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by Leila Morris
HEALTHCARE
• Will Exchanges Take Over the Health Insurance Market?
• Lack of Insurance Proves Fatal
• HHS Touts MLR Rebates
• Most Employers Hope Court Will Strike Down Health Care Reform
• How the Media Covered the Health Care Debate
IN CALIFORNIA
• The Fallout from the Autism Bill
• Agent Nabbed for Selling STOLI
EMPLOYEE BENEFITS
• Volunteer Takeover Sales Stabilized in 2011
FINANCIAL PLANNING
• Americans may be Overconfident About Meeting Retirement Healthcare Costs
LIFE INSURANCE
• Low Interest Rates Weigh on Life Insurers
NEW PRODUCTS
• Small Business Sales Support
• Variable Annuity
• Google Maps App Helps Reduce ER Visits
• Benefit Software for Self Insured Plans
EVENTS
• NAILBA Meeting in Orlando
Will Exchanges Take Over the Health Insurance Market?
Fifty-six percent of insurance executives say that most health insurance will be sold through exchanges within five years. This is according to a survey done by Connjecture at the recent American Health Insurance Plans (AHIP) conference in Salt Lake City. Nearly a third of the executives say the exchanges will be government-run. Sixty-one percent say that the majority of small businesses will not offer health insurance to their employees five years from now. Twenty-eight percent say they would most trust private-sector stalwarts like Wal-Mart to drive down the cost of healthcare as opposed to the government or the health insurance industry. Sixty-one percent say that President Barack Obama will benefit more from the upcoming Supreme Court ruling than presidential candidate Mitt Romney.
Only 4% of health insurance executives say the country is on the right track when it comes to health insurance. More than 40% say something has to change fundamentally and 40% say the course isn’t sustainable over the long term. Forty-nine percent say that unhealthy living habits are most responsible for the increase in healthcare costs while more than 20% say healthcare providers are most responsible. Sixteen percent cite government regulations as being most responsible. The number of uninsured Americans reached an all-time high in 2010 as nearly 50 million Americans went without health insurance for the entire year. For more information, visit www.connecture.com.
Lack of Insurance Proves Fatal
Lack of health coverage lead to the premature death of 26,100 people in 2010, according to a study by Families USA. From 2005 to 2010, the number of people who died prematurely due to a lack of health coverage rose from 20,350 to 26,100 a year. States with the most premature deaths due to uninsurance in 2010 were California with 3,164 deaths, Texas with 2,955 deaths, Florida with 2,272 deaths, New York with 1,247 deaths, and Georgia with 1,161 deaths. The survey compared the uninsured to the insured:
- Uninsured adults are five times less likely to have a regular source of care than the insured (55% versus 11%).
- 51% of uninsured adults who tried to find a new primary care doctor in the past three years said it was somewhat difficult or very difficult, with 20% saying it was very difficult.
- 41% of the uninsured said that a doctor’s office or clinic would not accept them as a new patient.
- Uninsured adults are nearly four times as likely to delay or forgo a preventive care screening due to cost (36% versus 10%).
- Uninsured women over 50 are about half as likely to have gotten a mammogram in the past two years (42% versus 79%).
- Uninsured 50- to 64-year olds with incomes below 250% of the federal poverty level are five times less likely than insured people in the same age group to have gotten a colon cancer screening in the past five years (10% versus 50%.)
- Uninsured adults are more than six times as likely to go without needed care due to cost (26% versus 4%).
- Uninsured Cancer patients are more than five times as likely to delay or forgo cancer-related care because of medical costs (27% versus 5%).
- Uninsured adults are more likely to be diagnosed with a disease in an advanced stage. For example, uninsured women are substantially more likely to be diagnosed with advanced stage breast cancer than women with private insurance, as are uninsured people with colorectal cancer.
- Uninsured adults are at least 25% as likely to die prematurely.
- Uninsured patients can’t get the same discounts on hospital and doctor charges that the insurance companies get. As a result, uninsured patients are often charged more than 2.5 times what insured patients are charged for hospital services. Three out of five uninsured adults report having problems with medical bills or medical debt.
For more information, visit http://www.familiesusa.org.
HHS Touts MLR Rebates
Nearly 13 million Americans will benefit from $1.1 billion in rebates from insurance companies this summer, according to Health and Human Services (HHS) Secretary Kathleen Sebelius. Rebates under the Affordable Care Act’s 80/20 rule will average of $151 for each family covered by a policy.
The health care law generally requires insurance companies to spend at least 80% of consumers’ premium dollars on medical care and quality improvements. Insurers can spend the remaining 20% on administrative costs, such as salaries, sales, and advertising. Beginning this year, insurers must notify customers how much of their premiums have been spent on medical care and quality improvement. Insurance companies that don’t meet the 80/20 standard must give policyholders a rebate for the difference by Aug. 1, 2012. (The 80/20 rule is also known as the “Medical Loss Ratio MLR standard.”) Consumers will get their rebate in one of the following ways:
• A rebate check in the mail.
• A lump-sum reimbursement to the same account used to pay the premium if by credit card or debit card.
• A reduction in future premiums.
Consumers will get a notice from their insurance company informing them of the 80/20 rule, whether their company met the standard, and, if not, how much their rebate will be. For a detailed breakdown of these rebates by state and by market, visit: http://www.healthcare.gov/law/resources/reports/mlr-rebates06212012a.html.
Most Employers Hope Court Will Strike Down Health Care Reform
As the country awaits the Supreme Court ruling on the Health Care Reform Act, 60% of employers hope for full repeal of the law, according a study by Market Strategies International. But 71% say that some good parts of the law tshould stay in place. Twenty-nine percent of employers expect the Supreme Court to repeal the law in full while 25% expect only portions of the law to be stricken. Susan McIntyre, senior vice president in the company’s Health Care division said that more than 60% of employers are waiting until after the 2012 fall elections to make to major changes to their benefit plans.
How the Media Covered the Health Care Debate
After helping define the Obama presidency for almost a year, health care reform largely disappeared in the American news media, according to a report by the Pew research center for excellence in journalism. Most of the coverage focused on politics rather than the substance of the bill. The language and framing of the issue favored by the bill’s Republican critics was far more prevalent in the news coverage than the language and framing favored by Democrats supporting the bill, according to research conducted by the Pew Research Center’s Project for Excellence in Journalism (PEJ).
Health care reached its heights as a news story in the summer of 2009 and early 2010, during the rise of the tea party and the battles in the House and Senate over passage of the legislation. In the third quarter of 2009, coverage of the health care debate filled 18% of the new with passions fueled by angry town hall meetings, according to PEJ’s News Coverage Index, making it the number one story in the news. That number remained high in the last quarter of 2009 at 13% and the first quarter of 2010 at 14%.
But the health reform law got far less attention once the battle shifted to the courts. From April 2010 through December 2011, the subject never exceeded 2% of the overall news in any three months period. That changed some in the first three months of 2012, with coverage rising to 5% of the news. The week of February 6-12, the story first made a comeback of 9% of the news as the debate over whether religious institutions should be forced to cover contraception in their health insurance plans emerged as a major issue. Four weeks later, Rush Limbaugh’s controversial comments about a Georgetown law student helped drive coverage to 10% the week of March 5-11.
At its peak, in 2009 and early 2010, the issue was more of a topic in the opinion part of the media culture, on radio and cable TV talk shows, than elsewhere. But it wasn’t always Obama’s partisan opponents doing the talking; it was often people from within the liberal camp who felt the law didn’t go far enough. During that period, liberal talk show hosts devoted more time to the issue than conservative hosts.
That fits with another finding in an analysis of the press coverage, particularly during the formative stages from June 1, 2009 through March 31, 2010. Most of the coverage of the health care reform bill focused on the politics as opposed to reporting on what the bill would do or the state of health care. Fully 49% of the coverage focused on politics and strategy and the legislative process. Only 23% of the coverage outlined what the various proposals would do and 9% focused on the state of the health care system in the U.S.
Which side got the better of this highly politically oriented coverage? An analysis by PEJ reveals that opponents of the reform won the messaging war in the coverage. Terms that are closely associated with opposition arguments, such as “government run,” are far more present in media reports than terms associated with arguments supporting the bill, such as “pre-existing conditions.” For more information, visit http://www.journalism.org.
The Fallout from the Autism Bill
On July 1, the Autism Bill goes into effect in California. Under SB 946, state regulated health care plans (also known as fully funded or fully insured plans) that provide hospital, medical, or surgical coverage must also provide coverage for “medically necessary” behavioral health treatment for pervasive developmental disorder or autism. The law compliments California’s Mental Health Parity Act, which passed in 2000.
SB 946 was passed with the hope that thousands of California families would save on out-of-pocket costs for the treatment of autism and other behavioral health conditions. However, SB 946 does not apply to self-funded medical plans. Self-funded plans may include the coverage outlined under SB 946, but it is not required. The mandate is due to expire on July 1, 2014 and an automatic repeal will take place on January 1, 2015.
“The new coverage requirement will certainly alleviate some of the financial strain families affected by autism experience. However, Burnham Benefits projects the mandate to impact overall annual costs up to 0.8%. Although the impact may not seem significant, every increase adds up in today’s environment of medical insurance costs,” said, Burnham Benefits underwriter, Ryan Meissner.
In addition to the projected cost increase, utilization of behavioral health services is likely to rise. Burnham expects behavioral health care providers to modify contractual agreements with carriers, which could increase consumer costs yet again. For more information, visit www.burnhambenefits.com.
Agent Nabbed for Selling STOLI
Landon Strauss, 35, of San Diego County was convicted of selling stranger owned life insurance (STOLI.) He was sentenced to three years felony probation and ordered to pay $128,405.07 to the insurer and $10,000 to the California Dept. of Insurance (CDI) for investigative costs.
STOLI schemes have been outlawed in California since 2009, with the passage of SB 98. Under California law, any party purchasing life insurance must have an insurable interest in the person being insured. From his office in Beverly Hills, Strauss sold $20 million worth of life insurance to a senior citizen in San Diego County in May of 2006. To ensure that the life insurance would be approved, Strauss fabricated information about the senior’s assets and personal net worth.
Strauss stole the identity of an acquaintance to create a phony CPA letter, which he submitted to the insurer along with the senior’s application. The CPA letter stated falsely that the senior had a net worth of $44.9 million. Strauss earned in $128,405.07 in commissions as a result of this scheme. Strauss agreed to a stipulation that he will not be involved in the business of insurance as an agent or broker or in any fiduciary capacity within the insurance business. Strauss has not been licensed to sell insurance since October of 2010.
Volunteer Takeover Sales Stabilized in 2011
Takeover sales now account for 42% of new voluntary sales premium reported in 2011, up just slightly from 41% in 2010, according to an Eastbridge study. (A takeover sale happens when one carrier’s plan is replaced with a similar plan issued by a different insurance carrier). “We have definitely seen takeovers increase in the voluntary market. Fortunately, the level of increase has slowed somewhat in the last year or so. But we know that, as competition increases in the voluntary market, this will continue to happen,” says Gil Lowerre, president of Eastbridge.
The following shows the takeover rates for the past five years as a percentage of new business premium:
2006 – 12%
2007– 17%
2008 – 29%
2009 – 38%
2010 – 1%
2011 – 42%
Despite the slower growth in 2011, carriers expect to takeover activity to increase. Fueling the trend is the growth of group products and takeover-prone products like dental, vision, and other healthcare-related products. Also fueling the trend are increased sales by benefit brokers, says Lowerre.
“Some group companies report that 80% or more of their business is takeover. Individual companies report percentages averaging 5% to 20%, depending on whether their portfolio is primarily permanent life insurance or a full traditional portfolio. While the trend is continuing there is still a lot of virgin business in the market,” said Lowerre. Brokers don’t have to be content with just a takeover plan since many employers are open to adding more types of voluntary products, he adds. The report is only available to participating carriers. For more information on participating in next year’s survey, contact Eastbridge at info@eastbridge.com or call (860) 676-9633.
Americans may be Overconfident About Meeting Retirement Healthcare Costs
Ninety-three percent of Americans with at least $250,000 in household assets are at least somewhat confident that will be able to pay for health care costs in retirement, according to a Nationwide survey. John Carter, president of Nationwide Financial Distributors said, “The good news is we’re not seeing the panic that many Boomers nearing retirement are having, but we hope this isn’t over-confidence that could lead to a lack of preparedness down the road…most of their health care costs have yet to come.”
Forty percent of those in retirement say their biggest expense is paying monthly housing bills; 21% say it’s the cost of health care; and 16% say it’s the cost of providing for their family. Those nearing retirement say they expect health care to be their biggest expense (45%), followed by monthly housing bills (35%) and providing for their family (9%).
Retirees, on average, estimate that they spend $4,083 a year on health care premiums, copayments, and deductibles. Retiree health care costs have increased 6% a year since 2002. A 65-year-old couple who retires today would need $240,000 to cover medical expenses – an amount that could take up to 35% of their annual Social Security benefit. And that number doesn’t include long-term care costs.
Kevin McGarry, director of the Nationwide Institute said, “The irony is that people who stay in shape have a better quality of life in retirement, but may end up with higher health care costs because they’re alive longer and need care for more years. Even if they’re able to pay for health care costs, too many retirees fail to plan for inflation. The costs of nursing home care and assisted living nationwide went up more than twice the rate of inflation between 2009 and 2010. And, according to the U.S. Department of Health and Human Services, people over the age of 65 have a 70% chance of needing long-term care during their lifetime.” Too many people underestimate the money needed to cover their health care costs in retirement because they do not think they will ever need long term care, McGarry said. For more information, visit www.nationwide.com.
Low Interest Rates Weigh on Life Insurers
Chief financial officers (CFOs) at North American life insurance companies are under substantial financial pressures with U.S. interest rates at their lowest since right after World War II. This is particularly true of companies with significant exposure to fixed-rate products, according to a survey of life insurance CFOs by Towers Watson. Life insurance CFOs said that the low interest rate environment is their primary business concern. In fact, 45% said that a prolonged low interest rate environment is the greatest threat to their business.
Lower interest rates reduce the returns that life insurers get on their investments. At the same time, they have to honor previous guarantees they promised to policyholders. In addition, John Fenton, senior life insurance consultant at Towers Watson said, “The low interest rate environment makes some of their products very unattractive in the marketplace, such as traditional fixed universal life and annuities.”
In general, ife insurance CFOs are not optimistic about the immediate economic future. Eighty-seven percent say there is a 50% or greater likelihood of a major disruption to the economy in the next 12 to 18 months, with 27% seeing a 75% likelihood of major disruption and 7% seeing almost certain likelihood of a major disruption.
Sixty-eight percent expect a three-year to five-year period of low interest rates, followed by a gradual increase. The CFOs are most concerned about statutory capital (63%), followed by their level of statutory earnings (53%).
In response to the low interest rate environment, 57% of CFOs say their company has established risk tolerance limits for interest rate risk. But 40% of companies with established rate risk tolerance limits have breached them, according to the CFOs. “This raises serious questions about how these companies are dealing with interest rate risk management. Most companies have a critical need to revisit their interest rate risk strategy in light of the economic environment,” said Karen Wells, senior investment consultant, Towers Watson.
CFOs have increased the cost of insurance rates for interest-sensitive products in order to manage their interest rate risk. Forty-three percent said that they are able to change cost of insurance (COI) rates under their universal life products based on investment earnings. In the past five years, just over a third of respondents have increased COI rates, expense loads, or both on at least some part of their life block.
Ninety-six percent have reduced the minimum guarantee on fixed-account products. Fifty-six percent have adjusted their premium rates, reduced living benefit guarantees, or adjusted fees on annuity products (56%), or ceased or significantly curtailed sales of some products (54%). One-quarter have exited product segments while another 13% plan to do so in the next six months.
Seventy-one percent expect increases in new life and annuity premiums of 4% or more in the first quarter of 2012, compared to the same period in 2011. Over 80% expect GAAP net revenue to grow 4% or more in the first quarter, compared to the same period in 2011. This is a notable increase in optimism compared to Towers Watson’s last CFO survey for the third quarter of 2011. Only 43% predicted increases in new life and annuity premiums of 4% or more and just 50% anticipated a GAAP net revenue increase of 4% or more. Adding to the sense of optimism, 50% of respondents predict that GAAP net income will increase by 4% or more compared to the first quarter of last year. For more information, visit http://www.towerswatson.com.
Small Business Sales Support
The Hartford launched a small business center to provide enhanced sales support to brokers and a quicker turnaround on requests for proposals. Sales associates specialize in consulting on group life and accident insurance, long-term disability insurance, and short-term disability insurance for companies with four to 49 employees. The center offers extended hours of operation. For more information, visit www.thehartford.com/gbsmallbusiness.
Variable Annuity
Nationwide Financial’s “marketFLEX” variable annuity products now have the enhanced risk management and diversification provided by extended investment options, including alternative investments. One fund provides for potential returns in both upward and downward moving market environments. The other strategy involves high yield bond funds and money market funds to profit from trends in the high yield asset class. For more information, visit www.nationwide.com.
Google Maps App Helps Reduce ER Visits
Two large Connecticut employers reduced non-emergency ER visits 17% with an educational Google app. The app was used to encourage members to use walk-in clinics or retail health clinics for non-emergency conditions, such as ear infections, reports HealthCore. The results reflect the first six months of a year-long study conducted in 2012 at the request of HealthCore’s parent company, WellPoint. For more information, visit www.healthcore.com.
Benefit Software for Self Insured Plans
Dynamic Health Strategies is offering software that helps self-insured plans detect waste in healthcare benefits and claims, such as fraud and duplicate billing. It also makes prioritized recommendations on employee wellness and disease management initiatives. For more information, visit www.HealthSpectives.com.
NAILBA Meeting in Orlando
The National Association of Independent Life Brokerage Agencies (NAILBA) is holding its annual meeting November 15 to 17 in Orlando. For more information, visit www.nailba.org/nailba31 .
