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Thursday April 24th 2014

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Policymakers Overlook A Major Cost Driver

 HEALTHCARE
• Policymakers Overlook a Major Cost Driver
• DOL Delays Exchange Coverage Notice
• HHS Allows Exclusions to Contraceptive Mandate
• States Fall Behind in Enacting Market Reforms
• Medicare’s Bundled Payment Initiative
• Health Account Balances Resume Growth
LONG TERM CARE INSURANCE
• Consumers Want Lower Cost LTC Coverage
NEW PRODUCTS
• Tool Predicts Healthcare Expenses in Retirement
• Life Insurance App
• ACA App
EVENTS
• Retirement Summit
FINANCIAL PLANNING
• Retirement Assets to Double by 2020
• ING Retirement Plan Clients Get a $5.2M Settlement
• Pension Plan Rules Drive Annuity Choice
IN CALIFORNIA
• Make Your Voice Heard!
• Tool Helps Low-Income Residents Find Coverage

HEALTHCARE

Policymakers Overlook a Major Cost Driver

KarenIgnagni

AHIP President & CEO – Karen Ignagni

Some physicians who don’t participate in health insurance networks are charging patients 10 times the Medicare reimbursement for the same service in the same geographic area. In some cases, they charge nearly 100 times more, according to a report from America’s Health Insurance Plans (AHIP).

For example, in New York, a physician billed a patient $115,625 for lumbar spinal fusion, which is 62 times the Medicare fee of $1,867. Similar examples were found in all 30 states and there are many examples of even higher variations in charges. The report is based on data gathered from Dyckman & Associates

AHIP says that public policy discussions focus how much insurers pay for these services while ignoring what out-of-network physicians are charging patients. AHIP wants policymakers to look at how these charges compare to in-network fees as well as fees charged for similar services in other countries.

AHIP President and CEO Karen Ignagni notes that consumers who get services from in-network providers usually have lower cost sharing, which has saved billions of dollars in out-of-pocket costs and premiums over the decades. For more information, visit www.ahip.org.

DOL Delays Exchange Coverage Notice

According to a CAHU report, the Dept. of Labor (DOL) has given official notice it will not be able to meet the fast approaching March 2013 deadline to release the Notice of Exchange Coverage Options that all employers are mandated to provide to all employees. DOL expects the notices to go out in the late summer or fall of 2013, which will coordinate with the open enrollment period for exchanges. DOL says that it is delaying to notice to coordinate with HHS’s educational efforts as well as IRS guidance on minimum value.

HHS Allows Exclusions to Contraceptive Mandate

The Department of Health and Human Services says it will allow religious organizations to opt out of the mandate to provide free contraception to employees, including abortifacient drugs. According to a statement by The Heartland Institute, “Nothing significant has changed. Religious employers will still be required, by law, to pay an insurance company that will provide sterilization, contraceptive, and abortion inducing drugs.”

A year ago, the administration announced a compromise under which health insurance companies would be required to provide free contraceptive coverage to female employees of religious institutions at the insurance companies’ own expense. Under the most recent compromise, insurers are still required to provide coverage at no cost to the employer or employee. To pay for this coverage, the insurers would get a credit against fees they owe for offering their policies for sale on federal insurance exchanges. This compromise is the subject of a second round of a proposed federal rulemaking.

States Fall Behind in Enacting Market Reforms

California has made a lot of progress in passing state laws to enact health reform. But the same cannot be said for many other states, according to a report by The Commonwealth Fund. The Affordable Care Act includes numerous consumer protections designed to improve the accessibility, adequacy, and affordability of private health insurance. But, without new legislation, some states face limitations in fully enforcing these reforms.

To date, only one state passed new legislation on all of these protections while an additional 10 states and the District of Columbia passed new legislation or issued a new regulation on at least one protection.

The following is California’s record of passing legislation to enact the reforms:

Guaranteed issue & rating requirements – The state passed a new law on the 2014 market reform. State action only applies in the small group market. In 2012, California passed new legislation that prohibits health care service plans and commercial carriers in the small-group market from varying rates using any factors other than age, geographic area, and family composition.
Essential health benefits, preexisting condition exclusions, waiting periods, & Actuarial value – The state passed a new law on the 2014 market reform.
Out-of-pocket costs – No law has yet been passed.

For more information, visit www.commonwealthfund.com.

Medicare’s Bundled Payment Initiative

More than 500 organizations will begin participating in the Bundled Payments for Care Improvement initiative made possible by the Affordable Care Act. The Centers for Medicare & Medicaid Services (CMS) will test how bundling payments for episodes of care can result in more coordinated care and lower costs for Medicare.

The initiative includes four models of bundling payments, varying by the types of health care providers and services. Depending on the model type, CMS will bundle payments for services from hospitals, physicians, post-acute facilities, and other providers during an episode of care. The goal is to to improve health outcomes and lower costs by getting providers to work together .

Participating providers will offer discounts on payments for the episode of care. Meanwhile, provider partners will work together to reduce readmissions, duplicative care, and complications. “The objective…is to improve the quality of health care delivery for Medicare beneficiaries while reducing program expenditures, by aligning the financial incentives of all providers,” said Acting Administrator Marilyn Tavenner. Click here to see the list of awardees.

Health Account Balances Resume Growth

Health savings accounts (HSAs) and health reimbursement arrangements (HRAs) are showing renewed growth after a slight drop during the recent recession. The average account balance has increased over the past two years, according to research by the Employee Benefit Research Institute (EBRI).  Average account balances leveled off in 2008 and 2009. Balances fell slightly in 2010, but increased in 2011 and 2012. Specifically, average account balances rebounded to $1,470 (up 9% from 2010) and to $1,534 in 2012 (up 4%).

In 2012, $17.8 billion in HSAs and HRAs, was spread across 11.6 million accounts. This was up from 2006 (when there were 1.3 million accounts with $873.4 million in assets) and 2011 (when 8.5 million accounts held $12.4 billion in assets).

The report also found the following:
• Men have higher account balances.
• Older people have higher account balances.
• Account balances increase with household income.
• Education has a significant impact on account balances independent of income and other variables.
• Rollover amounts increased with household income and education.
• Individuals with single coverage rolled over a slightly higher amount than those with family coverage in 2012.

Paul Fronstin of EBRI said, “Individuals who smoke have more money in their accounts than those who do not smoke. There was very little difference in account balances by level of exercise. Next to no relationship was found between either account balance or rollover amounts and various cost-conscious behaviors. The full report is published in the January 2013 EBRI Issue Brief no. 382. For more information, visit www.ebri.org.

LONG TERM CARE INSURANCE

Consumers Want Lower Cost LTC Coverage

Consumers are increasingly interested in the less expensive LTC policies, according to a survey by John Hancock. Thirty percent of consumers prefer a lower cost LTC policy over a traditional policy. That compares to 14% of consumers in a previous survey. Thirty-six percent of consumers age 45 to 51 prefer the lower cost policies compared to 11% in the previous survey.

Laura Vail Wooster of John Hancock Long-Term Care Insurance said, “This study confirmed our belief that interest in LTC insurance would rise quite significantly, particularly among younger buyers, when less expensive alternatives are offered and explained…Lowering the cost of LTC insurance is critical to making this coverage more accessible to a broader population. Traditional LTC insurance options have become more expensive over the years, so the industry must keep pursuing innovative solutions to help more Americans prepare for and cover at least some of this cost.”

On behalf of John Hancock, the Forbes Consulting Group surveyed 300 people, aged 45 to 65, with a household income above $70,000 and investable assets above  $100,000.

The policies that consumers looked at were the same except for the benefit increase option and corresponding price. They offered a three-year benefit totaling $164,000 and a 90-day elimination period. The traditional policy reflected a CPI inflation option, which grows on a compounded basis according to increases in the Consumer Price Index. The lower cost option reflected an option that grows gradually based on the performance of the general account that funds the policy.

For each example, people were shown John Hancock’s actual annual premium costs based on their age. They were then shown illustrations of how potential benefit increases could differ between the two policies and how the respective increases related to the anticipated increase in the cost of care. Consumers indicated the following preferences:

• 64% are interested in basic coverage at an intermediate price. They would be willing to pay some LTC costs out-of-pocket.
• 22% prefer full coverage at the highest price.
• 14% prefer catastrophic coverage at the lowest price. They would be willing to pay a significant amount of the initial cost of LTC out-of-pocket.

For more information, visit johnhancock.com.

NEW PRODUCTS

Tool Predicts Healthcare Expenses in Retirement

HealthWealthLink is now available in a new software platform or iPad app. It helps advisors determine how much healthcare expense their clients can expect in retirement and how to pay for it. For more information, visit http://www.hvsfinancial.com/medicare-2.

Life Insurance App

Manulife’s new InsureRight app teaches consumers more about insurance and helps them estimate how much life insurance they may need.  You can download the app from BlackBerry World or iTunes or InsureRight.ca.

ACA App

HealthCare Impact Associates LLC introduced “Health E(fix).” It provides complete data integrity, analytics, compliance, and audit capabilities for health benefit management under ACA regulations.  For more information, visit www.healthefx.us.

EVENTS

Retirement Summit

The Investment News Retirement Income Summit will be held May 13 to 14 in Chicago. For more information, visit www.investmentnews.com

FINANCIAL PLANNING

Retirement Assets to Double by 2020

By 2020, investible retirement assets of U.S. households aged 55+ will nearly double to $22 trillion, according to new LIMRA research. “There is a huge opportunity for the financial services industry to help Americans identify how much income they will need in retirement, develop a plan for investing their portfolio to generate income, while continuing to grow their assets,” said Jafor Iqbal, associate managing director, LIMRA Retirement Research.

In 2010, U.S. households age 55+ held $12 trillion in assets. Based on Census projections, these assets will grow to $22 trillion, which will be invested directly into products for generating retirement income. Fewer Americans receive income from an employment-based pension plan. Many more retirees will have most of their retirement assets invested in retirement plans. Almost two-thirds of these assets will be directed towards products that will generate income for them in retirement.

Iqbal said, “With such a large demand, advisors may have to provide income product solutions more efficiently. We are witnessing financial services firms changing the structure and business model to accommodate more customer-centric information and process, promoting uniform tools and services across the institutional and retail businesses to capture rollovers, emphasizing smooth transition of assets from the savings in institutional plans to retail side of the business where most retirement income products and solution are typically available.” For more information, visit www.limra.com.

ING Retirement Plan Clients Get a $5.2M Settlement

The Dept. of Labor announced a settlement agreement with ING Life Insurance and Annuity Co. Retirement plan clients who’ve been affected will receive $5.2 million in payments. DOL said that ING had not disclosed that it kept the investment gains it achieved when failing to process requested transactions in a timely manner. DOL said the company violated the Employee Retirement Income Security Act by failing failure to disclose its policy on reconciling transaction processing errors to retirement plan clients. Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi said, “Failure of a plan fiduciary to disclose the revenue it received from managing retirement plans is a disservice to employers who are providing this benefit to their workers.”

Acting Secretary Seth D. Harris said,” This Labor Department settlement will restore funds to about 1,400 retirement plans…All of us who are planning for retirement deserve to know how our savings and investments are being handled, how much is being charged in fees, and how much these transactions impact final account balances.”

The agreement requires ILIAC to disclose its policy on how it corrects transaction processing errors to plan clients covered by ERISA and to adopt procedures for terminating abandoned plans through the Employee Benefits Security Administration’s Abandoned Plan Program. In addition, the company agreed to pay a $524,508.73 civil penalty. The $5.2 million represents net gains kept by the company as a result of how it handled certain transaction processing errors from 2008 to 2011. Click here for more information about the ING settlement.

Pension Plan Rules Drive Annuity Choice

Why do some retiring workers with a pension choose to take a stream of lifetime income while others cash out their entire benefit in a lump-sum distribution? Amidst growing concerns about workers outliving their retirement savings, this has emerged as a key issue. It depends, to a large extent, on whether the pension plan allows lump-sum distributions, according to research by the Employee Benefit Research Institute (EBRI). Lump-sum distributions are the rule rather than the exception.  From 2005 to 2010, pension plans with no options for lump-sum distributions distribution had annuitization rates very close to 100%. In contrast, the annuitization rate was only 27.3% for defined benefit and cash balance plans with no restrictions on lump-sum distributions.  “Whether people annuitize depends, to a large extent, on whether or not they are allowed to choose some other option,” said Sudipto Banerjee of EBRI.

Apparently, differences defined benefit plan rules or features create very different annuitization rates (the rate at which workers choose to take their benefit as an annuity). In fact, the annuitization rates vary based on how much plan rules restrict the consumer’s ability to choose a partial or lump sum distribution.  When choosing a lump-sum distributions, the consumer takes on the responsibility for managing the distribution as well as the investment risk. The consumer arranges their own income flow from those funds in retirement.

Today, most defined benefit pension plans offer some type of single/lump-sum option, in addition to the traditional annuity choice. EBRI notes that defined benefit pension plans offered mainly one distribution choice through the 1960s: a fixed-payment annuity. In the 1970s, some defined benefit plans offered full or partial single sum distributions. As hybrid pension plans expanded in the 1980s, so did distribution options.  The full report is published in the January 2013 EBRI Issue Brief no. 381. For more information, visit www.ebri.org.

IN CALIFORNIA

Make Your Voice Heard!

CAHU is sponsoring day at the Capitol events from May 14 to 15. For more information, visit info@cahu.org

Tool Helps Low-Income Residents Find Coverage

WE Connect has re-launched its bilingual website and popular online screening tool, the Web Connector. It user-friendly experience to help low-income families determine eligibility for more than 10 critical programs.

The service offers the following:
• WEb Connector – In four easy steps users can determine eligibility for state and federal programs. The tool now screens for Medi-Cal.
• Resource Map – Enter a zip code to locate free resources in your neighborhood including tax preparation sites and events, job fairs, health clinics and health care enrollment fairs.
• WE Connect Supplement – The state’s most comprehensive bilingual guide about public and private programs for families. One and a half million copies will be distributed through a network of Spanish-language newspapers and more than 5,000 partner organizations. For more information, visit www.weconnect.net.