LONG TERM CARE INSURANCE
• Insurers Report a Big Jump In LTC Insurance Sales
• Ancillary Benefits to Be a Greater Differentiator in 2013
• 401(k) Participants Appreciate In-Plan Advice
• Individual Premiums Expected to Rise 14%
• Commissioner Criticizes Anthem’s Rate Increases
• Health Plans Get Mixed Grades
• Cora Tellez Receives Living Example Award
• Society of Actuaries Predicts Premium Increases
• Premiums Could Rise Under Healthcare Law, Sebelius Concedes
• CMS Reverses Proposed Cuts to Medicare Advantage
• Pay for Performance Is Still Rare
• Indexed and Income Annuities Set Sales Records
• Health Care Quality Report Card App
• Annuity With LTC Benefits
• Disability Policy for Small Business Owners
• Breaking into the Advice Business
Insurers Report A Big Jump In LTC Insurance Sales
A number of leading long-term care insurance companies received significant increases in applications during the first two months of 2013 compared to the same time period last year, according a study by the American Association for Long-Term Care Insurance. Several of the nation’s leading insurers saw a 30% to 55% increase in the number of applications submitted during January and February.
“Starting the year with significant sales growth is a welcome and very positive sign for the industry. Despite the negative talk about premium increases and insurer departures, consumer interest has never been greater. Based on producer feedback many agents and insurers are having an outstanding start to the new year,” said Jesse Slome, executive director of the national trade group.
Slome said, “Not everyone saw submission increases compared to the previous year, but everyone still had very strong sales activity. This is a great start to the year and the continued outlook is excellent.” Leading insurance companies marketing long-term care insurance policies include Genworth Financial, John Hancock, Transamerica, Med America, Life Secure and New York Life. For more information, visit www.aaltci.org.
Ancillary Benefits to Be a Greater Differentiator in 2013
A study by United Benefits Advisors (UBA) reveals that ancillary benefits will be a greater differentiator in 2013 than ever before. Thom Mangan, UBA CEO said, “As health care exchanges go online as a result of health care reform and fewer businesses are burdened with a full health care plan, we anticipate that interest in ancillary products will continue to grow. With more flexibility to offer attractive benefits like dental, life, long-term disability, and paid-time off, employers are increasingly adding these product lines, at little or no cost, to attract and retain top talent.”
Preliminary results from a study of nearly 12,000 employers reveal vast differences in ancillary benefits offered by employer size, region, and industry, highlighting the importance of using local benchmarking data in benefit planning. For example, only 0.5% of the employers, overall, offer on-site clinics compared to 7.4% of employers with more than 500 employees. Eight percent of employers with 1,000 or more employees offer pet insurance compared to .5% of those with less than 200 employees.
The survey also reveals the following:
• Nearly three quarters of employers offer dental coverage, with almost all large employers providing the benefit.
• Membership discounts are most popular in the Northeast where more than 5% of employers offer the benefit compared to less than 2% in the central part of the country.
• 95% of businesses with more than 500 employees offer group-term life insurance, yet only 56% with less than 50 employees offer this benefit. Thirty-seven percent of employers in all major industries offer the coverage.
• Construction, agriculture, and mining industries offer long-term disability insurance much less often (31%) than the national average (45.9%).
• 7.9% offer critical illness coverage and 3% offer long-term care insurance.
For more information, visit www.UBAbenefits.com.
401(k) Participants Appreciate In-Plan Advice
Employees who use the advisory services offered in their 401(k) plan have a more positive outlook about their future retirement, according to a survey by Mercer. Eighteen percent use online or in-person advisory services. These participants are much more likely to feel that they will have enough money for retirement, can live as well or better than when working, and will not have to delay retirement. Seventy-nine percent of participants say their plan offers some type of advice (online, in-person, or over the phone,) up from 72% in 2011.
Typical in-plan advice users are younger; better educated, and have higher incomes, balances, and deferral rates compared to those who don’t use the advice services. Suzanne Nolan, Administration Marketing and Communications leader for Mercer said, “The true challenge for a plan sponsor offering in-plan advice is to reach those on the lower end of the income spectrum where every dollar counts and who may also have a shorter time frame in which to accomplish their retirement savings goals.” For more information, visit http://www.mercer.com/2012-mws-summary.
Individual Premiums Expected to Rise 14%
Californians who buy individual health plans will see their premiums increase an average of 14% next year under the Affordable Care Act, but payments will depend largely on income, age, and where they live, according to a report by California’s health care exchange.
The study, conducted by Milliman, finds that premiums could rise for some individuals who purchase coverage through Covered California, but don’t qualify for federal subsidies. In contrast, those who are eligible for subsidies are likely to pay significantly lower monthly premiums.
The factors that are driving up premiums include the requirements for richer benefits for individual plans, the increasing number of older and less healthy people who will get coverage, and several other changes mandated by the ACA.
The most significant change will be a re-balancing of health insurance premiums, so that the consumer pays less out of pocket in co-pays and deductibles, and the premiums absorb more of the cost of care. This shift could save money for Californians who use medical services more often, but initially will result in higher premiums.
Patrick Johnston president and CEO of California Heath Plans (CAHP) said, “A small percentage of Californians will purchase their insurance through the exchange. Most will have the benefit of more predictable and comprehensive coverage and subsidies to help pay for that coverage. But lower cost sharing, richer benefits, and more predictable coverage will come at a cost for some.”
Individuals and some small businesses will be able to comparison shop for coverage and take advantage of subsidies for families earning up to $94,200 who purchase coverage through Covered California.
Johnston explains that the following ACA changes may affect premium prices for certain Californians:
• Richer benefits for individuals and reduced out-of-pocket costs: The ACA’s requirement for richer benefits for individual insurance will make these offerings more like employer-provided plans with expanded coverage and lower deductibles and co-pays. With richer benefits, Californians in the individual market may be required to purchase more costly coverage with additional benefits they may never use, such as pediatric dental care for beneficiaries who have no children. They may also have higher premiums because deductibles and co-insurance amounts will be limited. However, their health care costs could be lower because they will pay less out-of-pocket for doctors’ appointments, prescription drugs and other medical expenses.
• Younger beneficiaries lose some of their advantage: The ACA will change the way health plans calculate benefits, causing significantly higher premiums for younger beneficiaries. Because they were expected to be healthier, younger Californians previously paid about $1 for every $5 in premiums from older Californians. The ACA limits the difference to three to one, which will bring significant increases for younger people and lower premiums for older people.
• New taxes are imposed: The ACA will impose a sales tax that will average $10 billion a year to help pay for expanding coverage — adding nearly $5,000 to an average California family’s premiums over a 10-year period.
Johnston said, “All these expansions add to the already increasing cost of care — costs that have outpaced inflation as obesity, chronic conditions and many other factors have driven up medical expenditures. Health plans’ narrow profit margins and rising medical expenses leave no room for premiums to absorb the increasing costs of care, so we must all work together to lower these costs to ensure coverage is affordable. Affordability is a challenging issue, and we look forward to working with the state and Covered California in the months ahead.” For more information, visit http://www.coveredca.com.
Commissioner Criticizes Anthem’s Rate Increases
Insurance Commissioner Dave Jones calls the latest rate increase by Anthem Blue Cross “excessive and unreasonable.” Anthem Blue Cross is increasing rates on its small group health insurance policyholders while posting a return on equity of 25.2% as noted in the company’s 2012 financial statements. The average 12-month increase for the policyholders affected by this rate filing is 10.5%. For some Anthem small business customers, this translates to a 12-month increase of 22.9%. Anthem’s April 1st small group rate increases affect more than a quarter of a million healthcare consumers. “These ongoing and excessive rate increases are simply unsustainable, as many small businesses struggle simply to survive,” said Jones.
Department actuaries says that Anthem’s rate filing includes Over estimated future claims and utilization and excessive return on equity. It also charges policyholders in 2013 for healthcare reform fees and taxes that are not even being collected by the federal government until 2014. In fact, the federal government has yet to even determine the amount of some of those fees and taxes.
The April 1 rate increase will affect about 45,000 healthcare consumers within 7,000 small business employer groups whose policies are up for renewal between now and June and is also imposed on the rest of the small business policyholders as their polices renew throughout the rest of the year — affecting as many as a quarter of a million healthcare consumers.
Jones notes that this is the second time this year Anthem has imposed a rate increase on its small business customers. Jones is asking Anthem to reduce the average rate by 2.5% for these small businesses, which is an average reduction of 7.3% from the filed rates.
Health Plans Get Mixed Grades
Under California’s health plans and medical groups more children are getting immunized, getting checked for excess body fat, and being treated appropriately for throat infections. However, treatment varies widely for adults with chronic conditions, such as diabetes or heart disease depending on where they live or which HMO, PPO, or medical group provides their care, according to a report by The Office of the Patient Advocate (OPA).
HMOs and medical groups dramatically improved (14%) the number of adolescents receiving immunizations (measles, tetanus, hepatitis B, meningitis). Medical groups increased childhood immunization rates by 4%. PPOs are not rated for this measure.
Seven percent more adolescents and children covered by HMOs were checked children for body mass index. (PPOs are not evaluated on this measure.)
Seven percent more children in HMOs were treated appropriately for throat infections by not prescribing antibiotics unnecessarily. Five percent more were treated appropriately under PPOs and 6% more were treated appropriately under medial groups.
Among HMOs, care for lung disease, diabetes, and heart disease ranged from a score of two to four stars with one star representing poor care and four stars representing excellent care. HMOs significantly improved how often they determine body mass index for adults. Among PPOs, care for diabetes and heart disease ranged from one to three stars. PPOs improved by 10% in their rate of treating patients after a heart attack by ensuring that they get beta blocker drugs for at least six months after hospitalization for a heart attack. For more information, visit www.opa.ca.gov, or call (866) 466-8900.
Cora Tellez Receives Living Example Award
The Bay Area Tumor Institute has named Cora M. Tellez as this year’s recipient of its Living Example award. Tellez, who is president & CEO of Sterling HSA, was recognized for her contributions to the civic, philanthropic, and economic development of the San Francisco Bay Area. In 2012, Tellez led the development and launch of the Gift of Learning and Gift of Health program. Intended to encourage donors in the U.S. to send money to needy relatives in the Philippines, the program offers a secure vehicle to ensure that the donor’s funds are spent for their intended purpose.
She helped found Asian Community Mental Health and Filipinos for Social Justice. She has been recognized for her professional and community endeavors by such organizations as Women Healthcare Executives, the Asian Pacific Fund, and the Anti Defamation League. She also serves on the boards of several nonprofit organization such as the Institute for Medical Quality and UC San Diego’s Center for Integrative Medicine.
She is a former board member of Crescent Healthcare, Bank of Hawaii, Glendale Federal Bank, Cal Fed Bank, Catellus Development Company and First Consulting Group. She has served on numerous non-profit boards, including The Cowell Foundation, Mills College, Holy Names University, and The Institute for the Future and Philippine International Aid.
Society of Actuaries Predicts Premium Increases
A report by the Society of Actuaries illustrates several factors that will affect premium rates when the exchanges kick in under the Affordable Care Act (ACA). How the ACA affects average cost in the individual market will vary significantly across states. States that will have lower average costs under the ACA use community rating in the individual market. The reduction reflects the younger and healthier individuals who will enroll due to the reduced cost from the premium subsidies.
After three years of exchanges and insurer restrictions, the percentage of uninsured will decrease from 16.6% to between 6.8% and 6.6%. The effect of the ACA in reducing the number of uninsured will vary substantially across states depending on proportion of population that is uninsured before the ACA, the portion of the uninsured below 400% of FPL, and average individual costs.
Under the ACA, the individual market will grow 115%, from 11.9 million to 25 .6 million lives; 80% of that enrollment will be in the exchanges. Much of the increase in coverage will be due to premium and benefit subsidies for lower income individuals, many of whom will select the silver benefit tier since that is the tier for which benefit subsidies are tied.
Individual costs per-member/per-month will increase 32% under ACA. These costs reflect the underwritten risk in most states. While high-risk pools generally have few enrollees, the cost per individual is very high. Moving high-risk pool individuals into the individual exchange generally creates a significant increase in cost. However, it can be argued that proportionately more uninsured individuals will have similar risks in states that had relatively small high-risk pools. For more information, visit soa.org.
Premiums Could Rise Under Healthcare Law, Sebelius Concedes
The Obama administration acknowledged that some people could see their premiums rise under the healthcare reform law, according to articles in The Wall Street Journal and The Hill. HHS Secretary Kathleen Sebelius told reporters that those who are moving into a fully insured product for the first time may face higher costs. Sebelius said that transparency and market strategies will ease potential rate shock for consumers. “This is the first time…that insurance companies have to file their rates; it has to be very transparent; they have to offer the same kind of coverage without 5,000 tiny little lines and internal caps; and they have to compete for customers. And I am a believer in the market strategies that in and of itself will minimize the rate affect,” Sebelius said. The secretary’s concession on premiums put the White House on the defensive. When asked about Sebelius’s remarks, a spokesman for president Obama said healthcare costs are falling thanks to the reform law.
CMS Reverses Proposed Cuts to Medicare Advantage
The Centers for Medicare & Medicaid Services (CMS) reversed its position on taking a deep new cut to Medicare Advantage. CMS had proposed a 2.2% reduction in Medicare Advantage payments for 2014, at a time when medical costs are projected to increase by 3%. The new proposed payment cut would have compounded the hundreds of billions of dollars in Medicare Advantage cuts and new health insurance tax on Medicare Advantage policies included in the Affordable Care Act (ACA).
America’s Health Insurance Plans’ (AHIP) Coalition for Medicare Choices (CMC) launched a highly successful TV ad campaign featuring Medicare Advantage beneficiaries explaining what the cuts would mean to them. (The ad can be viewed at www.MedicareChoices.org.) In just four weeks, more than 40,000 Medicare Advantage beneficiaries contacted Congress and 46,000 seniors liked CMC on Facebook. More than 130 members of Congress from both parties sent letters to CMS sharing their concerns about the affect the new cut will have on seniors.
AHIP president and CEO Karen Ignagni said, “CMS has taken an important step to help stabilize Medicare Advantage at a time when the program is facing significant challenges. We are currently reviewing the final rate announcement and will continue to work with policymakers in both parties to strengthen this critically important part of Medicare that provides high-quality, affordable coverage to more than 14 million seniors and people with disabilities.”
Pay for Performance Is Still Rare
Only about 11% of the health care dollars paid to doctors and hospitals are tied to how well they deliver care or whether they create incentives to improve quality and reduce waste, according to a report by Catalyst for Payment Reform. Most payments are fee-for-service. Under this traditional model, providers are paid for every test and procedure they perform regardless of the necessity or outcome. Payments are also bundled, capitated, or partially capitated without quality incentives.
Forty-three percent of value-oriented payments offer bonuses or added payments for higher quality care. An example is fee-for-service with shared savings. Fifty-seven percent of value-oriented payments put providers at financial risk if they do not meet certain quality and cost goals. For more information, visit www.catalyzepaymentreform.org.
Indexed and Income Annuities Set Sales Records
Indexed and income annuity sales reached record highs in 2012, according to a Beacon Research study. Indexed annuity sales went up 3.7% while income annuity sales went up 8.5%. In the fourth quarter, income annuity sales were up 7.2% from a year ago and 0.3% from the previous quarter. It was the third consecutive quarterly improvement. Indexed annuity sales were up 1.2% over a year ago, but were down 3.2% from the previous quarter.
Deferred income annuity sales topped $1 billion for the first time in 2012. Sales climbed nearly 150% from the first to the fourth quarter. These products often generate more retirement income than do other annuity alternatives and are easy to understand. “It’s not surprising that growth was so rapid. The need for retirement income was also an important driver of the annual increase in indexed annuity sales,” said Jeremy Alexander, CEO of Beacon Research.
Total fixed annuity results were up 6.5% in the fourth quarter. Annual sales fell 11.6%. Large losses in fixed rate annuity sales were responsible for the annual decrease. Most carriers chose to maximize margins at the expense of sales. For more information, visit www.annuitymarketstudy.com.
Health Care Quality Report Card App
The Office of the Patient Advocate (OPA) is offering the 2013 health plan report cards on a redesigned, consumer-friendly Website, www.opa.ca.gov and as a mobile app for iPhone and iPad. The Website and app make it easy for consumers to review quality ratings on more than 40 clinical care measures for the state’s 10 largest commercial Health Maintenance Organizations (HMO), six largest commercial PPOs and 209 medical groups. For more information, visit www.opa.ca.gov.
Annuity with LTC Benefits
The State Life Insurance Company, a OneAmerica company, is offering an updated version of its popular asset-based long-term care annuity product, Annuity Care II. The product has been redesigned to perform well in a sustained low interest rate environment. Annuity Care II is designed as a single-premium annuity offering long-term care benefits. When LTC expenses are incurred, the consumer uses annuity value money first. When that value is exhausted, a special continuation of benefits fund is available. The recent enhancement ensures clients can carry a long-term care benefit that will never decrease due to interest rates and/or insurance charges and is guaranteed to provide at least five years of LTC protection. For more information, visit www.oneamerica.com.
Disability Policy for Small Business Owners
MetLife introduced a Business Overhead Expense (BOE) policy to help small business owners keep their business up and running despite a disabling illness or injury. Covered expenses may include office rent, utilities, employee wages, maintenance services, or other fixed overhead expenses. The policy is only available through professional associations who offer members the opportunity to obtain MetLife’s Group Long-Term Disability Insurance. For more information, visit www.metlife.com.
Breaking into the Advice Business
InvestmentNews is sponsoring a Webcast on April 16 from 1:00 to 2:00 pm PT. Panelists will explain how to get a foot in the door in the financial advice industry. InvestmentNews is holding a webinar on Attracting high-net-worth clients April 23 from 1:00 pm to 2:00 pm PT. For more information, visit www.investmentnews.com.