The California Department of Insurance fined Zenefits $7 million. It’s the largest penalty assessed by any commissioner against Zenefits and one of the largest penalties for licensing violations ever assessed in the department’s history. Zenefits was charged with allowing unlicensed employees to transact insurance and circumventing insurance agent education requirements.
A 2013 start-up, Zenefits is a San Francisco-based company that provides online HR services to businesses and encourage the same businesses to use Zenefits as an insurance broker. The California Department of Insurance launched an investigation in 2015, after getting complaints that Zenefits employees were transacting insurance without a license. Shortly after the investigation began, the company announced publicly that it was not complying with insurance laws and regulations. Zenefits’ CEO, Parker Conrad resigned. Insurance Commissioner Dave Jones said, “Zenefits is an example of an Internet-based start-up whose former leaders created a culture where important consumer protection laws were broken – a bad strategy that placed the company at risk and that other start-ups should not follow given our strong consumer protection laws and the Department of Insurance’s rigorous enforcement of those laws.”
The settlement agreement includes a $3 million penalty for licensing violations, including allowing unlicensed employees to transact insurance, a $4 million penalty for subverting the pre-licensing education and study-hour requirements for agent and broker licensing, and a $160,000 payment to reimburse the Department of Insurance for investigation and examination expenses.
The settlement provides that half of the total $7 million in monetary penalties are suspended in recognition of the self-reporting and remedial actions the company has already implemented including replacing the CEO, retraining of all licensed producers, and implementing automated process to verify that only licensed individuals solicit and sell insurance products. The suspended portion of the monetary penalty will be reinstated if Zenefits fails to confirm continued compliance with licensing and regulatory mandates based on an examination of the company’s business practices to be conducted in 2018. The difficulties drove Zenefits to cut a deal with some of its investors in June to reduce its valuation to $2 billion from $4.5 billion, according to the Wall Street Journal. A well-funded competitor, Gusto, is focusing on selling insurance to small companies and has been taking some customers from Zenefits, according to Bloomberg Technology.
California Leads When it Comes to Doctor Transparency
American consumers can find online quality ratings before purchasing just about anything—books, electronics, even vacations. But when it comes to doctor ratings, the information is hard to find, according to a report by the Health Care Incentives Improvement Institute (HCI3). This year, only California, Maine, and Minnesota earned an A, and more than half of states scored an F.
François de Brantes, HCI3 executive director said, “As Medicare, Medicaid, and commercial insurance plans migrate toward paying physicians for performance instead of volume…, they’re requiring providers to…report more and more quality information. Consumers deserve access to quality insights, too.”
Meaningful physician quality transparency tools have these things in common:
- Transparency tools should be provided by independent third parties.
- Transparency tools should offer timely information on clinician quality, preferably not older than two years.
- Transparency tools can’t deliver value if too few physicians are included in the ratings.
- Outcome measures should assess the impact of health care.
- Quality transparency websites should come up quickly in Internet searches, and the reporting should be easy for consumers to understand.
The full HCI3 report can be accessed at http://bit.ly/Quality-Card-2016.
LISI Teams Up with LifeMap
LISI will be the sole general agent distribution arm to the California broker community for LifeMap Assurance Company. LifeMap’s portfolio includes life, disability, vision, dental, accident, critical illness, and short term medical coverage, as well as employee assistance programs. LifeMap is a member of the Cambia Health Solutions family of companies, a total health and wellness solutions company located in the Pacific Northwest. Visit http://www.LifeMapCo.com to learn more.
Mobile App Helps Brokers Find Right ACA Plans
Quotit launched a mobile quoting app – QuotitGO. The free mobile app is available to all brokers, whether or not they are Quotit customers. It allows brokers to quote insurance options for consumers on the go, including real-time subsidy calculations. Over 85% of Americans qualified for subsidies in 2015 when enrolling in ACA marketplace plans. “QuotitGO allows brokers to view rates and premium subsidy information whenever and wherever. “This is important because agents have to be agile and ready to capitalize on a potential client, whether they get a call at the office or in line for coffee in the morning,” said Chad Hogan, senior vice president at Quotit Corporation. ExpressEligibility gives brokers the access to premium subsidy and public program eligibility information in an instant. The new QuotitGO mobile app is available in the Apple App Store and Google Play.
Engaging Millennials
A recent Gallup poll finds that only 29% of Millennials are engaged in their jobs. Unengaged employees simply show up, do their jobs, and go home, not giving their work a second thought. Engaged employees are passionate about what they do, why they do it, and how their work affects the world around them. Business units in the top quartile of employee engagement have 17% higher productivity, 41% less absenteeism, 10% better customer ratings, and 70% fewer safety incidents. They are also 21% more profitable than business units in the bottom quartile.
Millennials make up 38% of the workforce, but in less than 10 years they are expected to account for a staggering 75% of America’s labor pool. In order for engagement to occur, an employee must have sense of purpose in their work. One way is helping them address environmental and social issues. Confidence in their leaders is also critical for employee engagement. A survey conducted by Australian Culture Amp finds that 74% of respondents consider confidence in their leadership as a key driver of engagement. The good news is that the ball is in the employer’s court. Millennials are motivated to give of themselves and their talents—not just their money. One online platform and app, www.xocial.com, is partnering with businesses to build a socially conscious, cause-minded company culture through fun and simple campaigns that galvanize groups for a greater good.
401(k) Policies Get in the Way of Savings
Many 401(K) plans have policies that hinder worker’s ability to save, get employer contributions, and keep employer contributions (vesting) if they leave their job, according to a report by the General Accountability Office (GAO). GAO looked at 80 401(k) plans ranging from fewer than 100 participants to more than 5,000. Thirty-three did not allow workers younger than 21 to participate in the plan; 19 required participants to be employed on the last day of the year to get any employer contribution for that year; and 57 required employees to work for a certain period before employer contributions to their accounts are vested. Plan sponsors and plan professionals said they employed these policies to lower costs and reduce employee turnover.
Assuming a minimum age policy of 21, GAO projects that a medium-level earner who does not save in a plan or get a 3% employer matching contribution from age 18 to 20 could have $134,456 less savings by their retirement at age 67 ($36,422 in 2016 dollars). Saving early for retirement is consistent with Department of Labor guidance as well as previous legislation and allows workers to benefit from compound interest, which can grow their savings over decades. In addition, the law permits plans to require participants to be employed on the last day of the year to get employer contributions each year, which could reduce savings for ‘s mobile workforce. For example, GAO projects that, if a medium-level earner did not meet a last day policy when leaving a job at age 30, the employer’s 3% matching contribution that was not received for that year could have been worth $29,297 by the worker’s retirement at age 67 ($8,150 in 2016 dollars). GAO also projects that vesting policies may reduce retirement savings. For example, suppose a worker leaves two jobs after two years, at ages 20 and 40, and the plan requires three years for full vesting, the employer contributions forfeited could be worth $81,743 at retirement ($22,143 in 2016 dollars).The Department of Treasury is responsible for evaluating and developing proposals for legislative changes to 401(k) plan policies but has not recently done so for vesting policies. Vesting caps for employer matching contributions in 401(k) plans are 15 years old. A re-evaluation of these caps would help to assess whether they unduly reduce the retirement savings of ‘s mobile workers.
GAO also interviewed federal officials and 21 retirement professionals and academic researchers. GAO suggests that Congress consider a number of changes to ERISA including changes to the minimum age for plan eligibility and plans’ use of a last-day policy. GAO is recommending that Treasury assess whether vesting policies are appropriate for today’s mobile workforce.
Employer Trends in Wellness Plans
Eighteen percent employers offer comprehensive wellness programs, which is virtually unchanged from last year, according to a survey by United Benefit Advisors. Small employers with fewer than 25 employees, already the least likely to have wellness programs, have seen a 34.4% decrease in wellness programming in the past three years – going from 9% to 6%. Wellness programs are the most prevalent among government, education, and utility employers with nearly 31% offering them. Wellness programs are rare among the construction, agriculture, mining, and transportation industries with only 13% offering them, a rate that has held largely steady for four years. Sixty percent of plans offering wellness benefits came from employers with 1,000 or more employees; 51% came from employers with 500 to 999 employees, and 36% came from employers with and 200 to 499 employees.
Larger employers tend to use independent wellness program providers versus carrier programs. Sixty-three percent of employers with 500 to 1,000+ employees prefer independent programs. Not surprisingly, 90% of small employers (fewer than 25 employees) use carrier-provided programs, which is likely due to their low- or no-cost features when bundled with the health plan. Eighty-one percent of employers in the West and 67% of employers in the Northeast use carrier-provided wellness programs while the rest of the regions are fairly split between independent versus carrier-provided programs. The West had a significant shift toward carrier programs going from 69% in 2015 to 81% in 2016. The government, education, and utility industries have the most independently-provided wellness programs (50%).
Major lawsuits are pending against employers with particularly robust wellness programs, and the regulatory environment is becoming increasingly restrictive. As a result, employers are very cautious with program design, avoiding implementing high penalty and incentive programs. This year shows a dramatic shift from 36% of plans featuring cash incentives in 2015 to only 16% in 2016. Also, dramatically shifting away from cash incentives are construction, agriculture, mining, and transportation employers (going from 64% in 2015 to 48% in 2016). The finance, insurance, and real estate industries offer the most health club-related incentives at 50%. Offering paid time off is becoming rarer with 4.5% of employers offering this incentive, nearly a 20% decrease from four years ago.
Employers are beginning to use the regulations proposed by the Equal Employment Opportunity Commission (EEOC) as guidelines to develop wellness programs. The wellness guide provided by the Affordable Care Act (ACA) has spurred employers to implement premium differentials for participating in wellness participation and stopping tobacco use. However, many are wary of the EEOC’s new guidance about wellness programs that include health risk assessments, biometric screenings, and medical exams. How those regulations influence plan design remains to be seen. Employers that offer reduced medical premiums or contributed to an employee’s health savings account or flexible spending account see the greatest participation in the wellness plans and the biggest behavioral changes among employees. Employers and wellness consultants are increasingly using claims data as a replacement for the health risk assessment. Many employees complain about the time it takes to complete the assessment as well as the privacy concerns. Nonetheless, using a health risk assessment can have its benefits. To get the complete survey, visit www.UBAbenefits.com.
Pre-Retirees Emphasize Legacy Building Over Wealth Accumulation
Americans, aged 51 to 69, have a unique outlook on life, particularly when it comes to financial management and insurance, according to a new white paper from Chubb. While sharing several of the same interests and passions as younger cohorts, pre-retirees are more focused on legacy building than on wealth accumulation. Pre-retirees hold about $8 trillion in assets but, unlike younger generations, the majority are not focused on accumulating more wealth or property, but on providing a legacy, explains Alanna Johnson of Chubb. “Wealth advisors and insurance agents can best serve this generation by understanding the client’s changing risk profile and designing a holistic risk management program that fits their lifestyle,” she said. Pre-retirees and their advisors should be aware of the following risks to legacy building:
- Serving on non-profit boards that might not offer sufficient D&O liability coverage in the event of a lawsuit
- Emerging property risks as a result of relocation as more pre-retirees move or purchase property to be closer to their adult children and grandchildren
- No anticipating gaps in protection when pursuing sophisticated wealth transfer strategies, such as the establishment of a trust or LLC
- Not having sufficient medical evacuation coverage and travel insurance in the event of an accident or injury abroad.
To get a copy of the white paper, visit www.chubb.com.
How Workers View Their Health Plans
Workers tend to be more favorable about their own health plans than they are about the health care system, according to the EBRI/Greenwald & Associates survey. One-half of those with health insurance coverage are extremely or very satisfied with their coverage while only 12% are not satisfied. Also, 45% of workers are extremely or very satisfied with the quality of the medical care they have gotten in the past two years, 33% are somewhat satisfied, and 15% are not satisfied. While 48% of workers are extremely or very confident about their ability to get the treatments they need; only 34% are confident about their ability to get needed treatments during the next 10 years, and just 29% are confident about this once they are eligible for Medicare.
Forty-two percent are confident that they have enough choices about who provides their medical care, but that decreases to 25% when they look out over the next 10 years and when they consider the Medicare years. Thirty-two percent of workers are confident that they will be able to afford health care without financial hardship, but it decreases to 25% when they look out over the next 10 years and to 25% when they consider the Medicare years. For more information, visit EBRI.org.
IRS Extends Affordable Care Act Reporting Deadline
The IRS has issued a deadline extension for 2016 ACA reporting. The notice extends the due date for furnishing to individuals the 2016 Form 1095-B, Health Coverage, and the 2016 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, from January 31, 2017, to March 2, 2017. In addition, this notice also extends good faith transition relief. Greatland, a leading expert on Affordable Care Act (ACA) requirements, is advising employers to continue preparations as if the deadline had not been extended in order to better ensure compliance and avoid penalties. The IRS has issued a 30-day extension for employers and issuers to provide individuals with forms reporting on offers of health coverage and coverage provided. The due dates for 1095-B and 1095-C deadlines are as follows: February 28, 2017, for paper 1095 forms filed to the IRS, March 2, 2017 for 1095 copies to be sent to recipients and employees and March 31, 2017 to e-file 1095 forms to the IRS.
This is the second year that employers and insurers must file Form 1095 to remain in compliance. Bob Nault, Greatland’s CEO said, “While we expect this deadline change to have minimal impact on the far majority of our customers, we still are encouraging businesses to not wait until the last minute, which can lead to [making] mistakes or missing the deadline, even with the extension. Failure to file 1095 forms for the 2016 tax year could be very costly for businesses.”
Here are some Important notes about the deadline extension:
- ACA Reporting is still required for 2016
- The good faith transition relief for 2015 has been extended for 2016
- The ACA Reporting requirements for 2016 have not changed
- The IRS is prepared to begin accepting ACA reporting in January, but due to feedback from businesses and insurers, it has decided to give additional time to complete necessary forms for the second year. This extension is intended to give employers and providers a chance to gather data, report information and report it correctly. It is important to note that reporting is still required for 2016 and the IRS implemented the extension to help those who might need more time.
For more information, visit www.greatland.com.
Many Employers View Employer Mandate as Top Health Care Concern
Forty-eight percent of employers say the employer mandate is their primary health care concern going into the next administration. “Not surprisingly, there is heightened interest in the fate of the employer mandate, which places significant reporting obligations on employers, including how they report coverage, track service, and determines value and affordability. But it’s important to realize that, in the short term, these mandates and the Affordable Care Act (ACA) reporting obligations and penalties remain in effect,” said J.D. Piro, national practice leader of Aon’s Health and Benefits Legal practice. Aon surveyed 800 employers a week after the election and found that these are there other top concerns:
- 17% Prescription drug costs
- 15% Excise Tax
- 10% Tax exclusion limitations on employer-sponsored health care
- 8% Paid leave laws
- 2% Employee wellness programs
“While details remain to be seen about policy proposals to address prescription drug pricing, this is an area that employers will keep a close eye on as drug costs continue to increase. Employers will also be tracking the fate of the excise tax to see how the 115th Congress handles this important matter,” said Piro. For more information, visit http://aon.mediaroom.com.
Net Operating Income for U.S. Life/Health Industry Lowest in Five Years
The U.S. life/health industry reported a net operating income of $17.5 billion, the lowest in the last five nine-month year-to-date interim periods, and down 27.4% from the prior-year period, according to preliminary financial results. These results are detailed in a new Best’s Special Report, titled, “A.M. Best First Look – 3Qtr 2016 U.S. Life/Health Financial Results.” Data is derived from companies’ statutory statements as of November 18, 2016. These financial results represent approximately 85% of the total U.S. life/health industry’s premiums and annuity considerations.
Although the trend of weakening operating performance continues for the U.S. life/health industry, core results included a net increase of $0.2 billion during the first nine months of 2016 over the period of 2015 for premiums, net investment income, and amortization of the interest maintenance reserve. On the expense side, death, annuity, and surrender benefits were down $3.1 billion while direct commissions and expense allowances increased $0.4 billion and policyholder dividends increased by $0.7 billion.
A 55% drop in net income was exacerbated by a $7.3 billion decline in realized capital gains, capital, and surplus for the U.S. life/health industry. Nevertheless, the industry reached a record $364.2 billion as of September 30, 2016. The U.S. life/health industry also saw continued growth in invested assets, reaching a record $3.7 trillion as of September 30, 2016. To get the full copy of this special report, visit http://www3.ambest.com.
2017’s Best Life Insurance Companies
Voya took the top spot in Insure.com’s annual Best Life Insurance Company survey. The 15 top insurers are rated on affordability, customer service, and likelihood to recommend. In the survey of more than 1,690 policyholders, Voya, formerly known as ING, got an impressive five out of five stars for customer service and 4.75 stars for value for the price. Eighty-nine percent of policyholders would recommend the life insurance company. Here is a summary of the results:
First place: Voya
Overall score: 97.1
Value for price: 4.75
Customer service: 5
Would recommend: 89%
Second place: State Farm Life Insurance
Overall score: 92.5
Value for price: 4.75
Customer service: 4.75
Would recommend: 87%
Third place: John Hancock Life Insurance
Overall score: 90.4
Value for price: 4.5
Customer service: 4.5
Would recommend: 89%
Life Insurance with Wellness Benefits
John Hancock launched a wellness program for its Vitality life insurance policyholders. They can earn a new Apple Watch Series 2 for just $25 by being more active. Policyholders choose their Apple Watch Series 2, pay the $25 initial fee (plus tax), and get an Apple Watch Series 2 to get started. Participants track their activities and earn Vitality Points that go toward monthly payments for their watch over two years. John Hancock Vitality members will be able to fully fund their Apple Watch by meeting monthly Vitality Active Rewards targets that are achievable over 24 months. John Hancock’s Vitality program allows policyholders to save significantly on their premiums and earn valuable rewards by taking small steps to live healthy, like walking, exercising or getting regular check-ups. The program expanded earlier this year with the addition of the Vitality HealthyFood benefit. Customers can earn points and save up to $600 a year on their grocery bills for choosing healthy foods at participating grocery stores. For more information, visit manulife.com.
Practice Management Tool for Advisors
Voya Financial launched its Business Builder tool for financial advisors as the latest addition to the firm’s expanding suite of practice management resources. The new tool will allow advisors to set and monitor the progress of business growth goals. The Business Builder tool is for advisors who serve retail clients and participants in school, government, and nonprofit employer-sponsored retirement plans. The tool provides a comprehensive view of gross dealer concession (GDC) sales, and net new assets across multiple product categories, which enables a more efficient estimate of growth projections. For more information, visit voya.com.
Wellness Mobile App
Humana launched Goal Guru, an iOS and Android-compatible mobile app and web experience. It gathers data from a multitude of trackers and mobile apps. It allows users to participate in competitions and engage each other through wellness tracking. It also offers 24/7 interaction with a digital coach. The app is designed to improve the activity level of employees by monitoring of steps, weight, and sleep. Users get personalized news feeds throughout the day and can increase engagement by messaging a team or individuals to initiate a challenge.