The Affordable Care Act (ACA) will bring profound changes to health benefits in 2015, according to a statement by Ben Geyerhahn, CEO and Founder of BeneStream. Coverages mandated by the ACA go into effect on January 1. There is also the requirement that companies with 100 or more employees must offer health benefits to all full-time staff under the employer mandate.
The employer mandate will affect the working poor the most. This year the working poor are being offered a range of options by employers, which means that many will have health insurance for the first time in 2015. However, any additional cost to the monthly budget is more than many can afford. That’s why 29 states passed Medicaid expansion. Because of the expansion, Medicaid now covers up to 138% of the poverty rate, which is $32,900 in income per year for a family of four.
With the exchanges, access to health insurance means more preventative care versus emergency care. More people have health insurance upon arrival to the emergency room, which lowers costs. With the employer mandate taking effect, these factors will continue to improve.
However, full-time employees who have been getting health insurance are likely to have fewer plan options than in previous years, and those options will come with narrower networks. Many employees will see higher monthly premiums with higher deductibles along with a smaller range of in-network doctors. And some plans no longer cover out of network doctors.
Also, family coverage will evaporate for many this year. Families can go to the exchange to get the remaining members covered while some may qualify for the Children’s Health Insurance Program (CHIP).
Health Care Predictions for 2015 and Beyond
The ACA brings increased cost responsibility on consumers, smarter technology, and more choices for 2015 and beyond. Vitals CEO Mitch Rothschild outlines five key changes to expect in the coming year:
1. Diagnosis Outside The Doctor’s Office: There are several reasons why your next diagnosis may happen outside of a doctor’s office in 2015. Retail clinics and urgent care centers are often more convenient. Over-the-counter home kits are can now diagnose more conditions, such as Hepatitis C, HIV, and prostate cancer. New technologies scan for everything from fevers to Parkinson’s disease. People will be seeing the doctor less often, but for more serious problems. Wearable technology provides data that patients can discuss with their doctors, allowing for more accurate diagnosis and care. For 2020, there will be a huge appetite for self-diagnostics, which could reduce the cost and resources it takes to provide routine care. A wave of simple diagnostic tools and tests will become the norm in a few years,
2. Provider Price Wars: The health care marketplace will get a boost from more options for medical care and diagnosis and more transparency. Companies and health plans are pairing quality and cost data on hospitals and doctors, allowing consumers to shop for care. Competition, cost and choice will fuel price wars among health care providers. Besides retail clinics like CVS and Walgreens, hospitals and medical centers will also compete on price. Places like the Surgery Center of Oklahoma guarantee the price for procedures, including doctor fees, initial consults, and uncomplicated follow-up care. The center has attracted patients from across the country. The cost is cheaper than local hospitals; and employers are willing to foot the bill — flights, travel and lodging included. Couponing, incentives and other retail-model discounts will become part of the shopping experience for patients. In 2020, hospitals will invest in certain diseases and disorders while outsourcing general surgeries and procedures to more efficient and price-competitive surgery centers. This will lead to better, more efficient care.
3. Emphasis On Behavioral Data: Personal data and incentives can help people take manage their financial and physical well-being. In 2020, new tools and services will be needed to connect and analyze a wider range of data sources and deliver deeper meaning as we move from historical tracking to predictive modeling.
4. Care Designed For One: The personalized care movement will come from the convergence of data and technology. Doctors will go beyond the medical history form and inflexible guidelines to consider their patients’ genetics and behaviors. In 2020, there will be DNA-designed pharmaceuticals. As personalized health evolves next to genetic mapping, we will soon see medications and treatments designed for your physiology.
5. Cost Increases Spur Consumer Shopping: There is no end to the movement toward high deductible health plans (HDHPs). Large deductibles highter out-of-pocket costs. As a result, thoughtful consumer purchasing will become the norm. The result will lead us towards a less wasteful, more efficient health care system. In 2020, expect to see more benefit trimming. Pharmaceutical benefits will be redesigned. Expensive specialty drugs will force employers to increase cost sharing for brand-name medications.
For more information, visit www.vitals.com.
Key Health Care Trends in 2015
Next year, the healthcare system will be front and center as the Supreme Court rules on the constitutionality of health insurance exchange subsidies and changes to the Affordable Care Act (ACA) continue. It will be a pivotal year for the healthcare industry with the ongoing rise of healthcare costs, acceleration of consolidation among providers and payers, and looming 2016 elections, according to a report by the Navigant Center for Healthcare Research and Policy Analysis. Here are six key areas to watch in 2015:
1. Significant uncertainty continues over the ACA: Administrative actions and amendments have brought 38 changes to the law, and more will follow. Gaining attention will be the expansion of Medicaid and an expansion of health exchange enrollment expansion among individuals and small businesses. There may be a change in the excise taxes on devices, drugs, and health plans. The industry will also be monitoring demonstrations and pilots like accountable care organizations (ACO). The ACA’s Physician Payment Sunshine Act will bring more transparency of business relationships along with intensified efforts to reduce the costs of unnecessary care and fraud. Congress will weigh in on the law’s implementation and funding, with repeal unlikely.
2. CMS expects healthcare costs to increase 6% a year for the next decade: More employers will drop insurance coverage for employees; those keeping coverage will use higher deductible products to shift financial risk to their employees. Health insurers and employers will press for bigger discounts and shift risk to providers. Bad debt will increase for providers and margins will shrink. Demand for services resulting from the newly insured and growing Medicare enrollment will exacerbate issues of access and workforce effectiveness. Sticker shock for hospital prices and specialty drugs will continue to be big issues as employers and consumers seek more transparency.
3. Providers will consolidate into regional health systems. Many will sponsor their own health insurance plans: Alternative medicine and technological advances will drive services from beds, to clinics, to homes, and to self-monitoring capabilities. Integrating these capabilities with physicians and business partners will mean the following for hospitals: heightened risk, diversification of businesses and competencies, centralization of back office functions and supply chain relationships, increased access to capital, and a stronger focus on complying with state and federal regulations. Maintaining the status quo is not an option for most hospitals.
4. Adherence to evidence-based care will be the industry’s biggest challenge: Thirty percent of health spending goes for tests, procedures, and diagnostics that have no scientific evidence of appropriateness. The Office of the Inspector General will penalize providers that do more than what’s necessary for purposes of financial gain. Also, social media fuels the public’s appetite to know what works best, who does it well, and at what cost.
• Medicare, Medicaid, health insurers, and employers believe that shifting risks to providers is the key to reducing costs while enhancing safety and quality: Replacing fee-for-service incentives with results means using bundled payments, value-based purchasing, penalties for avoidable re-admissions and unnecessary care, and other programs. The shift is already underway. Employers, plans, and the government are driving these changes. Clearly incentives are changing. Payers find this to their advantage, but providers are threatened. Engaging physicians, allied health professionals, and post-acute providers in the transition is cumbersome, complicated, politically risky, and expensive.
• The Informed Patient: The market for healthcare is composed of household that spend $16,000 a year for healthcare. It’s second only to their housing costs, and is increasing faster than their wages. Retail clinics are experiencing exponential growth as are alternative therapies, like yoga for pain management.
For more information, visit www.navigant.com.
Doctors Warn that ACA Pain Has Just Begun
The President’s unilateral delay of the employer mandate is about over. Businesses with 50 or more full-time employees will have to start filing detailed reports with the IRS in January 2015, according to a statement by the Association of American Physicians and Surgeons (AAPS). “Full time” means 30 hours or more. Congressman Michael Burgess (R-Tex.) called attention to this during a conference call co-sponsored by the Galen Institute, “Penalties don’t kick in until next year, but the data collection requirements are huge and complex. Burgess said that professional assistance is likely needed.”
Employers must report the number of hours worked, as well as health insurance coverage for each worker. AAPS executive director Jane M. Orient, M.D said, “The pain from the Affordable Care Act has only just begun. Higher insurance premiums, penalties for not satisfying ObamaCare mandates, and data collection expenses are unaffordable for many businesses. Costs are passed along to workers, who may lose their job altogether or be forced to work at two part-time jobs, as well as to customers. Many businesses will decide not to expand, or could fold.” The Congressional Budget Office doesn’t count such costs to Americans, she noted.
In the King v. Burwell case, the Supreme Court could rule that ACA means what it says about subsidies only flowing through state-established exchanges. That is the source of much uncertainty. If that is the decision, States that declined to set up an exchange could be under a lot of pressure. Orient said, “People need to remember that those subsidies are the trigger for the employer mandate’s penalties. There is no free money. Some get other taxpayers to help pay their premiums; others may lose their job.” For more information, visit www.aapsonline.org.
Delivery and Payment Reform May Stall without Direct Employer Action
While employers find alternative provider delivery models and payment reform attractive, most don’t understand them or the value they provide, according to a survey by Aon Hewitt. As a result, they may miss a significant opportunity to lead and improve the health and financial outlook for their workforce and business. The following are highlights of a survey of more than 220 companies:
• 75% don’t understand payment transformation models
• 51% don’t understand the cost and quality data provided by their carriers related to new models like Accountable Care Organizations (ACOs)
• 71% are unaware or need to learn more about the attribution process and how they contribute to the payment of these new provider delivery models
• 60% are providing or are considering providing a financial incentive for employees and dependents to use these new models through plan design changes, narrow network options, HRA/HSA contributions or cash.
• 24% steer participants (through plan design or lower cost) to high quality hospitals or physicians for specific procedures or conditions, and another 56% are considering doing so in the next three-to-five years.
• 18% use integrated delivery models, such as patient-centered medical homes, to improve primary care effectiveness, and another 56% plan to do so in the next 3-5 years.
• 11% contract directly with hospitals or other health providers in specific locations, and another 28% plan to do so.
• 10% have adopted reference-based pricing, and another 58% plan to do so.
“Employers are increasingly making innovative provider network structures an important part of their strategy, which will help to improve health care purchasing and shift the payment focus towards value based reimbursement and support providers who produce higher quality outcomes,” said Mike Taylor, senior vice president of Delivery System Transformation at Aon Hewitt. For more information, visit www.aonhewitt.com.
Health Care Spending Accelerates
Spending on health care services grew 5.4% in the third quarter of 2014 (July to September) compared to the same quarter in 2013. This is substantially higher than the 3.7% rate in the second quarter and the 3.9% rate in all of 2013, according to a report by the Quarterly Services Survey. Prescription drug prices rose 4.1%, up from 3.8% in September 2014. Year-over-year hospital prices grew 1.1% in October, which is the lowest reading since September 1998. Charles Roehrig, director of Altarum’s Center for Sustainable Health Spending said, “While it is too early for definitive conclusions, this may well represent the predicted ramping up in spending by the estimated 10 million people gaining coverage in early 2014 under the Affordable Care Act.” For more information, visit www.altarum.org/HealthIndicators.
Municipalities See Greater Need for Benefit Consultants
The Cadillac tax on richer health plans could be a major burden to municipalities beginning in 2018. However, municipalities plan to adjust health plans, making the excise tax irrelevant. They plan on using ACA benefit consultants extensively to adjust their benefit plans, according to a survey of the 50 largest U.S. cities and counties rated by Fitch Ratings. Widespread changes to health plan expected as are negotiations with labor. For more information, visit www.fitchratings.com.
LIFE INSURANCE OUTLOOK
Stable Outlook for Insurers in 2015
The rating outlook for the life insurance industry is stable for 2015, according to Fitch Ratings. Positive factors have mitigated Fitch’s concerns over low interest rates. Fitch expects relatively stagnant earnings growth in 2015 due to a moderate decline in interest margins, which will offset growth in fee and underwriting income. Fitch expects credit-related investment losses in 2015 to remain below pricing assumptions and historical averages based on strong corporate bond fundamentals and further improvement in the real estate market.
Statutory capitalization exceeds pre-crisis levels. Fitch also reports retained earnings, various capital management initiatives, modest growth in in-force business, and strong liquidity. Fitch is not as concerned as it has been over equity market risk tied to legacy variable annuity (VA) guarantees. Fitch cites better conditions in the equity market in recent years. But it’s expected to remain a drag on profitability in the near term. VA guarantees could hurt industry earnings and capital in a severe stress scenario, which is unexpected, but still plausible. Rising interest rates could have positive implications for U.S. life insurers. But if interest rates decline to levels seen in 2012 and stay there much beyond 2015, Fitch is likely to change its outlook to negative based on weakened earnings profile and anticipated capital affects associated with reserve strengthening. For more information, visit http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=840868
Promoting Employee Benefits by Generation
Employers who address employees’ generational needs could see higher benefit enrollment, according to a report by Securian Financial Group. The white paper offers the following strategies for each generation:
• Baby Boomers (born 1946 to 1964) appreciate honest, simple language and financial scenarios. They also want information about estate planning.
• Generation X (born 1965 to 1981) respond to virtual marketing and a focus on significant life events such as marriage, having children or job change.
• Millennials (born 1982 to 1993) respond to online resources. They also want open lines of communication with HR to get support.
Paula Bilitz, director, Group Life Marketing, Securian Financial Group said, “Another approach to improving benefits enrollment is to ask employees what they like and don’t like about the current process. Employees are often willing to share critiques of their company’s benefits communications and provide suggestions for making them better.” For more information, visit www.securian.com
Voluntary Product Trends
The most prominent voluntary product trends are the rise of guaranteed issue and lower participation requirements, according to a study by Eastbridge Consulting Group. Nearly three-quarters of the carriers surveyed plan to introduce new products this year, with many planning to introduce more than the typical number. Hospital indemnity is the most commonly mentioned product to be added in the next two years, followed by critical illness, universal/whole life, supplemental medical (gap plans) and accident. Critical illness and accident insurance are the top two growth products for the next two to three years. For more information, visit www.eastbridge.com.
Voluntary Commission Rates Hold Steady
Commissions on voluntary products have stayed relatively consistent, according to a report by Eastbridge. Commissions for universal life, accident, and critical illness have increased slightly while rates for dental and hospital indemnity/supplemental medical products are down somewhat. The report also reveals the following:
• Most carriers offer multiple commission shcedules, generally based on product or enrollment type and sales volume.
• Few carriers offer incentives for using electronic enrollment.
• The majority of carriers offer a bonus program for their brokers/producers, most often ones for new sales and persistency.
For more information, visit www.eastbridge.com.
Aetna Issues Rate Increases
Aetna’s recent rate filing on its small group policies is excessive and unreasonable, according to Insurance Commissioner actuaries. The average increase of 10.7%, which is effective January 1, 2015, will affect more than 64,000 individuals. For small business with renewal dates in the first quarter of 2015, the maximum increase is 19.5%. Insurance Commissioner Dave Jones said, “After the Department’s health actuaries completed their analysis of the rate filing, the results were shared with Aetna’s leadership and the department requested they reduce the rate. Aetna is moving forward with this unreasonable rate increase, which will cost small businesses a projected $23.5 million in excessive premium, based on the company’s own projections.”
The company’s assumption that members in the new ACA-compliant plans are less healthy than members in the older plans contradicts Aetna’s actual experience. Moreover, any such adjustment should be offset by the federal risk adjustment program, so this should not result in a rate increase. The company’s assumption that utilization will grow by 2.5% in 2014 and 2015 in unjustified. This assumed growth in utilization is excessive given the recent history of utilization growth in the company’s health plans and current trends among carriers. The company has applied its pricing trend over a full quarter using an annualized trend rate of 9.4%. The company should have applied the pricing trend to only one and one-half months. Also,the trend rate used (9.4%) is larger than and inconsistent with other trend assumptions used in the filing.
Exchange Enrollees Face Tough Purchasing Decisions
With more options this year, exchange enrollees will have tougher decisions to make, according to the National Health Council. Many people enroll in Silver and Bronze plans with the lowest premium. But a plan’s cost-sharing structure determines much of the annual spending for patients who have regular health care needs. The Council created a free, online calculator to help people understand the plans available in their state at, www.puttingpatientsfirst.net. The calculator illustrates how a person’s total annual health care spending can vary based on plan selection.
Guide to Child Support and the ACA
When it comes to family law, each state has created its own rules about who provides medical insurance and gets the tax exemption. But the Affordable Care Act will change all of that, according to Matthew Brickman, a family and divorce mediator. He is offering a free guide at http://www.ichatmediation.com/ObamaCareAndChildSupport.
Healthcare Provider Directory
Vericred launched a website that helps consumers choose a health plan that lets them keep the doctors they prefer. Consumers enter their zip code, ages of family members, and their healthcare providers. PlanCompass searches plans available in their area to find those that match their preferred doctors and facilities. For more information, visit www.plancompass.com.
Mercer launched “Mercer BenefitsCentral” for large clients and their employees. It offers personalization with targeted messaging, educational resources, and program content. It offers a familiar consumer experience with tools, such as shopping cart technology, cost and feature comparisons, and personalized guidance. For more information, visit www.benefitscentral.com.