Health Insurers Must Reinvent Their Business Model Toward Consumerism

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by Leila Morris – Health insurers must change their business models now to address a growing wave of consumerism, according to Psilos Group’s 2014 Healthcare Outlook. “The health insurance industry’s 50-year legacy as a business-to-business model is on the edge of irrelevance. The health insurance market is rapidly shifting to 40% individual policies from just 10% prior to the Affordable Care Act. A change of this magnitude affects every stakeholder in healthcare,” said Steve Krupa, managing member of Psilos Group.

Insurers must reinvent their entire businesses to embrace consumer expectations and respond to a dramatic shift toward more individual policies through public and private healthcare exchanges. This means overhauling market research, benefit design, network development, operations, marketing, and sales. Psilos says that insurers need to do the following:
• Understand their new individual consumer base.
• Provide value-added products and services beyond mandated baseline care.
• Shift service to meet consumers’ demands. More consumer interaction will require contemporary technology and automation among insurers and their business process outsourcing partners.
• Understand that price transparency, quality measures, and other healthcare consumerism trends will change the relationship between insurers and providers.
• Make customer service and business transactions real‐time, 24/7, and accessible via multiple platforms, including online and mobile.
• Reach various consumer segments and leverage exchanges as a primary distribution channel, which is in stark contrast to their experience selling group plans directly to employers.

Al Waxman, CEO and senior managing member of Psilos said, “Insurers will have to make major changes…to remain competitive in a post-ACA world. The good news is that technological innovations are addressing the full spectrum of needs…If approached correctly, we’re predicting the result will be a more outcomes-focused healthcare system in which the patient is the most important aspect of the business.” For more information, visit www.psilos.com.

Employers Look to Private Exchanges

Twenty-eight percent of midsize to large employers have looked into private exchanges. Twenty-four percent say that private exchanges could provide a viable alternative for their active full-time employees as soon as 2016, according to a study by Towers Watson. These top three factors that would cause employers to adopt a private exchange for full-time active employees:
1. 64% – They see evidence that a private exchange can deliver greater value than their self-managed model.
2. 34% – Other large companies in their industry have adopted a private exchange.
3. 26% – They can’t stay below the excise tax ceiling as 2018 approaches.

In contrast, public exchanges are not on the radar. In fact, 99.5% have no plans to exit health benefits and direct active employees to a public exchange. Seventy-seven percent don’t expect public exchanges to offer a viable alternative for their full-time employees in 2015 or 2016. The Affordable Care Act’s excise tax, which is is top of mind for large employers, could cost companies billions of dollars unless they act now to keep below government-mandated cost thresholds in 2018 and beyond. Employers that have kept health care benefit costs increases lower than average are not resting on their laurels. They are working very hard to maintain that success, said Dave Osterndorf of Towers Watson.

Seventy-three percent of employers are concerned about triggering the excise tax. Forty-three percent say that avoiding the excise tax is the top priority for their health care strategies in 2015. Osterndorf said, “Private exchanges offer more choice, including account-based plans, with the tools and support for helping employees make better health decisions, and recognize the connection between their physical and financial well-being. Employee understanding and engagement are critical to the long-term sustainability of an employer’s program. Private exchanges can accelerate the fulfillment of that goal.”

Nearly three-quarters of respondents offer account-based health plans (ABHPs), with another 9% expecting to add one for the first time in 2015. Nearly 16% have adopted an ABHP as their only plan option, up from only 7% in 2012. Nearly one-third could offer ABHPs as their only option by 2015 if they follow through with plans. Private exchanges offer a new opportunity to save on health care coverage with a reduced operational burden, which is the main reason that employers are evaluating them more seriously. For more information, visit towerswatson.com.

Getting Service Right With a Private Exchange

If private exchange vendors offer the right level of consumer service, their platforms will create a revenue opportunity for carriers, brokers, and product partners in the coveted group market. But if they get it wrong, they’ll offer just another portal with a user ID and password, according to a report by Aite Group. Having an exchange platform does not negate the need for personal interaction to ensure the right plans are offered and employees are making the right decisions on tough, complicated issues. As employees face the daunting task of choosing their own benefits, vendors should consider a tiered support plan that allows employees to get help or go it alone. “Vendors must recognize the need to overstock the decision-support tool chest,” says Lindsey O’Connell, a research associate in Insurance at Aite Group. For more information, visit www.aitegroup.com.

IN CALIFORNIA

Governor Signs Pet Insurance Law

Governor Brown signed AB 2056 (Dababneh) into law. As the first law of its kind in the nation, it will require pet insurers to disclose important information about their policies, standardize definitions, and provide consumers a 30-day free look period. AB 2056 was sponsored by Insurance Commissioner Dave Jones and will go into effect July 1, 2015.

Under the new law, pet insurers must disclose reimbursement benefits, limitations on pre-existing conditions, and coverage limitations including coinsurance, waiting periods, deductibles, and annual or lifetime policy limits. Consumers will also gain a 30-day free look period to cancel a pet insurance policy for a full refund. AB 2056 was supported by a number of animal welfare organizations and consumer groups. The pet insurance industry is expected to reach $750 million by 2015 as Americans spend more than $15 billion each year on veterinary care. For more information, visit http://www.insurance.ca.gov.

ACO in Northern California

Hill Physicians Medical Group, Dignity Health Medical Foundation, and Dignity Health hospitals formed an accountable care collaboration and introduced the Aetna Whole Health product. The new product, designed for businesses with employees in Sacramento, San Joaquin, and Yolo Counties, will be available starting in April 2015. This new collaboration with Hill Physicians Inc. and Dignity Health will provide coordinated care for Aetna members through more than 280 primary care physicians, 837 specialists, 37 hospitals and 14 urgent care facilities. The accountable care collaboration will feature a new model of health care delivery that’s designed save money for employees who use providers in the accountable care network, provide a more coordinated, personalized experience for patients, and result in better health care outcomes. A new payment model will reward Hill Physicians and Dignity Health for the following:
• The percentage of Aetna members who get recommended preventive care and screenings.
• Better management of patients with chronic conditions, such as diabetes and heart failure.
• Reductions in avoidable hospital readmission rates.
• Reductions in emergency room visits.

Sacramento Bee Misclassified Employees as Independent Contractors

The Superior Court for the County of Sacramento ruled that the Sacramento Bee misclassified newspaper carriers as independent contractors instead of employees. This decision arose in a class action entitled Sawin v. The McClatchy Company, case number 34-2009-00033950. This ruling is consistent with a growing trend in California. In 2004, newspaper carriers sued the Orange County Register. After seven weeks of trial, the Orange County Register settled the dispute with the carrier class for $38 million. In 2009, the carriers for the San Diego Union Tribune sued claiming that the carriers were being classified improperly as independent contractors and not employees. The trial court in San Diego entered its judgment against the San Diego Union Tribune for damages and attorneys’ fees of approximately $10 million. The San Diego Union Tribune’s appeal is pending.

The California Supreme Court held that the newspaper carriers were employees so long as the newspaper retained any right to control how carriers performed their service regardless of whether that right to control was actually exercised. The Supreme Court in Ayala relied on the same factors as the courts in San Diego and Sacramento in rendering judgment against the newspaper companies.

An article titled, “Misclassified Contract to Cheat” appeared in the dozens of McClatchy newspapers throughout the U.S., including The Fresno Bee. It described this unlawful practice and its harmful effects. It states, “The practice, known as ‘misclassification,’ can save an employer 30% to 50% on payroll costs, the same as an employer who pays in cash. That allows the company to underbid a job by 25% and still make a profit. At the same time, state and federal governments lost billions of dollars in tax revenue needed to pay for critical social service programs. Law-abiding businesses are forced to pay higher taxes and expenses while being at a disadvantage in competing for jobs.” For more information, visit www.Callahan-Law.com for more information.

EMPLOYEE BENEFITS

Many Small Business Owners Are Bumbling HR Tasks

Many small businesses owners are handling HR functions in-house, and they don’t always do a good job. Eight-one percent of business owners handle core HR functions at their company while only 2% rely on outsourced HR consultants and firms, according to a Harris Poll Survey for TriNet. The following statistics show how small business employers are failing at HR:
• 23% lost staff to a competitor because they couldn’t match their benefits or compensation.
• 22% couldn’t hire quality talent because they couldn’t match their competitors’ benefits or compensation.
• 34% had payroll errors including disbursing checks/direct deposit late (13%), having faulty record keeping (12%), withholding an incorrect amount for taxes (8%), overpaying employees (8%), and underpaying employees (5%).
• 15% said their company lost money because they did not track expenses correctly while 15% said their staff had expensed items they shouldn’t have.
• 30% are nervous about managing HR issues.

Some small business owners spend about three weeks a year dealing with payroll taxes. Additionally, when payroll mistakes occur, business owners might have an issue with the IRS and be forced to seek financial or legal restitution.

Burton Goldfield, president and CEO, TriNet said, “HR regulations are changing much more rapidly than they did in the past…Even when business owners have dedicated internal HR staff, it can be hard for them to take care of the day-to-day needs of employees while keeping on top of the latest regulations.”

Cancer Survivors Face Lasting Financial Struggles

Sixty-two percent of middle-income cancer survivors were not financially prepared for cancer diagnosis and treatment, according to a study by the Washington National Institute for Wellness Solutions. Sixty-five percent of survivors with an annual household income of $35,000 to $100,000 did not have enough household income to cover treatment-related expenses and incurred debt. They experienced the following after treatment:
• 30% had debt of $10,000 or more.
• 15% had debt of $20,000 or more.
• 11% of those younger than 50 or diagnosed with Stage III or IV cancer, incurred more than $40,000 in debt.
• 57% said that at least one aspect of their treatment cost more than they expected. They were also surprised by the extent of expenses not covered by medical insurance.
• 55% withdrew from savings or investment accounts to finance treatment.
• 46% used credit cards.
• Survivors younger than 50 were three times more likely to borrow money from friends and family (27% vs. 8%) or withdraw from their 401(k) (24 vs. 9%).
• 25% wished they could have talked more to other survivors through support groups. Survivors recommended support services from the American Cancer Society.

Survivors face long-term physical and financial challenges after cancer treatment:
• 44% say they have less physical strength.
• 31% are less financially secure.
• 24% say their career prospects are worse.

However, 85% say at least one aspect of life has improved, and 45% say that having a healthy lifestyle a top priority following treatment, up from 28% before diagnosis. For more information, visit http://www.wninstituteforwellness.com.

LIFE SETTLEMENTS

Capital Returns to the Life Settlement Market

The life settlement market continues to show signs of recovery, according to a Conning study. Life settlement transactions increased in 2013 for the second year in a row, and 2014 is likely to continue that trend. Steve Webersen, director of research, said that Conning expects long term growth in new settlements over the next 10 years. But that growth will not be enough to offset a decrease in in-force life settlements through claims. “We will be watching for…market initiatives building volume through smaller face value and long-term care policy settlements,” he said. For more information, visit www.conningresearch.com.

NEW PRODUCTS AND SERVICES

Health Plan Comparison Tool

HealthCare.com launched a health insurance comparison website. HealthCare.com now features nearly 200 carriers and more than 90,000 health insurance plans. A tax subsidy calculator estimates financial aid from the federal government. There is also a tax penalty calculator and a guide to determine which health plan is best for each person. Also, consumers can apply online, talk to a licensed agent over the phone, or schedule an appointment with a local advisor.

Health Plan for Expatriates and World Travelers

GeoBlue introduced a health insurance plan for expatriates and long-term travelers. With GeoBlue Xplorer Select, world travelers who are in the U.S. more than 35 days a year, can meet the requirements of the Affordable Care Act (ACA) while having comprehensive coverage outside the U.S. With GeoBlue Xplorer Select, travelers retain their domestic coverage, but also have international benefits to help them access care from quality providers outside the U.S. This combined approach is often equivalent in cost to a high cover, no deductible expat plan. Applicants may qualify for short-form underwriting and don’t need to provide any medical records or detailed health questionnaires. The underwriting process is expedited, the assigned rates are not based on the applicant’s health history, and maternity coverage is available on the plan effective date. For more information, visit http://www.geo-blue.com.

Universal Life

MetLife launched the MetLife Secure Flex Universal Life product, which offers guarantee provisions and strong cash value growth. A death benefit guarantee offers guaranteed coverage regardless of policy performance up to a certain age (as late as 90 depending on issue age). Policyholders also get a guarantee of policy charges at the end of the death benefit guarantee period. As they purchase the policy, they know exactly how much cash value will be needed to continue coverage after the death benefit guarantee period ends. For more information, visit www.metlife.com/moretolife.

Guaranteed Protection Universal Life Product

The Penn Mutual Life has reduced no-lapse guarantee premiums for the popular lifetime level and 10 pay options by an average of 3% to 5%. The premium reduction and the chronic illness accelerated benefit rider are included on most policies at no additional charge at issue. For more information, visit http://www.pennmutual.com.

Open Enrollment Video Series

Guardian Life is launching an online video series that explains how to optimize your workplace benefits to avoid coverage gaps and achieve financial goals. It can be found on www.GuardianAnytime.com and YouTube.com

Website for Small Businesses

Colonial Life launched a website for small business owners. The site offers a free e-book on common mistakes when growing a small business. It offers tips on common concerns of small business owners, such as finding and keeping the right people, and managing cash flow. The site also offers blog posts on topics from managing Millennials to saving money. “This new site doesn’t have our usual focus on Colonial Life’s products and services. It’s designed to help build our reputation with small business owners,” said Steve Bygott, assistant vice president, market development. For more information, visit http://www.coloniallife.com/smallbusiness.

Medicare Drug Plans

UnitedHealthcare introduced its 2015 Medicare health and prescription drug plans with an out-of-pocket maximum. Most plans members will get their medications without paying a separate premium for a stand-alone Part D plan. For 2015, the company is increasing the number of medications on the tier 1 of the formulary for Medicare Advantage-Part D plans. Many of the medications that beneficiaries use most commonly will be available for a lower copay. For example, generic versions of Lipitor, Synthroid, Actos, Coumadin, Fosamax, Singulair and 72 other drugs will move to tier 1. UnitedHealthcare is also lowering prices through its Pharmacy Saver program in 2015, allowing Medicare Advantage members to save even more money on their medications. Members will be able to show their member ID card at participating pharmacies to get select generic medications for as low as $1.50 per 30-day prescription. UnitedHealthcare will offer a choice of Medicare Advantage plans with monthly premiums. These plans will offer additional features or lower cost-sharing. Monthly premiums in 2015 will not change for 60% of UnitedHealthcare’s Medicare Advantage members. More than 22 million Medicare beneficiaries in the company’s 2015 coverage area, including three-quarters of its Medicare Advantage members, will have access to a standard UnitedHealthcare Medicare Advantage plan with a $0 premium beyond the Medicare Part B premium. For more information, visit www.UHCMedicarePlans.com.