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Thursday April 17th 2014

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Sun Life Drops Annuities to Focus on Employee Benefits

EMPLOYEE BENEFITS
• Sun Life Drops Annuities to Focus on Employee Benefits
• How to Reduce Presenteeism
• Reducing the Incidence of Short Term Disability Claims
• Younger Workers Value Retirement Planning
INDUSTRY OUTLOOK
• The Top Five Reasons to Use Captives
IN CALIFORNIA
• SeeChange to Offer A Private Exchange
• Integro Acquires The Rule Group
• Carriers Request Rate Increases
HEALTHCARE
• Employer Coverage to Remain Strong Post Reform
• Exchanges Will Offer Better Coverage Than Medicare
• Americans Support Expanded Mental Health Coverage
• Seniors Should Look Beyond Premiums in Medicare Plans
LIFE INSURANCE
• These Groups Have the biggest Gaps in Life Coverage
• Life Insurer Investments Are Under Pressure
NEW PRODUCTS
• Retirement Plan
• Discount Vision and Hearing Plans

EMPLOYEE BENEFITS

Sun Life Drops Annuities to Focus on Employee Benefits

Delaware Life Holdings will purchase Sun Life’s domestic U.S. annuity business and certain life insurance businesses for $1.35 billion. The transaction will consist primarily of the sale of 100% of the shares of Sun Life Assurance Company of Canada (U.S.), which includes Sun Life Financial’s domestic U.S. variable annuity, fixed annuity, and fixed index annuity products, corporate and bank-owned life insurance products, and variable life insurance products. The transaction is expected to close by the end of the second quarter of 2013 subject to regulatory approvals and customary closing conditions.

Dean A. Connor, president and CEO of Sun Life Financial said, “We will continue to invest in our U.S. employee benefits business, which is already a top 10 player and in our growing voluntary benefits business. We have made excellent progress in growing of these businesses in 2012. We will also continue to support growth in MFS, our highly successful investment manager, which has a large U.S. presence and over $300 billion of assets under management globally.”

Sun Life Financial estimates that the transaction will result in a reduction in book value of $950 million at closing. It is estimated that the impact of the transaction on Sun Life Financial is approximately ($0.22) per share of earnings in 2013, assuming actual experience in line with actuarial best estimates.  Employees of Sun Life Financial U.S. in Wellesley, Massachusetts; Lethbridge, Alberta; and Waterford, Ireland will continue to support the acquired businesses, which will be renamed “Delaware Life Insurance Company.” For more information, visit www.sunlife.com/PresentationsForInvestors.

How to Reduce Presenteeism

A white paper from The Standard explains how employers can address presenteeism, which is defined as the decline in workplace productivity due to a medical condition. In this recovering economy, employers and their workers are doing more with less, which stretches employees to their limits. The white paper outlines five solutions:

• Work with a disability carrier that provides on-site assistance.
• Make sure that the disability carrier you choose offers quick and effective ergonomic interventions with equipment to improve workers’ productivity.
• Improve employer pharmacy programs to reduce the effects of medical conditions that can contribute to lost productivity.
• Integrate the company’s health management programs.
• Provide health management programs such as wellness initiatives, employee assistance plans, and disease management.

To download the white paper, visit www.workplacepossibilities.com.

Reducing the Incidence of Short Term Disability Claims

Identifying at-risk employees and providing nurse intervention can reduce the incidence of disabling illnesses and injuries, according to a study sponsored by Cigna. The study was published in the December 2012 issue of the Journal of Occupational and Environmental Medicine. Intervention reduced the short-term disability incidence rate to 17% among at risk employees compared to 20% of those not in the intervention group.

A nurse-led intervention included early identification of employees at high risk for future short-term disability, outreach to the employees, clinical assessment, and a range of disability absence prevention strategies. For more information, visit www.cigna.com.

Younger Workers Value Retirement Planning

The stereotype of younger workers is that they waste their money on immediate rewards like iPads and coffee at Starbucks while ignoring their financial future. But a study by Prudential shows the opposite — the youngest generation in the workforce is highly motivated to save for retirement and would plan ahead if they knew more about retirement benefit options from their employers.

Millennials, born in 1991 or later, recognize that contributing to their retirement is a must, even in a recession. Eighty-three percent say that they want to save more when they see what can happen to people who don’t save enough for retirement.

Millennial workers put saving for retirement ahead of leisure spending or saving for vacation or a house. At the same time, there are clear gaps in how much Millennial workers know about retirement planning. They understand retirement planning as a concept, but say that employer-sponsored plans are complex and overwhelming.

The survey suggests that interactive educational solutions could motivate Millennial workers to contribute more to their retirement savings.  Plan sponsors should offer personalized, high-tech solutions since this young generation adapts well to emerging technologies. For more information, visit http://www.news.prudential.com.

INDUSTRY OUTLOOK

The Top Five Reasons to Use Captives

by Brad Barros

As the Fiscal Cliff draws near, many businesses are preparing for uncertainty by building pre-tax reserves through a time-tested structure known as a “captive” insurance company.  While a majority of public companies and many well-informed business owners use this valuable planning and risk management solution, some business professionals are unaware of why they should consider  a captive.

Captives are often beneficial for privately owned businesses with $5 million to $250 million in revenues, whose owners want to build insurance protection and wealth outside of their operating company.

Captives provide critical protection for businesses that might otherwise struggle or fail in an adverse economic climate. A captive can be owned by the shareholders. It can also be partly owned by key employees, so that their interests are aligned with their employer’s long-term objectives.

There are many reasons why businesses can use captives; below are the top five:

1.    Businesses develop important protection by establishing reserves for uninsured and underinsured risks.
2.    Captives use the whole dollar. When compared with self-insurance (retained earnings or after-tax traditions) a business may be able to pay tax-deductible premiums into its insurance company and garner further tax benefits as mandated by congress.
3.    As reserves and surplus grow, a business may be able to save insurance costs by raising its deductibles or lowering coverage from third-party insurance companies.
4.    Captive reserves and surplus are protected statutorily.
5.    Captives can be used to lower the cost of traditional casualty insurance by acquiring coverage on a wholesale basis, thereby eliminating certain costs.

The design of a captive is often critical to its long-term success. While many financial planners, attorneys, and accountants are aware of these risk finance structures, relatively few firms have enough knowledge to design and implement them in a manner that maximizes business operations.  That said, the cost of a properly managed captive can be as low as 40 basis points per year, making it a highly attractive option for any business that’s looking to lower its costs and gain advantage against less prepared competitors in the years ahead.

Brad Barros is managing director and co-founder of Attainium Capital Development Advisors, LLC. For more information, visit http://attainiumcapital.com.

IN CALIFORNIA

SeeChange to Offer A Private Exchange

By leveraging Liazon’s Bright Choices exchange technology, SeeChange Health will offer its own private exchange of insurance products to employers with 50 or more employees. Through the exchange, employees spend benefit dollars on the medical and ancillary plans that fit their needs best. In turn, employers spend less time and money on health care administration. For more information visit www.SeeChangeHealth.com or visit www.liazon.com.

Integro Acquires The Rule Group

New York-based insurance brokerage and risk management firm, Integro, acquired The Rule Group of Pasadena, Calif.  Financial terms of the transaction were not disclosed. Founded in 1907, The Rule Group consists of three divisions: The Rule Company, which provides insurance and risk management services; TRG Insurance Services, an employee benefit consultant; and Solid Waste Insurance Managers, which is one of the largest providers of insurance products to waste haulers in the western United States.

For more information, visit www.integrogroup.com.

 

Carriers Request Rate Increases

The California Department of Insurance is reviewing the following proposed rate increases:

Company Name Type of
Coverage
Average
Annual
Rate
Change
Proposed
Range
Rate
Change
Proposed
Covered
Lives
Proposed
Effective
Date
Blue Shield of California Individual 11.7% 10.4% to 11.9% 268,653 03/01/13
Connecticut General Life Individual 1% -6% to 6% 23,206 04/01/13
Anthem Blue Cross Individual 24.6% 296,059 02/01/13
Anthem Blue Cross Individual 26% 340,085 02/01/13
Aetna Individual 18.8% 16.3% to 21.9% 68,766 04/01/13
Anthem Blue Cross Individual -2.1% -2.1% to -2.1% 1,659 01/01/13
Blue Shield of California Small Group 04/01/13
Health Net Small Group 7.1% -13.6% to 15.2% 10,632 02/01/13
Health Net Small Group 16.07% 10% to 10% 897 01/01/13
Kaiser Permanente Small Group 8% 383 01/01/13
Kaiser Permanente Small Group 8% 628 01/01/13
Aetna Small Group 8% -22.7% to 22.4% 38,446 01/01/13
SeeChange Small Group 11.5% -34.6% to 16.5% 7,236 01/01/13
Anthem Blue Cross Small Group 6.5% .6% to 17.4% 52,396 01/01/13
Anthem Blue Cross Life and Health Insurance Company Small Group -2.1% -10.7% to 9.1% 7,610 01/01/13
Anthem Blue Cross Small Group -2.1% 10.7% to 9.1% 7,610 01/01/13

HEALTHCARE

Employer Coverage to Remain Strong Post Reform

For businesses that employ 81% of workers with health insurance, offering health coverage will continue to make economic sense post health reform, according to a study from the National Institute for Health Care Reform. The study was conducted by University of Minnesota researchers working with the Center for Studying Health System Change (HSC).

Economic incentives to offer coverage will remain strong for many businesses under health reform, especially larger, higher-wage firms. However, incentives will weaken for small and low-wage employers – the very establishments that were most likely to drop coverage because of rising costs.

Post-reform, employer premium contributions remain tax-exempt. Also, beginning in 2014, there will be a penalty on larger employers that do not offer affordable health insurance. There will also be premium tax credits for lower-income people to purchase insurance in new state exchanges if they don’t have access to affordable employer coverage.

After 2014, the largest firms (500 or more workers) will have an average incentive of $2,503 per employee to offer coverage. The smallest firms (fewer than 50 workers) will face a lower average economic incentive of $990 per employee. This is mainly because these smaller employers will be exempt from the penalty for not offering coverage.

There will be economic incentives to offer insurance to workers in many industries. The exceptions are workers in accommodation, food services, entertainment and recreation, agriculture, forestry, fishing because of the greater eligibility of these workers for exchange subsidies. Employers with a union presence will have a large economic incentive to offer coverage after 2014. For more information, visit http://www.nihcr.org.

 

Exchanges Will Offer Better Coverage Than Medicare

Many Americans who are just above the poverty level will have better access to higher quality health care through the health insurance exchange than through Medicaid, according to a study from the National Center for Policy Analysis (NCPA).

The working poor will qualify for free, subsidized private insurance that pays doctors and hospitals at higher rates than Medicaid. Overall, private insurers pay physicians fees that are about 75% more generous than what Medicaid pays. In California, private insurers pay physician fees about 120% more than what Medicaid pays.

New York, California, Texas, New Jersey and Florida stand to gain the most by letting working poor residents access private coverage in the exchange. These five states would enjoy an additional $140 billion in medical spending; accounting for nearly two-thirds of the total $223 billion. California would get $31 billion.

NCPA Senior Fellow Devon Herrick says the government is willing to subsidize most of the premiums for private insurance for those just above 100% of the poverty line, but not for those below the poverty line. In the exchange, a family pays no more than 2% of its income for insurance and the government pays the rest. But, people below 100% of poverty can’t go into the exchange because of the way the ACA was written. Because Medicaid pays so little, a third of physicians won’t accept new Medicaid patients so people on Medicaid tend to overuse emergency rooms. For more information, visit http://www.ncpa.org/pub/st343.

Americans Support Expanded Mental Health Coverage

Ninety-three percent of Americans agree that basic private healthcare plans should cover the treatment of mental health illnesses and addiction, according to survey by Public Opinion Strategies for the National Association of Psychiatric Health Systems (NAPHS). Eighty-one percent say that health insurance plans should cover the same three levels of care and services for mental health and addiction as they do for physical health including inpatient hospitalization, residential/rehabilitative services, and outpatient care. Respondents tend to agree that mental and physical health should be treated equally since they are intertwined. Respondents also see the benefit of treating mental health issues to save money in the long run. For more information, visit www.naphs.org.

Seniors Should Look Beyond Premiums in Medicare Plans

It has become increasingly important for Medicare beneficiaries to look beyond premiums when choosing a Medicare Part D plan, according to an analysis by Avalere Health. The study found major differences in the number of drugs in the formulary, in cost sharing, and in the use of preferred pharmacies. There are significant variations in the percentage of drugs covered under the top 10 stand-alone prescription drug plans. For example, Humana Enhanced covers 76% of Part D covered drugs while WellCare Classic only covers 53%. The lowest-premium plans are the Humana Wal-Mart-Preferred Rx Plan and the United AARP Saver Plus Plan. These two plans each cover 63% of covered drugs. For more information, visit www.avalerehealth.net.

LIFE INSURANCE

These Groups Have the biggest Gaps in Life Coverage

Consumer groups with the biggest life insurance coverage gaps are unmarried parents, large families, women, and those with certain common health conditions, according to a white paper by Genworth. Brian Bulakites of Genworth said, “Consumers often believe life insurance costs nearly three times its actual price; this is a major contributor to the large coverage gap we’re seeing in these four groups.”

Fifty-nine percent of unmarried women have no life insurance compared to 43% of those who are married. Sixty-nine percent of unmarried fathers have no life insurance, compared to 34% of married fathers. Forty-three percent of married mothers have no life insurance, compared to just 34% of married fathers.

The study authors note that many commonly diagnosed health issues – like asthma and depression – are no longer barriers to receiving preferred rates on life insurance, which helps financial professionals close the coverage gap. The white paper includes a checklist that can help consumers identify changing needs and determine which financial obligations should be covered by a policy. For more information, visit genworth.com/lets-talklife.

Life Insurer Investments Are Under Pressure

Life insurers are facing the lowest continued  interest rates since the 1950s, according a study by Conning. “While most of the negative impacts of the financial crisis faded in 2011, the continued policy of low interest rates from the Federal Reserve took its toll on fixed income yield and is now being…responded to as a longer term challenge,” said Mary Pat Campbell, analyst at Conning. On a positive note, insurers have worked hard to rebuild capital positions and improve leverage in the aftermath of the economic crisis, said Stephan Christiansen, director of research at Conning. Many have repositioned their product portfolios to reduce the risks of their liabilities. As a result, they have some room to take additional risk in pursuit of yield. For more information, visit www.conningresearch.com.

NEW PRODUCTS

Retirement Plan

John Hancock enhanced its turnkey retirement income program with the RSQ Analyzer, which examines the likelihood that a client’s portfolio will generate the income they desire for the rest of their lives. Financial professionals have added flexibility to change the investment growth rate assumptions. Two new product comparison tools to enable the financial professional to identify the most relevant life insurance product solution that would best fit the clients’ needs. For more information, visit https://www.johnhancockfinancialnetwork.com.

Discount Vision and Hearing Plans

Lincoln updated its Lincoln DentalConnect product for employer benefit packages. For new and existing Lincoln DentalConnect PPO and indemnity members, plans now include the Lincoln VisionConnect discount vision program, powered by HealthAllies and the EPIC Hearing Service. For ore information, visit www.optumhealthallies.com.