• Employers Top Strategies for Controlling Costs
• Health Incentives Gain Popularity
• Agent MLR Bill is Reintroduced
• Legislation to Eliminate the Health Insurance Tax is Reintroduced
• Consumer Driven Plans Gain Popularity In Private Exchanges
• Health Plans Pair High Coinsurance With Big Out-of-Pocket Costs
• Americans Are Still in the Dark About Health Reform
• Hospital Prices Drive Health Care Costs
• MassMutual Reports Strong Retirement Plan Sales
• One America Sets Sales Records
• Pension Plans Faced Record Deficit in 2012
• Covered California Faces Criticism Over Plan To Partner With Wal-Mart
• CAHU Sponsors Day at the Capitol in Sacramento
LIFE INSURANCE & ANNUITIES
• Life and Annuity Need to Adapt to a Changing Market
• Dental and Vision Plan App
• Universal Life
Employers Top Strategies for Controlling Healthcare Costs
• While PPO remains the most prevalent plan type (43% of all known plans), there was a 5% increase in HSA plan types – from 16% to 21% of plans. This represents a common cost-control strategy as more employers shift to a consumer-driven model.
• The highest individual deductible option ($2,500) saw a significant increase over the past year, rising 7% in popularity. This supports the growth in HSA plan types, as HSAs must be accompanied by a high-deductible health plan. It also illustrates another employer cost-shifting strategy.
• The most common range for out-of-pocket costs stayed the same from 2011 to 2012, in the $2,500-$3,499 category. However, there was a noticeable shift toward higher out-of-pocket maximums across the board.
• Another cost-cutting strategy was to increase the prescription drug deductible.
• Though Rx deductibles under $50 remained the most common, the Rx deductibles over $250 now represent 25% of all plans – up 5% from 2011.
For more information, visit www.zywave.com.
Health Incentives Gain Popularity
Incentives are playing an increasingly important role in encouraging employees to improve their health, according to survey by Aon Hewitt of nearly 800 large and mid-size U.S. employers. Eighty-three percent offer incentives to employees for participating in programs that help them become more aware of their health status. These may include taking a health risk questionnaire or participating in biometric screenings. The following is a breakdown of the incentives that these employees offer:
• 79% offer a reward.
• 64% offer monetary incentives of $50 to $500, and 18% offer monetary incentives of more than $500.
• 16% offer a mix of rewards and consequences.
• 5% have a consequence.
Jim Winkler, chief innovation officer for Health & Benefits at Aon Hewitt said, “Health-risk questionnaires and biometric screenings are the key tools in providing that important information…that links behaviors to action.” Incentives will continue to be a critical part of employers’ health care strategies in the future,” he added.
Aon Hewitt did a separate survey with the National Business Group on Health and The Futures Company. Eighty-six percent of the workers took some action after completing health-risk questionnaire getting suggestions based on their results. Sixty-five percent made at least one lifestyle improvement as a result.
More than half of employers have seen improved health behaviors and/or an increase in employee engagement. Almost half saw an increase in employee morale, satisfaction and/or attitudes, and 44% saw changes in health risks.
The following is true of companies that offer incentives:
• 56% require employees to participate in health programs, comply with medications, or participate in activities like health coaching.
• 24% offer incentives for making progress toward or attaining acceptable ranges for biometric measures such as blood pressure, body mass index, blood sugar and cholesterol. More than two-thirds are considering this approach in the next three to five years.
In the next few years, 58% of employers plan to impose consequences on participants who do not take appropriate actions to improve their health. Thirty-four percent are interested in tying incentives to program designs that require a focus on health 365 days a year. For example, they may offer incentives for completing a progressive physical activity program that increases minutes each quarter, achieving the recommended cardiovascular physical activity of 150 minutes per week.
Stephanie Pronk of Aon Hewitt said, “Employers mainly rely on financial incentives to drive desired activities and behaviors, ranging from building awareness to achieving health outcomes. However, in the near future, these designs will be most successful…when they are linked to an organizational culture that makes it easier for employees to make healthier personal decisions.” For more information, visit www.aonhewitt.com.
Agent MLR Bill is Reintroduced
U.S. Senator Mary L. Landrieu, D-La., chair of the Senate Committee on Small Business and Entrepreneurship, and Sen. Johnny Isakson, R-Ga., have introduced S.650, the Access to Independent Health Insurance Advisors Act. This legislation addresses a provision of the Affordable Care Act known as the “medical loss ratio” (MLR), which has had dramatic, unintended consequences for nearly a half million licensed independent agents and brokers, and their employees.
Due to the Department of Health and Human Services’ (HHS) interpretation of the MLR provisions in the health reform law, health insurance carriers are required to treat agent and broker commissions as part of their administrative costs. This threatens the ability of independent agents and brokers to stay in business and serve the public. The Access to Independent Health Insurance Advisors Act excludes from the MLR compensation earned by independent agents and brokers that serve the individual and small group markets.
This legislation is designed to ensure that health insurance agents and brokers can continue providing essential counseling and advocacy services to consumers looking for the right health insurance coverage. Sens. Lisa Murkowski, R-Alaska, and Mark Begich, D-Alaska, are also original cosponsors of the legislation.
“This bipartisan legislation will ensure that our independent insurance agents and brokers can continue providing essential services to consumers who depend on them to assist with coverage or claims problems. Due to HHS’ interpretation of the health care law many agents and brokers — many of whom are one- or two-person small businesses — have had to reduce client hours or close up shop altogether because of these unintended consequences. This legislation will strengthen the Affordable Care Act, keep these small firms in businesses and protect this important service for consumers,” Sen. Landrieu said.
Sen. Isakson said. “This legislation will ensure that shortsighted regulations do not stand in the way of health insurance agents and brokers who want to continue assisting consumers so that they can find the best health coverage to meet their needs.”
The legislation is supported by the National Association of Health Underwriters (NAHU), the Independent Insurance Agents & Brokers of America (IIABA) and the National Association of Insurance, Financial Advisors (NAIFA) and the Council of Insurance Agents and Brokers (CIAB).
Janet Trautwein, CEO of NAHU said, “MLR requirements…continue to have a devastating financial affect on the country’s about half-million licensed professional health insurance agents and brokers, and on all of their employees and their millions of employer and individual clients. While we agree with the goal of providing consumers with more value for healthcare dollars spent, the MLR requirements significantly and negatively affect access to health insurance agents and brokers at the very time our economy is the weakest and healthcare consumers need the most help.”
Trautwein noted that millions of individuals and small businesses depend on licensed agents and brokers to help them navigate the healthcare market and find health plans that suit their needs and budgets. In fact, as the Congressional Budget Office said, agents and brokers often serve as de facto human resources departments for many small firms-negotiating premiums, processing claims and enrolling employees. Without agents’ expert advice, many individuals and businesses will end up spending more for health insurance and get less care.
“We soon hope to see a similar bill introduced in the House as we are confident that all parties will be able to work together to resolve the issue during this congressional session. We look forward to working with members of Congress and the Administration on this critical issue and other needed improvements to the healthcare reform law,” she said.
Legislation to Eliminate the Health Insurance Tax is Reintroduced
U.S. Senators John Barrasso (R-WY) and Orrin Hatch (R-UT) reintroduced the Jobs and Premium Protection Act (S.603), which would eliminate the health insurance tax included in the president’s health care law. Senator Barrasso said, “Over the last three years, Americans and small businesses have watched their health premiums increase under the president’s health care law. Now, they’re set to get hit again unless Congress repeals the costly health insurance tax. Small businesses and their employees are the ones who are going to end up paying this unfair tax.”
Senator Hatch said, “American families and job creators can’t afford the cost or consequences of this ObamaCare health insurance tax. Higher insurance costs, fewer jobs and smaller paychecks is not what president Obama promised when he signed the largest expansion of government into law nearly three years ago, but that’s exactly what’s already happening in no small part because of this tax, said. Raising taxes on health insurance can only ever lead to higher health care costs, because the price of the tax will be passed onto consumers. In this economy and with families and businesses struggling to succeed, it’s time we repeal this egregious tax once and for all.” Senators Richard Burr (R-NC), Dan Coats (R-IN), Mike Crapo (R-ID), Jim Inhofe (R-OK), Johnny Isakson (R-GA) and Mike Johanns (R-NE) are original cosponsors of the Jobs and Premium Protection Act.
Consumer Driven Plans Gain Popularity In Private Exchanges
During the 2013 annual enrollment period, 39% of those who enrolled in Aon Hewitt’s multi-carrier private health care exchange chose a consumer-driven health plan (CDHP), up from 12% in 2012. Conversely, the number of employees who enrolled in a PPO-type plan decreased from 70% in 2012 to 47% in 2013. For 2013, 32% of employees chose a similar type of plan their existing coverage such as a PPO for example. Twenty-six percent chose richer coverage. Forty-two percent reduced their payroll contributions and selected a less rich form of coverage.
Sixty-eight percent 68% of exchange enrollees used a health plan comparison tool compared to just 48% of employees who completed a traditional enrollment with Aon Hewitt. In addition 57% of exchange enrollees used the provider search tool compared to only 14% of traditional-plan enrollees. For more information, visit www.aonhewitt.com.
Health Plans Pair High Coinsurance With Big Out-of-Pocket Costs
Health plans with the highest average coinsurance rate (above 40%) also have the highest average annual limit on out-of-pocket expenses for enrollees. The coinsurance rate did not track predictably with the average deductibles that consumers pay.
Coinsurance is a common term in the individual and family market as a method of cost sharing for more expensive services, including hospitalization, surgery, child birth, and emergency care. Out of the 9,711 plans examined, a quarter of plans with coinsurance rates were higher than the national average. The lowest range of up to a 10% coinsurance rate corresponded to an average out-of-pocket limit of $4,286 while the highest range of above 40% corresponded to an average limit of $8,825.
The Affordable Care Act (ACA) will prevent companies from offering plans with some of the outer limits of these costs, but in some instances, consumers may face even higher deductibles and out-of-pocket costs than the average plan.
Kev Coleman, head of Research & Data at HealthPocket said, “This is definitely a situation of buyer beware, particularly if people assume that a plan with a low premium but high coinsurance translates into less money out of their pockets in a given year. A serious medical episode could completely change the financial affect of the health plan.”
Starting in 2014, cost transparency will be even more critical since health plans will be designed around the percentage of medical costs the consumer is expected to pay. Consumers will need to understand how much of their costs their health plan covers and what their healthcare providers charge for services.
Using figures from a study by the Kaiser Family Foundation, the analysis compared average costs for individual and family plans with some potential designs for the upcoming Bronze and Silver plans offered under the ACA. A Bronze Plan with the same coinsurance rate as the national average was found to have a higher deductible and out-of-pocket limit than the average plan. A Silver Plan using the same coinsurance rate as the national average had a higher out-of-pocket limit but significantly lower deductible.
All plans under the ACA will include their deductibles as part of the out-of-pocket limits, making it easier for consumers to better estimate their costs, and more services will be covered under these plans than the comparison plans. For more information, visit http://www.healthpocket.com.
Americans Are Still in the Dark About Health Reform
Americans are not sure how the health reform law will affect them and few are paying attention to state-level decisions about implementation, according to the latest Kaiser Health Tracking Poll.
Though opinion on the law remains nearly evenly divided, opponents’ attacks seem to have taken a toll on the public’s expectations. Americans are now more likely to say the law will make things worse rather than better for their families. While most of the law’s individual provisions remain popular, many of the most well-liked elements are the least well-known among the public. Public knowledge of the ACA’s provisions has not increased since 2010. In fact, awareness of some key provisions has declined since the law’s passage when media attention was at its height.
The public hasn’t been paying much attention to the decisions of state and federal policymakers about Medicaid expansion and health insurance exchanges. Forty-eight percent have hear nothing about their state’s decision on whether to create a state run exchange; 15% have heard some; and 7% have heard a lot about it.
While health care cost growth has slowed in recent years, a majority of the public perceives that the country’s health costs have been going up faster than usual. While health care cost growth continues to outpace inflation, the rate of growth in national health expenditures has slowed markedly in recent years. The public’s perception is quite different, however. Fifty-eight percent say that, the cost of health care for the nation has been going up faster than usual over the past few years.
Thirty-four percent say that their own family’s health care costs have been going up faster than usual while 24% say the costs been going up about the same amount as usual, and 32% say their costs have held steady in recent years. Only 2% say their costs have been going up more slowly than usual or have come down. For more information, visit www.kff.org.
Hospital Prices Drive Health Care Costs
Inpatient Hospital prices increased 8.2% per year from 2008 to 2010 with wide variation in price levels and growth rates across states and localities. The study published in the March issue of the American Journal of Managed Care (AJMC) was conducted by researchers at America’s Health Insurance Plans (AHIP).
Taking into account the complexity of treatment and the number of procedures performed, the authors estimate that 1.3% to 1.9% of this increase could be attributed to increased intensity per admission. Thus intensity-adjusted price increases ranged from 6.2% to 6.8% annually during this period.
The price for a spinal fusion increased the most (15.2% per year) from 2008 to 2010. That was followed by bronchitis and asthma treatment (10.3% per year) and uterine laparoscopic procedure for non-malignancy (9.8% per year).
A recent report from the Health Care Cost Institute found that despite some increases in utilization, spending growth was driven primarily by increases in the prices paid. Last year, the S&P Healthcare Economic Composite Index showed the average per capita cost of hospital services in the commercial market had increased by nearly 8%.
Data show that increasing provider consolidation is one contributor to rising hospital prices. When hospitals consolidate, merging with other hospitals or buying up physician practices, they have greater negotiating strength and competition is limited. The result is higher prices for services, higher costs for patients, and often no improvement in the quality of care delivered. AHIP recently filed an amicus brief on the affect of hospital consolidation in the Court of Appeals for the Sixth Circuit in support of the Federal Trade Commission (FTC). For more information, visit www.ahip.org.
MassMutual Reports Strong Retirement Plan Sales
MassMutual is enjoying a strong start to 2013 following the company’s recent acquisition of The Hartford’s retirement plans business. Through February, MassMutual’s retirement plan sales results are ahead of plan by 25%.
While 71% of the sales pipeline is with large broker-dealer firms, independent firms are gaining share quickly. MassMutual’s proposal activity in the emerging markets (under $5 million in assets under management) is its strongest ever, with 80% of new plans coming through third-party administrators (TPAs). Month-over-month proposal activity in February increased over January, with March off to an even better start. For more information, visit massmutual.com.
One America Sets Sales Records
The OneAmerica companies set a new sales record in 2012 for employer-sponsored retirement plan sales. Sales were up 22% over 2011’s previous record. It’s the third straight year company broke its record for new retirement plan sales.
The company’s tax-exempt unit saw a 57% increase in sales of employer-sponsored 403(b) plans. Total assets and participant counts also set records. OneAmerica also set a record with 9% growth in renewal contributions – a measure of the growth of assets within retirement plans already with the companies.
Bill Yoerger, president of retirement business for the OneAmerica companies said, “We continue to execute on our sustainable, multi-year growth plan to be highly competitive in the multiple markets we serve in the 401(k) and not-for-profit markets. We’re particularly excited that we continue along an growth plane, but also that we grew in all of our markets from small to very large plans.”
Sales were up 140% over 2011 through OneAmerica’s actuarial and consulting company, McCready and Keene, which administers retirement plans through its open-architecture trust solution. OneAmerica ended the year with a 96% retention rate on existing business. For more information, visit www.oneamerica.com.
Pension Plans Faced Record Deficit in 2012
Record-low discount rates among the 100 largest US corporate pension plans led to record-high pension obligations and a $388.8 billion pension-funding deficit. That’s a $61.1 billion deficit increase in 2012, according to a study by Milliman. Since the end of 2010, declining interest rates have widened the pension funding deficit by more than $150 billion, driving record deficits in each of the last two years. The pension-funding ratio stood at 77.2% at year’s end, down from 79.2% at the end of 2011. The deficit increase and reduced funding ratio in 2012 happened in spite of efforts by certain plan sponsors to de-risk their pension plans.
With the Federal Reserve Board indicating its intention to keep interest rates low through 2014, pension obligations will remain high. The year is off to a strong start from an equity perspective, and de-risking may continue in 2013. But until interest rates move favorably, the pension-funding deficit is likely to continue.
Many pension plan sponsors made significant efforts to reduce risks in 2012, even as record-low interest rates made it an expensive time to pursue these kinds of risk management efforts, says John Ehrhardt, consulting actuary and co-author of the Pension Funding Study. “But there was no fighting the inevitable gravity of these low interest rates, as the 100 pension plans in our study saw a cumulative deficit increase in excess of $60 billion. All this in spite of strong asset performance that exceeded the expectations of most plan sponsors. People are probably getting tired of hearing me say this, but pension funding status will continue to be tied to interest rates. If rates stay low — and all indications are that they will through 2014 — these pension plans will struggle to fill their funding gap.
With an 11.7% investment return in 2012, the Milliman 100 pension plans performed better than they expected—but it wasn’t enough to offset the ballooning deficit. Nor were contributions in excess of $60 billion.
While the $61.5 billion in contributions during 2012 was significantly greater than most prior years, it exceeded the 2011 total by only $6.3 billion and the 2010 total by only $1.8 billion. The lower-than-expected contributions were likely due to plan sponsors electing to change their contribution strategy following the passage of the MAP-21 interest rate stabilization legislation.
Following a $38.5 billion charge to earnings in 2011, the Milliman 100 pension plans again set a new record for total pension expense, with a $55.8 billion charge to earnings. The $17.3 billion increase in pension expense is consistent with the prediction of $16 billion said by last year’s study. This year’s study predicts a $7.6 billion increase in pension expense in 2013.
In 2011, plan sponsors decreased the percentage of assets invested in equities by more than 5%. In 2012, the percentage of assets allocated to equities remained relatively stable (from 38.2% to 38.0%), as the move toward liability-driven investments (LDI) slowed. Because of the strong performance of equities in 2012, plans with higher equity allocations had better investment returns than those with higher allocations to fixed-income investments. For more information, visit milliman.com.
Covered California Faces Criticism Over Plan To Partner With Wal-Mart
Covered California — the state’s health insurance exchange — is facing criticism over a plan to allow Wal-Mart to enroll individuals in the health plans offered through the new insurance market, the Los Angeles Times reports Covered California officials want employees at Wal-Mart and other retailers to help individuals learn about and purchase health plans offered through the state health insurance exchange.
However, labor unions and consumer advocates oppose the idea, arguing that Wal-Mart and similar retailers should not advise others on health coverage when many of their workers do not qualify for employer-sponsored health insurance and instead get benefits through Medi-Cal, California’s Medicaid program.
James Araby — executive director of the United Food & Commercial Workers Union’s Western States Council told the LA Times, “We are appalled and offended that the exchange would contemplate partnering with Wal-Mart and other retailers notorious for failing to provide health benefits to many of their workers and providing substandard benefits to the workers who do qualify.” Wal-Mart defended its employee health benefits and said that they exceed what many retailers typically offer their workers. A spokesperson for Wal-Mart said that it is too early to discuss a partnership with the exchange.
Labor leaders met with Covered California officials with a goal of developing requirements for retailers that partner with the exchange to ensure they are providing comprehensive health benefits for workers. Union leaders said they will pursue legislation if they cannot reach an agreement with exchange officials.
Peter Lee — executive director of Covered California – told the LA Times, We are not changing our retail strategy, and it would be a distraction to have legislation about setting different standards for who the exchange can work with.”
CAHU Sponsors Day at the Capitol in Sacramento
CAHU’s Day at the Capitol will be held May 14 and 15 in Sacramento. It will include professional development sessions with the opportunity to earn CEUs, a legislative update. Sessions will cover how agents can get ready for California’s new health insurance market and the health benefit exchange. The will also be an opportunity to meet your legislator for more information, visit http://www.cahu.org/meetings/day-at-capitol.
Life and Annuity Need to Adapt to a Changing Market
The consumer market for life and annuities is stressed by demographic, lifestyle and preference changes, according to a study by Conning. Mary Pat Campbell, analyst at Conning, said “Our analysis of the consumer market for life insurance and annuities identified eight key areas of change that insurers must manage. Some of the most pressing right now are the changing age profile and socioeconomic shifts, as they have more immediate affect on life events that typically drive life insurance sales.”
Stephan Christiansen said, “Consumers’ life insurance protection gap actually doubled from 2006 to 2012 due to the affect of consumer changes.” That analysis identifies a growing need for coverage that forward-thinking companies are looking to target with new distribution and product design solutions. At the same time, the market is becoming more diverse, with individual consumer segments developing at different paces. Those insurers that are most agile will create opportunities in this time of change. For more information, visit www.conningresearch.com.
Dental and Vision Plan App
Guardian Life enhanced the Guardian Anytime Mobile App.
Members can now view, e-mail, or print dental and vision member identification cards directly from their iPhone and Android smart phones – another way Guardian is making it easier and more accessible for customers to use benefits. The recent upgrade makes it more convenient for members to view an image of their ID card and share the card with their provider via email or print to a wireless printer. For more information, visit www.guardiananytime.com/mobile, for more information.
American General introduced Elite Global Plus II. The fixed index universal life insurance (IUL) product provides death benefit protection as well as the strongest accumulation potential of the carrier’s UL products. American General says that these features make it perfect for supplemental retirement funding and other future income stream needs. For more information call 800-677-3311 or visit