Medicare Advantage – A Growth Vehicle for Health Plans

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Health plan executives may be missing an opportunity to capitalize on the growing demand for Medicare Advantage (MA) plans, according to a survey by KPMG. Consumer adoption of these plans is expected to grow as more Baby Boomers enter retirement years. Despite interest and growing membership in MA, the number of health plans viewing the category as a major part of their market offerings decreased to 24% in 2014 from 35% in 2011. Only 29% of health plan executives see MA as a source of market segment growth in 2015, putting that category behind individual insurance and small and large group plans.

“Health plans have been going through unprecedented transformation as a result of the Affordable Care Act…Individual insurance is expected to be a major part of health plan offerings, but there is an overlooked opportunity to engage aging Baby Boomers, who may see this as an option instead of traditional Medicare as they enter their retirement years,” said Ashraf Shehata, U.S. advisory leader for Health Plans.

Congressional Budget Office projections see MA enrollment growing to 19 million by 2017, an increase from the 16 million in these plans. Two in three people older than 64, who are open to joining MA plans, are likely to do so this year. Renewal among members is at 85%, and one in three traditional Medicare plan beneficiaries are open to changing to MA.

According to the KPMG survey, nearly half of the people covered by Medicare would be willing to absorb a premium increase of $100 per month while 38% would switch to narrower provider networks and 14% would seek plans with higher deductibles. If the monthly premium for traditional Medicare increases by $200, only 19% would be willing to absorb the premium increase. Narrower networks would be the most attractive option to Medicare beneficiaries under that scenario over higher deductibles (54% versus 27%).

Most people pay $104.90 for Medicare Part B, which covers durable medical equipment, medically necessary services and preventive care, according to CMS. Two-thirds of MA enrollees have at least one serious chronic illness, compared to 34% of enrollees in traditional Medicare. This disparity is likely to continue. More than half of those who said they were likely to enroll in MA in 2015 have a chronic condition. Seventy-seven percent of MA enrollees with chronic conditions are satisfied with their health plan, versus 66% of those with no chronic condition.

Shehata said, “Seniors are leaning toward MA plans as a better alternative to Medicare gap coverage, and people with chronic conditions tend to be sensitive to out-of pocket medical costs. Our survey also found that seniors might be inclined to switch to MA plans if vision care were covered, if their primary doctor was coordinating care or if incentives were available for managing their blood sugar and blood pressure. There are some very interesting opportunities for health plans to profitably gain new customers while delivering value to seniors.” For more information, visit www.kpmg.com.

HHS Urged to Prepare for Possible Elimination of ACA Subsidies

The American Academy of Actuaries called on HHS to address the possible elimination of Affordable Care Act (ACA) premium subsidies. If the U.S. Supreme Court decides in favor of the petitioners in King v. Burwell, there could be a significant drop in health plan enrollment and an increase in the risk profile of remaining enrollees. This would drive up average health costs for health plans. Insurers are limited in their ability to change premiums for 2015 and 2016. As a result, premiums for  2015 and 2016 are likely to be inadequate to cover claims. These premiums need to be submitted before the court’s ruling.

The Academy said that HHS and state authorities should consider allowing contingent premium rate submissions and/or revised submissions to help mitigate the potential for inadequate 2016 premiums in FFM states. These changes could include the following:

  • Allowing insurers to submit two sets of contingent premium rates. One set would reflect pricing assumptions that would be appropriate if premium tax credits continue to be available; the other set would reflect pricing assumptions that would be appropriate if premium tax credits are no longer allowed.
  • Allowing premium rate revisions after the May 15 submission deadline.

For more information, visit www.actuary.org.

Non-Recurring Health Services Are Most Costly to Retirees

A study by the Employee Benefit Research Institute (EBRI) looked at how retirees spend their out-of-pocket money on health care. Recurring health-care services remain stable throughout retirement while non-recurring ones increase with age and tend to be more expensive.

Sudipto Banerjee, EBRI research associate and author of the report said, “Health care…is the only part of household expenditures that increases with age. While some of these costs are more predictable, others are uncertain, and for many people these expenses spike toward the end of life when resources are slim. To successfully manage your resources in retirement, a good plan may include separate preparations for each.”

In 2011, average annual out-of-pocket health care cost for a household with members 65 to 74 years old was $4,383, accounting for 11% of total household expenses. That increases for households ages 85 and above to $6,603 a year, or 19% of total household expenses.

The average annual expenditure for recurring health care expenses was $1,885 among the Medicare eligible population. Assuming a 2% rate of inflation and 3% rate of return, a person with a life expectancy of 90 would need $40,798 at age 65 to fund their recurring health care expenses. This does not include expenses for insurance premiums or over-the-counter medications.

Non-recurring health care services increase with age. In particular, nursing-home stays can be very expensive. Not surprisingly, the costs of nursing home stays, home health care, and overnight hospital stays are much higher in the period preceding death. More than 50% in every age group above 65 received in-home health care from a medically trained person before death. For those 85 and above, 62.3% had overnight nursing-home stays before death and 51.6% were living in a nursing home before death. Women over 85 have significantly higher nursing-home use. But the rest of the differences between men and women are small. For more information, visit www.ebri.org

CMS Proposes Updates to Part D

The Centers for Medicare and Medicaid Services (CMS) released proposed changes to the Medicare Advantage (MA) and Part D Prescription Drug Programs. CMS says that the proposal would provide fair payments to plans while rewarding high-quality care. CMS is proposing to continue to refine the star rating system to encourage improved quality. CMS proposes to modify the system to ensure that plans are not penalized unfairly for enrolling dual eligible or low-income beneficiaries.

The proposal also enhances the value of in-home assessments to support care planning and care coordination and improve enrollee health outcomes. The Advance Rate Notice proposes changes in payments. On average, the expected revenue change would be positive growth of 1.05% when combined with expected growth in plan risk scores due to coding. Plans that have shown quality improvement and have demonstrated a focus on customer satisfaction would see additional growth. Plan payment levels will continue to be somewhat higher than the equivalent payments in fee for service.

The 2016 Draft Call Letter proposes steps to ensure that plans maintain accurate provider directories and make those directories widely available, helping enrollees better understand the providers available to them. In addition, CMS proposes to work with Part D sponsors that offer limited access to preferred cost sharing pharmacies in their networks to ensure all beneficiaries have access to affordable coverage.

CMS says that enrollment and quality in the Medicare Advantage and Part D Prescription Drug program has grown since the Affordable Care Act. Medicare Advantage has reached record high enrollment each year since 2010. That trend continues in 2015 with an increase of more than 40% since passage of the Affordable Care Act. Also, premiums have fallen nearly 6% from 2010 to 2015. More than 90% of Medicare beneficiaries have access to a $0 premium Medicare Advantage plan.

According to CMS, the continued popularity of the program reflects a clear signal that Medicare Advantage and the Prescription Drug Program are attractive to health plans and beneficiaries. In 2015, CMS estimates that 60% of Medicare Advantage enrollees will be in four- or five-star plans – an increase of 43 percent since 2009.

The Advance Notice and draft Call Letter may be viewed through: http://www.cms.hhs.gov/MedicareAdvtgSpecRateStats/ and selecting “Announcements and Documents.”

When to Consider Term Health Insurance

Term health insurance premiums average 66% lower than unsubsidized premiums for Obamacare bronze plans, according to a study by AgileHealthInsurance. The reasons behind the premium differences include the broader mandatory benefits of Obamacare plans and the lack of coverage for pre-existing conditions for term health insurance.

“Consumers who don’t qualify for significant Obamacare subsidies or can’t get insurance outside the enrollment period should definitely investigate term health insurance. For millions of people, term health insurance can represent a more affordable option than Obamacare or a bridge to next year’s Obamacare enrollment period,” said Bruce Telkamp, CEO of AgileHealthInsurance.

The following are ideal profiles for people who purchase term health insurance:

  • People under 65 in good health.
  • People who need health insurance for a specific period (e.g. an interval in between jobs)
  • A young adult who can no longer be insured through their parents’ health plan.
  • People who need health insurance outside of the Affordable Care Act’s enrollment period, but who don’t qualify for a Special Enrollment Period.
  • Retirees in good health who no longer have employer-provided health insurance but are too young to enroll in the Medicare program.

Term health insurance cannot be longer than 364 days in any state. In some states, policies are limited to a maximum term of six months.

The study compared the average premiums among term health insurance and unsubsidized entry-level Obamacare health plans. When comparing premiums for nonsmoking men and women ages 30, 40, and 50, all ages saw major pricing advantages in term health insurance. Thirty year-old applicants had premium quotes over 70% lower while 50-year old applicants had premium quotes over 50% lower.

The dramatic savings in premiums should be viewed in light of three considerations: Obamacare premiums can be significantly reduced for those who qualify for subsidies; term health insurance premium savings should be adjusted down for the cost of the fine for not having health insurance compliant with Obamacare standards; and people with poor health can be rejected for term health insurance coverage.

People with certain chronic conditions or poor health would not be served well by a term health insurance product. Additionally, people who have had a significant health event or medical condition in the past two years also are advised to seek other forms of health insurance because pre-existing medical conditions are not covered by term health insurance.

When the coverage period for a term health insurance policy ends, an enrollee may be eligible to apply for a new term health insurance plan or seek other health insurance coverage, such as coverage provided by an employer or coverage provided by an Affordable Care Act health plan. Negative changes in health status can result in the application being rejected. But they can still purchase Affordable Care Act coverage.

Affordable Care Act plans typically have broader benefits. All health plans that comply with the Affordable Care Act must have “10 Essential Health Benefits.” Term health insurance plans don’t have a standardized set of benefits and typically offer what would be described as “major medical coverage,” which covers healthcare costs in the event of serious medical issues, though normal doctor visits for routine illnesses and injuries are typically covered. Affordable Care Act plans don’t deny care for pre-existing conditions nor do they reject insurance applicants based on health problems. For more information, visit www.AgileHealthInsurance.com.

IN CALIFORNIA

Drug Benefits Vary Greatly in Covered California Plans

In 2014, prescription drug benefits varied greatly among the health plans offered through Covered California. There were also differences in coverage among these plans and California’s most common employer-based health plans. In a project supported by California HealthCare Foundation (CHFC), Avalere Health compared Covered California plans to one another and to employer-sponsored insurance. Researchers examined 2014 pharmacy benefits and how easily consumers could compare their options. The report finds the following:

  • Covered California plans provided affordable, comprehensive access to the most commonly used medications for consumers with relatively limited drug needs.
  • Compared to selected employer plans, the plans offered through Covered California were more aggressive in managing prescription drug use through administrative controls, such as prior authorization and step therapy, a requirement that a less expensive drug be tried before a costlier alternative is approved.
  • Researchers examined drugs used to treat five categories of chronic conditions that rely on medication management — HIV/AIDS, mental health, immunology, asthma/COPD, and diabetes. Formulary coverage, utilization management, and tier placement varied by plan and drug class.
  • Comprehensive information on drug coverage and out-of-pocket costs was hard to find, which could hinder consumers who try to make informed purchasing decisions.

For more information, visit www.chfc.org.

Long-Term Care in California – A Shattered System

California’s Senate Select Committee on Aging and Long Term Care issued a report calling for an overhaul of California’s fragmented long-term care system. The report, “A Shattered System: Reforming Long-Term Care in California,” recommends consolidating programs and improving workforce and training. The state’s economic recovery offers the opportunity to reinvest in the system and support services for older adults, people with disabilities, and their families, who rely on a patchwork of services to avoid institutionalization. “Continuing to place a low priority on reinvesting in California’s home and community-based care will only force greater reliance on institutionalization and higher costs for the state. Years of devastating budget cuts and program eliminations across California’s LTC system cannot be underestimated,” according to the report.

Consumers seeking statewide services face programs with inadequate funding, a lack of information, a lack of services and providers, insufficient transportation and housing, and geographic isolation. California’s home and community-based service infrastructure has struggled to keep up with demand for services, which is partly due to significant budget cuts during the recession. The report recommends the following:

  • The state should gather information to create quality measures for LTC. The state needs to collect and integrate data from across programs to drive program and policy decisions.
  • The California Health and Human Services Agency should establish safety net and standards for home and community-based services to determine the basic statewide service mix, particularly for each of the 44 rural counties. This will establish a baseline to identify gaps and invest in resources appropriately. The state should also re-establish the Cal Care Net website for people and families to access information and understand their LTC options.
  • The state should analyze workforce needs of the LTC population, outline training and education requirements for the LTC workforce, and align resources accordingly. The state should also consider the needs of family caregivers, which are the backbone of the LTC workforce. The state should expand nurse delegation of health maintenance tasks and implement legislation to help identify the caregiving needs of people who have been discharged from hospitals to home settings. The state should institute full practice authority for nurse practitioners in order to expand access to primary care services across the state.
  • The Legislature and Administration need to engage with recommended policies on a number of federal issues, including finding a solution to the nation’s LTC financing crisis, reauthorizing the Older Americans Act, and raising the eligibility threshold for Medi-Cal LTC

CAHU Summit

CAHU’S Capitol Summit will be held May 19 to 20 in Sacramento. For more information, visit www.cahu.org.

Covered California Offers a Second Chance to Enroll

Covered California is offering a special enrollment opportunity for consumers who did not know that there was a tax penalty for being uninsured in 2014 or who learned they may face a penalty for 2015. From February 23 until April 30, consumers can apply for health coverage during special enrollment by attesting that they did not realize there was a tax penalty. They can select “Informed of Tax Penalty Risk” when filling out an application at CoveredCA.com.

The new tax penalty for being uninsured — known as the “shared responsibility payment” — motivated many consumers to purchase insurance this year during the November 15 to February 15 open-enrollment period via Covered California.

Covered California Executive Director Peter V. Lee said, “We don’t want anyone to say they were blindsided by the shared responsibility payment. That’s why we are establishing this limited-time special-enrollment that builds on the broader availability of coverage for Californians who have a change of circumstance making them eligible outside of open enrollment. If you didn’t realize the tax consequences of not having insurance, you can enroll in a Covered California plan starting on Monday, Feb. 23 until April 30.”

Consumers who are filing their taxes this year may pay a penalty for not having health insurance. And the penalty for going without insurance in 2015 will go up significantly. Those who can afford insurance, but don’t buy it would pay $325, per adult, in a household or 2% of their income, whichever is greater. According to the IRS, a single person earning $40,000 a year would pay a penalty of nearly $300 for being uninsured in 2014. A family of four earning $70,000 a year would pay nearly $500 for being uninsured in 2014.  Those penalties will increase. The same individual making $40,000 will see their penalty jump from almost $300 to nearly $600 in 2015. That family of four would see its bill jump from nearly $500 to almost $1,000. For more information, visit www.CoveredCA.com.

LONG TERM CARE

Long Term Care Claims Reveal Popularity of Home Care

Eight million Americans have purchased long-term care insurance and an increased number are now starting to claim benefits, according to a report by American Association for Long-Term Care Insurance (AALTCI). Most people mistakenly associate LTC with skilled nursing home care, but 51% of all newly opened claims begin with home care. Good coverage can cost about $100-a-month for a 55-year-old healthy male. That’s for roughly $160,000 of benefits, which covers quite a bit of care. Add a flexible inflation growth option and your benefits grow over time,” explains Jesse Slome, director of (AALTCI).

“In 2014 we paid $105 million in claim benefits, a 12% increase over the prior year…This protection is best purchased in your 50s and 60s when you are still able to meet the health qualifications and costs for coverage are lower,” says Bill Naylon, president of MedAmerica Insurance Company.

According to AALTCI, roughly two-thirds of all beneficiaries are women, and 54% of new LTC insurance applicants are 55 to 64. Most insurers charge higher rates for single women, but offer discounts for couples or partners who apply for coverage. While most new claims begin for policyholders who are 70 or older, nearly 9% of claims begin before age 70. The leading causes for home care claims are stroke, Alzheimer’s, arthritis, cancer and injury. For more information, visit www.aaltci.org/guides.

EMPLOYEE BENEFITS

Employers Take a Closer Look at Employee Benefits

The landscape for employee benefits is ripe with opportunity, according to a white paper by Wells Fargo. Healthcare reform has prompted benefit managers — and increasingly C-suite executives — to look closer at employee benefits. Most employers have not yet made changes, such as moving from fully insured to self-funded or using private exchanges. But those two strategic items took the top spots in the “under consideration” category. While offering a high-deductible plan ranked as only the fifth most common change, it held the top spot for options under consideration.

Compared to benefit managers, C-suite executives are more strongly anticipating the increase of changes that shift the cost burden. Both C-suite executives and benefit managers cite the top four changes expected in the next five years as [mportance of wellness offerings, coverage of family members, employee attraction due to benefit offerings, and employee retention due to benefit offerings. From spousal coverage to wellness programs, employers are reviewing and updating a wide array of benefits to attract and retain the best talent, improve employee productivity, and boost morale.

Ninety-two percent of C-suite executives and 80% of benefit managers say their company has been effective in improving morale through benefits. Most decision-making falls within the company’s executive committee. However, nearly 60% of benefit managers say that staff is involved in managing strategies and benefits.

C-suite and benefit managers agree that employee benefits have the biggest effect on improving employee loyalty and engagement, and lowering medical costs for the employer and employees. This is followed by reduced absenteeism, reduced cost of temporary or fill-in workers, and reduced presenteeism. Four in five employers say it’s important to measure the effect of these benefits on improving employee health. However, their confidence in measuring the effectiveness of these benefits is lower.

C-suite executives and benefit managers agree that the top goals for employee benefits over the short-term (12-18 months) are maintaining employee productivity and managing costs. However, benefit managers are more focused on maintaining the current level of benefits than are the C suite executives, which is most likely because they the ones fielding employee questions and complaints. With the economy improving and the quantity of job seekers expected to increase, benefit managers say that maintaining benefits will help them attract the right talent and retain high performers.

For the long-term (next five years), maintaining employee productivity and managing costs remain among the top three goals. However, both C-suite executives and benefit managers say that managing costs is number one. This comes as no surprise with the ACA’s excise tax looming in 2018.

Seven in 10 companies are increasing the percentage that employees contribute to premiums for spouses or have already done so. Six in 10 have changed or are changing the options for type of plan and increased the co-insurance feature. Less than six in 10 benefit managers said employees had reacted positively to benefit changes, compared to nearly seven in 10 C-suite executives. Employers can increase employee acceptance by partnering with benefit providers to communicate changes to employees. For more information, visit https://wfis.wellsfargo.com/services/employeebenefits/Pages/Research.aspx.

NEW PRODUCTS

Employee Benefits

AXA launched its U.S. employee benefit business through subsidiaries AXA Equitable Life Insurance Company and MONY Life Insurance Company of America. The company will offer a suite of benefit products scheduled to begin roll out in mid-2015 including group life insurance, dental and vision, short- and long-term disability, gap medical and hospital indemnity, and critical illness. Hervé Balzano, head of Group Employee Benefits, said that AXA researched the U.S. market extensively, and found that one segment – small- to medium-sized businesses with 20 to 500 employees – remains underserved. These businesses and their employees comprise roughly half of the expanding U.S. employee benefits market, which is undergoing transformation following the implementation of the Affordable Care Act. Balzano said, “AXA is entering the U.S. employee benefits market at a time of great opportunity to help business owners navigate new regulations and obtain affordable and flexible coverage for their employees. While competitors struggle to adapt their legacy services and technology to the present, we have the advantage of building, from the ground up, a seamless platform that is unencumbered by the past and ready for the future.” For more information, visit

www.axa.com.

Disability

Unum is offering a voluntary disability product that simplifies benefit decision-making while allowing employees to easily choose right the financial protection and price. Employers can offer short-term disability, long-term disability or both, along with a few other options, such as whether premiums are shared or 100% employee-paid. Employees can select the benefit amount as well as the elimination period on short-term disability, if available. For more information, visit www.unum.com.

Health Insurance Exchange Directory 

The website, www.healthexcecstore.com is offering a health insurance exchange directory for $150 or $115 in a pdf. format. The directory includes all public exchanges, public partnership exchanges and plan management arrangements as of the date of publication and numerous private exchanges and exchange platforms.