March 14, by Leila Morris
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HEALTHCARE
• Preferred Networks Are Hurting Independent Pharmacies
• HHS Loosens Insurance Exchange Rules
• Satori Receives Healthcare Savings Patent
• Healthcare Reform Is Driving Up Health Plan Costs
• Medical Care Exerts a Growing Financial Burden
• Is Slower Growth in Medicare Spending the New Normal?
• Kidney Patients Get Equal Access to Private Coverage
LONG TERM CARE INSURANCE
• Why LTC Insurance Is Risky for Life Insurers
• Broker Is Bullish on LTC Insurance
FINANCIAL PLANNING
• Retirement Confidence Slips
REVERSE MORTGAGES
• Younger Homeowners Seek Reverse Mortgages
SALES AND MARKETING
• Associations Offer Selling Opportunities for Brokers
NEW PRODUCTS
• Survivorship Life
• Generating HR Documents Automatically
• Life Concierge Program
LIFE INSURANCE
• The Life Insurance Middle Market Offers Huge Opportunities
Preferred Networks Are Hurting Independent Pharmacies
Four members of the Association of Community Pharmacists Congressional Network (ACPCN) sued HHS and the Centers for Medicare and Medicaid Services (CMS). The pharmacies want CMS to stop approving network schemes that allow select pharmacies to entice enrollees with lower copayments while requiring non-preferred pharmacies to charge higher prices.
In little more than a year, these anti-competitive practices have driven 6.3 million of the 19.5 million Medicare D enrollees from their neighborhood pharmacy to the big box pharmacies. John Rector ACPCN’s Legal Advisor said, “The lockout of competing pharmacies…was never intended by Congress, which guaranteed…that any willing pharmacy would have equal access to the terms and conditions of any Part D network contract.”
The lawsuit charges that CMS has allowed prescription drug plans, run by benefit managers, to create these preferred pharmacy networks. “This lawsuit was filed by independent pharmacies to preserve the right of their patients to fill prescriptions at the pharmacy of their choice and receive the same pricing they would by going to these retail giants,” said Mike James, vice-president of Government Affairs for ACPCN.
Under Medicare Part D’s “Any Willing Provider Law,” a prescription drug plan must permit the participation of any pharmacy that meets the terms and condition of the plan. Seven Medicare Part D preferred retailer networks have been offered since 2011, including the exclusionary plans of Humana-Wal-Mart, AARP, Aetna, CVS-Caremark and Rite-Aid. Meanwhile, independent pharmacies have been denied access to these preferred networks. Plaintiffs say that if these practices are not changed, residents in rural or metro areas could be forced to drive miles to the find the nearest preferred pharmacy to fill their prescriptions at the preferred price.
HHS Loosens Insurance Exchange Rules
Health and Human Services Secretary Kathleen Sebelius announced a final rule to help states set up Affordable Insurance Exchanges. Starting in 2014, these exchanges will allow consumers and small businesses to choose a private health insurance plan and offer the public the same kinds of insurance choices as members of Congress receive.
The framework preserves and, in some cases, expands the significant flexibility in the proposed rules. For example, the final rule allows states to decide whether their Exchange should be operated by a non-profit organization or a public agency; how to select plans to participate; and whether to partner with HHS for some functions. The final rule also offers significant additional flexibility in determining eligibility. It also makes it easier for small businesses to get coverage through the Small Business Health Options Program (SHOP); strengthens consumer protections; and keeps it simple for health plans interested in participating in Exchanges.
The final rule builds on over two years’ work with states, small businesses, consumers and health insurance plans. HHS says that public input was integral to the developing the final rule.
The policies offer states substantial flexibility as they design a marketplace that works for their residents. The policies offer guidance in two key areas:
• Setting standards for establishing exchanges, setting up a Small Business Health Options Program (SHOP), performing the basic functions of an exchange, and certifying health plans for participation in the exchange.
• Establishing a streamlined, web-based system for consumers to apply for and enroll in qualified health plans and insurance affordability programs.
For more information on exchanges, including fact sheets, visit http://www.healthcare.gov/exchanges.
Satori Receives Healthcare Savings Patent
Satori World Medical received a patent for its Health & Shared
Wealth Program (http://satoriworldmedical.com/content.php?id=10), which calculates savings when a patient selects the Satori Global Network versus a U.S. based hospital and physician for a surgical procedure.
Healthcare Reform Is Driving Up Health Plan Costs
Some employers are already finding that complying with the Patient Protection and Affordable Care Act (PPACA) is driving up costs for their group health plan. The majority expects to pass the price increases on to employees, according to a survey by Willis Group Holdings, a global insurance broker.
Fifty-six percent of employers that have quantified the cost of complying with the PPACA, say it has increased the cost of their plans. More than 15% say that the cost increase is 2% to 5%. More than 15% say it’s more than 5%. Employers say that their most significant cost drivers are requirement to provide coverage to adult child coverage up to age 26 and the removal of the annual/lifetime limits for essential health benefits.
More than half expect similar employers to pass more costs for dependent coverage to employees. One-third of employers expect similar employers to reduce coverage to the lowest-cost package to avoid the pay-or-play penalty. Nearly two-thirds of employers expect employee contributions to increase. A majority of employers plan to expand their wellness programs.
In the next 12 months, 40% of employers will review strategies for communicating with employees about their benefits. Only one-third of employers that wanted to hold onto grandfathered plans have done so. The rate of losing grandfathered status has far out-paced the Department of Health & Human Services’ expectations for 2012. This suggests that employers have had to make many plan changes to offset cost increases.
Jay Kirschbaum of Willis said, “Despite the increased costs, employers continue to value providing medical benefits to their employees. They do not plan to eliminate that benefit, but are considering the possibility that the state exchanges will provide a potential option.” For more information, visit http://www.willis.com.
Medical Care Exerts a Growing Financial Burden
In the first six months of 2011, one in three people were in a family experiencing financial burden of medical care. One in five were in a family having problems paying medical bills; one in four were in a family paying medical bills late; and one in 10 were in a family that had medical bills they could not pay. Almost 24% of children were in families that had problems paying medical bills compared to 21% of adults aged 18 to 64, 10% of adults aged 65 to 74, and 7% of adults aged 75 and over. For more information, visit http://www.cdc.gov/nchs/data/nhis/earlyrelease/financial_burden_of_medical_care_032012.pdf
Is Slower Growth in Medicare Spending the New Normal?
Medicare spending has slowed due to the economic downturn. But other factors may slow Medicare spending over the long term, such as cost-control efforts and the potential for broader provider payment reform, according to an analysis by researchers at the Center for Studying Health System Change (HSC), published online in the New England Journal of Medicine.
The Congressional Budget Office expects Medicare spending, per enrollee, to grow more slowly than the overall economy over the next decade. Researchers point to a new Medicare payment policy and looming reductions in the growth of Medicare payment rates for almost all categories of providers other than physicians as enacted in the Affordable Care Act (ACA). While some have questioned the sustainability of the ACA reductions, merely undoing the ACA cuts would mean reverting back to the old normal of unsustainably high growth in Medicare outlays, according to the article.
The ACA planted the seeds for accountable care organizations (ACOs). It bundled payment for episodes of care, patient-centered medical homes, and incentives for reducing re-admissions. Now those seeds offer a way forward, the authors write. For more information, visit http://www.hschange.Fore org/CONTENT/1278/.
Kidney Patients Get Equal Access to Private Coverage
The Dept. of Health and Human Services clarified that the Medicare Secondary Payer (MSP) provision will apply to small group plans sold in the new health insurance exchanges. Under law, MSP allows those diagnosed with kidney failure to maintain their group health plan private coverage for 30 months before enrollment in Medicare. The rule clarifies that they will be granted the same right to maintain private coverage for up to 30 months as people with group health coverage purchased outside of the exchange. It ensures equal access for patients end stage renal disease who chose to purchase insurance through an exchange.
The Dialysis Patient Citizens (DPC) noted that this 30-month period is crucial for many patients because it minimizes interruptions in care during the critical transition to dialysis or a transplant and it allows patients to continue using their preferred providers.
Why LTC Insurance Is Risky for Life Insurers
Long-term care (LTC) insurance is one of the riskiest products that U.S. life insurers offer. This risky environment is underscored by Prudential’s decision to join a growing list of large insurers to exit the LTC market, according to an analysis by Fitch Ratings.
Regulations that protect LTC policyholders from unexpected price increases limit the insurers ability to re-price LTC policies. Insurers that have been overly optimistic on initial pricing assumptions are seeing significantly lower returns. Insurers have raised prices on the policies in order to fill the gap. But a number of states have enacted rate stabilization regulation, which makes it clear that it will not be easy to increase premiums.
Higher than expected claims and historically low interest rates have hurt LTC results. Fitch says that LTC business is vulnerable to interest-rate risk because of the long-tail nature of the product and future renewal premiums. Low rates continue to curb the investment income that’s needed to help fund LTC benefits. “We believe mispricing of the LTC product will continue to weigh on life insurers’ earnings and capital, but…in-force individual LTC business accounts for less than 2% of industry reserves and premiums.” For more information, visit www.fitchratings.com.
Broker Is Bullish on LTC Insurance
While carriers like Prudential are getting out of the long-term care business, LTC Financial Partners LLC (LTCFP) says it plans to offer more choices for individuals and employee groups. Cameron Truesdell, LTCFP’s CEO said, “In a time of economic transition, it’s logical for carriers to gravitate toward their strength. For Prudential that appears to be the group market. Other carriers have gone in the opposite direction.”
Truesdell said, “The choices we offer are getting more substantial all the time. That’s true for individual policies as well as our multi-life offerings for groups.” The offerings are from multiple insurance carriers including the following:
• John Hancock
• MedAmerica
• LifeSecure
• United of Omaha Life
• Mutual of Omaha
• Transamerica
LTCFP and MedAmerica recently announced a distribution agreement to offer a broad suite of long-term care insurance products with reduced underwriting and multi-life discounts to employee groups, called “LTC Complete Worksite Solutions.”
“This is an example of the bullish trend of our business,” Truesdell says. “We are constantly building our policy options and the way we deliver and support them.” “Long-term care protection will be available through us, at very affordable rates, in a number of innovative ways, such as LTC riders to life insurance policies,” he added. For more information, visit http://www.ltcfp.com.
Retirement Confidence Slips
Americans’ confidence in their ability to retire is the lowest it has been in two decades, according to a survey by the Employee Benefit Research Institute. Just 14% are very confident that they will have enough money to live comfortably in retirement –- down from a peak of 27% in 2007. Only 14% of Americans are very confident they will have enough money to live comfortably in retirement. Workers with the most debt have the least confidence.
Forty-two percent of workers say job uncertainty is the most pressing financial issue facing most Americans. However, retirement confidence is measurably higher among workers who’ve taken positive financial actions, including saving in an employer-sponsored plan, getting advice from a financial professional, and calculating retirement.
Sixty percent of workers have less than $25,000 in total household’s savings and investments, excluding the value of their primary home and any defined benefit plans.
Sixty-six percent of workers say they or spouse has saved for retirement, a continuing decline from the 75% measured in 2009. In 1991, 11% of workers expected to retire after 65. That number has grown to 37% by 2012. Half of retirees say they left the work force unexpectedly due to health problems, disability, or changes at their employer, such as downsizing or closure. For more information, visit www.ebri.org.
Younger Homeowners Seek Reverse Mortgages
Since the collapse of the housing market in the U.S, more younger people are seeking reverse mortgages, according to a study by the MetLife Mature Markets Institute. Boomers age 62 to 64 represent one-in-five prospective borrowers of reverse mortgages, which allow people to draw on home equity without monthly mortgage repayments. The average age of those who have gone through reverse mortgage counseling is now 71.5 years.
The Dept. of Housing and Urban Development (HUD) reports a similar decline in the average age of borrowers to age 73. Forty-six percent of homeowners who are considering a reverse mortgage are under 70. The percentage of 62- to 64-year-olds who are prospective borrowers has increased 15% since 1999, despite the fact that younger applicants have had lower available loan limits.
As part of mandatory counseling for all reverse mortgage applicants, HUD-approved counselors collected the data for the study. Sixty-seven percent of recent counseling clients have a conventional mortgage that will need to be repaid if they decide to take out a reverse mortgage. Twenty-seven percent have both housing and non-housing debt. Borrowers with sizable existing debt may deplete home equity rapidly.
Sandra Timmermann, Ed.D., director of the MetLife Mature Market Institute said, “Since reverse mortgages do not have income requirements and other forms of credit have become less accessible, these loans will become more attractive. It is worth noting that HUD stated recently that lenders may conduct financial assessments of applicants to ensure that they have the ability to meet their loan obligations. There is a good chance home equity will evolve from being an emergency measure to one that is part of a strategic retirement plan.” said Barbara Stucki, Ph.D., vice president for home equity initiatives for the National Council on Aging.
The report also highlights the following:
• A Reverse mortgage is no longer a one-size-fits-all solution because of recent changes including lower loan limits, a fixed-rate HECM, and a new loan option.
• Some consumers assume that a fixed rate is preferable to an adjustable rate HECM. But a fixed rate HECM can be more costly and offer less flexibility. In addition, lenders can now offer reverse mortgages with minimal upfront costs, which can make the loan attractive for more short-term needs.
• By transferring existing debt from their home to the reverse mortgage loan obligation, borrowers will only defer these mortgage payments (with interest) until they die or move out. Borrowers must also meet all of their other reverse mortgage obligations including making timely property tax and homeowners insurance payments.
• Borrowers may benefit from involving other professionals in decision-making, including legal, financial, and tax advisors. They may also consult with medical advisors to provide input on health challenges that could make it hard to stay at home.
• Reverse mortgage borrowers can stay in the home as long as they wish. But the loan will have to be repaid sooner or later. Financial advisors, senior advocates, housing specialists, and other experts will need to develop appropriate exit strategies to guide consumers through these transitions.
• Homeowners can use home equity to pay for home repairs or pay off tax burdens. In some situations, a reverse mortgage can forestall a foreclosure.
• Using home equity as more than a last resort can help keep cash shortfalls from becoming major problems, but the growing trend toward borrowing at earlier ages raises concerns. Aging Baby Boomers, who are likely to live longer than their parents, may not have saved enough for their additional retirement years. Consequently, seniors they may need to preserve a portion of their home equity. For more information, visit www.MatureMarketInstitute.com.
Associations Offer Selling Opportunities for Brokers
More than one-third of the members of associations and affinity group are receptive to getting insurance through the association, which reveals an important opportunity, according to a MetLife survey. David Brennan of MetLife said that many Americans are looking for financial protection in the wake of healthcare reform, the economic recession, and a shift to more employee responsibility for benefits. Having customized tactics and a deep understanding of the marketplace can help convert those potential customers into actual purchasers, he added.
The study analyzed eight association types – unions, credit unions, lobby/political associations, professional associations, government associations, alumni groups, special interest/social/recreational groups, and affinity groups. The study reveals the following:
• 28% of members who joined an association looking to purchase coverage are seeking life insurance and 25% are seeking health insurance.
• Half of members who are interested in getting insurance through an association say the main reason is to take advantage of rate advantages. Having the organization’s leadership review the insurance product can help generate members’ interest.
• The consumer climate demands a multi-channel approach to broker-client communications. Forty percent of association members prefer to find out about insurance offerings by working with an agent in person over the phone. Thirty-nine percent prefer to get information through the mail and 27% prefer e-mail. For more information, visit www.metlife.com.
Survivorship Life
Aviva’s new indexed life insurance product offers financial protection for small businesses, blended families, and people whose estate tax planning needs may change. Aviva USA’s Survivorship Builder combines protection for more than one person on a single policy. It offers customers multiple solutions during various stages of their lives. Survivorship life insurance can help survivors handle a sudden tax burden, replace income, gift assets to grandchildren and keep the family business in the family. For information, visit www.avivausa.com.
Generating HR Documents Automatically
Arch is offering software that enables users in the U.S. and U.K. to generate documents like employee contracts and employee transfers automatically. Since the data comes directly from the SAP solution, documents are consistent and less prone to human error. Arch says that the software saves significant money, time, and paper. For more information, visit http://www.arch-global.com.
Life Concierge Program
ING has introduced the ING Global Life Concierge Program to help agents, employers, and policyholders understand the ING Indexed Universal Life-Global Plus product and self-owned life and retirement (SOLAR) insurance arrangements. With SOLAR insurance arrangements, an employer can pay for all or some of the annual premiums, which may be tax-deductible for the business. These arrangements may also offer employees tax-deferred wealth accumulation as well as supplemental retirement income and death benefits. The concierge program is designed to help agents and their clients with ING IUL-Global Plus policy questions, specifically those involving retirement income distributions and tax considerations. For more information, visit http://ing.us.
The Life Insurance Middle Market Offers Huge Opportunities
There is a $10.2 trillion life insurance protection gap for the middle market, which is a huge opportunity for life insurers, according to a study by Conning Research & Consulting. “Over the past five years the missed opportunity in the middle market…has grown significantly,” said Terence Martin, director at Conning Research & Consulting.
The financial crisis and the recession have had far-reaching effects on income, asset values, and debt levels, all of which increased the size of this missed opportunity. In addition, the rising cost of healthcare, especially in the middle market, may create an emerging need for life insurance planning.
Stephan Christiansen, director of research at Conning, said that life insurers have significant challenges penetrating the middle market, such as distribution cost, and access. But these challenges may finally be eased with the Internet and social media. In addition, predictive modeling and a more automated underwriting process hold promise for insures that struggle with the cost of underwriting. As insurers seek growth in the recovering economy, they will analyze the technology commitment that’s needed to succeed in the middle market. The report, “Opportunities in Reaching the Middle Market with Life Insurance” is available for purchase from Conning Research & Consulting by calling 888-707-1177 or by visiting the company’s web site at http://www.conningresearch.com.
