancer care drugs is increasing. Over 80% of the patients and over 90% of the practices affected by a cancer drug shortage also experienced a more severe financial burden.
The root cause of the drug shortage is economic, said Ted Okon, executive director of COA. Medicare’s system for reimbursing cancer drugs has created pricing instability. That has resulted in disincentives for manufactures to produce these low-cost but vital generic cancer drugs and invest in manufacturing facilities for these products.
In addition to issues of optimal treatment, drug substitutions made because of a shortage often result in patients facing significantly higher costs. When treating ovarian cancer, a commonly used drug is Leucovorin. The cost to Medicare is $35 per dose; the patient co-payment is $9. But Leucovrin is a generic drug and in short supply, says Dr. Patrick Cobb, an oncologist at the Frontier Cancer Centers and Blood Institute, Billings, Montana, and COA past president. The substitute is a branded drug that is readily available. The cost to Medicare for a dose of the branded drug is $2,000 and the cost to the patient is $520. “This is an unacceptable consequence of the drug shortage crisis,” he said. The complete survey results and comments from respondents are available at http://www.communityoncology.org/site/coa-studies.htm.
Health Plans Prepare to Participate in Exchanges
Spurred by the individual health insurance mandate and the prospect of adding thousands to their rolls, a majority of health insurance leaders are already preparing or implementing plans to participate in health insurance exchanges, according to a poll conducted by KPMG LLP, the U.S. audit, tax and advisory services firm.
More than two thirds of health plan business leaders who participated in poll in September had developed a plan to become exchange ready (39%) or had started implementing required changes and are on schedule to meet the October 2013 open enrollment deadline to participate in an exchange (29%). Seventeen percent had analyzed customer opportunities and developed a product strategy. Eleven percent had not started planning to enter an exchange but said they intend to participate. Just 7% don’t intend to participate in an exchange.
Clearly, health plan leaders are increasing their focus on the retail side of operations and are moving to put into place the operational pieces required to participate in an exchange and interact directly with consumers, said Joe Parente of KPMG’s Healthcare. They are also taking a much closer look at their networks and redefining their strategy to be more competitive.
More than 75% of health plan leaders see their biggest growth coming from consumer-directed or high deductible plans. Cynthia Ambres of KPMG said plans need to focus on differentiating themselves to attract the individual market and small group employers that are likely to migrate to exchanges. Insurers need to decide at what level they want to go after the individual market and how they distribute their products to as many outlets as possible, including state health benefit exchanges, a federally facilitated exchange, private exchanges and direct commerce sites. For more information, visit www.kpmg.com/us).
2012 Report on the $500 billion US Health Insurance Carriers
The U.S. managed health insurance industry includes about 1,000 companies with combined annual revenue of about $500 billion. The industry is highly concentrated with the 50 largest companies generating about 75% of revenue, according to a report by Research and Markets. The rising cost of medical care is driving the demand for health insurance products. Large companies and organizations have advantages in negotiating contracts with health care providers while small companies can compete by providing special coverage plans as part of government programs, such as Medicaid, or for specialized populations. The industry is highly automated and capital-intensive; annual revenue per employee is close to $1 million. For more information, visit http://www.researchandmarkets.com.
Life Settlements See Weak Investor Supply Despite Growing Consumer Demand
While consumer demand for life settlements remains strong, capital inflows remained weak in 2011, according to a study by Conning. Life settlement market volumes remained low in 2011, reflecting weak capital inflows continuing as in the past few years. This is partly due to investor concerns over standards of underwriting and pricing accuracy. “Because of fewer new policies settled – the amount of in-force life settlements actually declined for the first time in 2011 based on death claims and lapses on previously settled policies,” said Scott Hawkins, analyst at Conning.
While consumer demand for this product remains strong, the asset class has been unable to attract enough capital to meet that demand. “The market has centered mainly on acquiring distressed portfolios rather than funding new policy purchases. But we may be seeing early signs of change – The future of life settlements as an asset class seems to be contingent on developing stronger market structures and confirming pricing accuracy for potential investors,” said Stephan Christiansen, director of research at Conning. Yet the life settlements asset class continues to hold interest for investors that are struggling with today’s low interest rate environment. Work is underway to restructure and increase attractiveness to investors. “We are beginning to see early signs of renewed investor interest and commitment in the class for the first time since the financial crisis,” he said. For more information, visit www.conningresearch.com.
Succession Planning Webinar
The National Assn. for Annuities (NAFA) is sponsoring a free educational webinar Friday, November 30 at 7:30 a.m. It will cover what you need to do to preserve the value of your life’s work, your book of business, and the value of your business. Gain insights on the benefits of staging a transfer of your business to a new owner. For more information, visit https://www1.gotomeeting.com/register/607541560
Annuity Manager Website
Guardian Life launched the My Annuity Manager website. Clients can quickly and easily view account information, transfer existing balances, allocate future premiums, change annuity payment allocations, reallocate balances and initiate model-to-model transfers. For more information about Guardian, please visit: www.GuardianLife.com
Anthem Blue Cross, University of California Health Form Alliance
Anthem Blue Cross and University of California Health have formed the California Health Alliance to look at how to improve access to affordable, quality health care for California residents. Among some of the initial areas of focus of this alliance will be the development of accountable care models to better manage costly chronic conditions and the expansion of alternate delivery systems, such as telemedicine to encourage wellness and prevention and, provide access to health care for residents in rural areas. In addition, this new alliance is expected to provide opportunities for research, analysis, literature development and policy recommendations. Visit www.anthem.com.
Settlement Reached In Death Master Investigation
The California Department of Insurance has negotiated a multi-million dollar settlement with John Hancock Life Insurance Company and John Hancock Life and Health Insurance Company along with the state insurance departments of Illinois, New Hampshire, North Dakota, Pennsylvania and Michigan.
The John Hancock companies have agreed to business reforms that will ensure they perform thorough searches to pay out life insurance, annuity, and retained asset account benefits to consumers. John Hancock companies will also pay $13.3 million to the states. California’s share of the settlement is expected to be approximately $1.8 million.
In 2011, the John Hancock companies were the first life insurers to agree to turn over to state unclaimed property officials so that unclaimed property officials could search for beneficiaries. The John Hancock companies also agreed to some prospective business reforms.
This John Hancock companies had selectively used the database to cut off payments to annuity holders, but did not use the database to identify deceased life insurance insureds and pay their beneficiaries.
The settlement requires the John Hancock companies to run the Social Security Death Master File or similar databases monthly to determine whether their life insurance insureds, annuity owners, and holders of retained asset accounts (accounts holding insurance benefits paid to beneficiaries) have died. The Death Master file is a database containing the names and contact information for people who have died in the United States, which life insurers purchased from the Social Security Administration. If a John Hancock company learns that a policyholder died, it must conduct a thorough search for beneficiaries, using contact information in its records and online search and locator tools. If the company does not find a beneficiary, it must transfer the benefit to the appropriate unclaimed property official as required by law.
Commissioner Dave Jones, in coordination with the other lead state insurance regulators, achieved similar settlement agreements with Prudential Life Insurance Company, MetLife, Nationwide and AIG. In those settlements, the insurers agreed to similar business reforms. Those insurers have agreed to pay over $75 million to participating states. California’s share of those settlements is expected to be over $7 million.
Guardian and the Pension Resource Institute, LLC launched The Resource Optimizer, which enables clients to determine plan risks, employer needs, and the opportunity costs of implementing a retirement plan. For more information, visit www.GuardianLife.com.
Corporate Rx Program
LowestMed is offering its Corporate Rx Program to help employers and employees reduce healthcare benefit expenses. The program features a mobile app that employers can offer to their employees to access better pricing options than their health insurance plans and retail prescription prices. For more information, visit www.lowestmed.com.
Babikian to Head Transamerica’s Brokerage Division
The†Life & Protection (L&P) Division of Transamerica announced the promotion of Michael Babikian to president and CEO of Transamerica Brokerage, a distribution unit of L&P. Transamerica Brokerage is a distribution unit that markets and sells life and long term care products through independent general agents, brokers, direct marketers and other distributors.
He previously held the position of executive vice president, chief marketing officer, Brokerage, and Chief Product Officer for L&P. In his prior role, Michael implemented a new approach to product development and created and executed marketing strategies that contributed significantly to the growth of the business.
Before joining Transamerica, Babikian was general counsel to Infinite Source Technologies, Inc., an attorney for the tax law firm of Baker, Olson, LeCroy & Danielian, and a tax specialist in KPMG’s Multi-Family Office.
Babikian completed his undergraduate studies at the University of California at Irvine and received a law degree from the University of the Pacific, McGeorge School of Law. He subsequently earned a Master of Laws in taxation at the University of San Diego and a Master of Business Administration from the University of Southern California. In addition, Babikian is an alumnus of Harvard Business School, having graduated from the program for leadership development. Babikian replaces Marty Flewellen, who was promoted to Chief Distribution Officer of L&P. For more information, visit www.transamerica.com